Raising capital to start a business is challenging by its very nature, even more so for mission-driven businesses. Forming business partnerships entails finding like-minded people and organizations who understand your mission. You’ll need lenders who recognize what you’re trying to do and know how to support you through good times and bad.
In this episode, Caryl Levine shares her experience in partnering with RSF Social Finance. Raising capital is essential for your business, but partnering with the wrong people can harm it. Caryl shares all the reasons why it matters who you choose to borrow money from and all the benefits that Lotus Foods has gained through partnering with RSF Social Finance.
If you want to find out how to choose the right lenders and partners for your business, then this episode is for you!
Here are three reasons why you should continue reading:
Learn how Lotus Foods is changing how the world grows rice.
Discover why choosing the right lenders is beneficial for your mission.
Find out why businesses need both patient capital and debt.
Visit our website for more insights on cash flow and profit on the Her CEO Journey™ podcast.
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Her CEO Journey™ Patient Capital Series:
Investing in Social Impact — The Journey of Lyndsey Boucherle
The Value of Capital for Mission-Driven Business — The Journey of West Tenth
Impact Investing and Investment Cooperatives — The Journey of Lizette Pena
How to Heal the Planet and Create Shared Value for People with Regenerative Finance — The Journey of Mindy Christensen
[05:18] How Lotus Foods Started
Caryl and Ken discovered black rice in Xishuangbanna on a market research trip.
Smitten by its taste, texture, and nutritional value, they began asking around about black rice.
Upon discovering other pigmented grains of rice and learning about the plights of small farmers, they set out to create a market for heirloom varieties at a fair trade price.
“... these pigmented rices that had such beautiful plate presentation, but most important, they tasted great and then the added value was the nutritional value of it. This was really something that we wanted to bring to the American consumer.”
[08:40] Introducing Black Rice to the American Market
Caryl and Ken started in foodservice because they had little capital.
They gave high-end chefs samples of black rice, forbidden rice, and Bhutanese red rice.
It allowed them to show that rice can be the center of a plate.
[10:10] More Crop per Drop
When they started in 1993, Caryl and Ken’s mission was to partner with small family farmers to keep the biodiversity of rice alive while also giving them access to a global market.
“Most people don’t understand that rice does not thrive in water. It learned to survive in water, but it doesn’t thrive in water.”
In 2005, Olivia Vent and Dr. Norman Uphoff were working with farmers around the world to use a new agroecological method called “More Crop per Drop.”
More Crop per Drop is a simple six-step methodology where farmers use less water, fewer seeds, and younger seedlings to triple their yield.
It also helps reduce methane gas emissions by 60% and sequester carbon.
[13:11] Reaching Small Scale Farmers
Lotus Foods doesn’t engage in technical assistance but acts as market connectors.
NGOs or nonprofits show farmers how the methodology worked and had them test it in small plots of their land.
Female farmers adopted the methodology.
What started as a grassroots movement has spread to over 69 countries, with millions of farmers implementing it.
“But in the years that we’ve been doing it, we’ve really seen such a tremendous uptake in [More Crop per Drop] because it works. It’s a win-win for everybody. We’ve never seen anything like this that has economic, environment, and social impacts as this methodology.”
[16:47] Economic Impacts
Partnering with Lotus Foods gave farmers access to a global marketplace.
Farmers can now grow and harvest rice knowing that they have a market that truly supports them.
When Caryl and Ken started 25 years ago, there was no fair trade rice, and they engaged in direct trade.
Direct trade is giving a percentage above the fair market value.
[19:03] Bootstrapping Lotus Foods
Caryl and Ken bootstrapped Lotus Foods with their savings.
In the early stages, they financed the company with credit cards that offered 0% short-term financing.
Their first line of credit came from their membership with Costco.
They went for their first equity raise in March 2008.
Caryl and Ken were fortunate that their first investors were angels. They were also able to get their line of credit from other sources until they met New Resource Bank.
[21:27] Working with RSF Social Finance
In 2008, they attracted subordinated debt from Grassroots Business Fund and Root Capital and used the money to rebrand to SRI.
New Resource Bank introduced them to RSF Social Finance in 2013.
“... all businesses go through good times and bad times. RSF has always been there for us during both the good times and the bad times.”
RSF has a “work with” policy as opposed to conventional banks’ “work out” policy, where they call the line and liquidate the company’s assets.
[24:42] How RSF Social Finance Has Helped Lotus Foods
RSF Social Finance helped Lotus Foods seize the window of opportunity with the increased demand during the pandemic by giving them access to capital. Since they reacted more quickly than their competitors, their customers increased.
Caryl doubts other lenders would be able to truly understand and support their mission.
RSF Social Finance helped them with the spike in freight by delaying a payback on their line of credit.
More than the products offered, the value that RSF Social Finance truly offers them is in their patience, mission alignment, and commitment.
The lack of external pressure to do anything beyond their mission has helped them avoid jeopardizing everything they set out to do.
“We’ve never had the external pressures to do anything beyond our DNA and our mission from the get-go, which really would jeopardize everything that we set out to do. We were really fortunate that we never actually had to even think that way.”
[29:48] On Capital and Community Pricing Gathering
Caryl and Ken feared that venture capital wouldn’t be patient or mission-aligned enough for them.
“If you’re going to have an audacious goal and be mission-aligned, you really need to be able to govern and control your destiny.”
Instead, a mixture of equity and debt gave them more control of their company.
When a lender makes space for investors and farmers to share their input on pricing, the outcome will be a more progressive, collaborative, and mutually beneficial policy.
“... when a lender makes the space for both investors and farmers to sit at the same table and ask for input and how to set pricing, the result will be more thoughtful and progressive and respectful policy that is collaborative and mutually beneficial.”
It’s rare to find like-minded, aligned lenders like RSF Social Finance.
[33:48] Ken’s Insights as a Financial Planner
Align yourself with capable people.
Learn by doing.
Have a clear vision of yourself, your brand, and your goals.
“... as an entrepreneur, it’s learning by doing. You have to have a vision of who you are and what your brand is and what you’re aspiring to, and a willingness to pursue a course that was previously not explored...”
Be true to yourself and go with your gut.
Know when to ask for help.
“But I think the most important thing too is learning when to know that you need help and get access to that help, not being afraid to do that or letting your ego get in the way.”
[35:15] Working with a Fractional CFO
Outsourcing skills is a great way to support your business without letting optics get too far ahead of revenue growth.
Caryl and Ken have done this in different areas in the past and will continue to do so.
“We believe in doing all you can to support the business without letting your optics get too far ahead of your revenue growth, and outsourcing skills is a great way to do this before making the full-time investment.”
[35:54] Caryl’s Final Advice
Debt has allowed them to advance monies to small farmers, while equity has helped them with inflection points in their business.
Patient capital and debt are both important for a company’s long-term strategy.
Many young companies are getting high valuations and taking on a lot of equity, which can potentially lead to loss of control over their businesses.
Losing control of your business disables mission-aligned businesses to thrive.
Caryl Levine is the co-founder and co-CEO of Lotus Foods. Founded in 1995, Lotus Foods is an industry leader in organic, heirloom, and pigmented rice produced sustainably on smallholder farms. With their audacious ambition of “changing how the world grows rice,” they focus on products that address consumer interest with superior quality, innovation, and nutritional value. They also seek to grow the demand for more sustainably produced and fairly procured rice.
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As a mission-driven female entrepreneur, raising capital while staying focused on your mission can be challenging. Thus, finding like-minded partners is vital to your success. If you enjoyed today’s episode of Her CEO Journey Podcast™, then hit subscribe and share it!
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