Case Study: MAD Agriculture – Mad Capital
Location: USA
Investment type: Grant, debt, equity, collateral funding & non- extractive finance
Mad Capital is the sister company of Mad Agriculture, a USA-based non-profit, ‘Working from heart to head, poetry to science, financing to markets, and soil to shelf ’.
Founded on the premise that organic and regenerative farmers should have the same access to finance as conventional growers, Mad Capital has gone and created its own capital solutions, in partnership with farmers and a range of investment and funding sources.
Mad Capital works with farmers to provide:
- Transition Loans — purpose built to support a farmer seeking to transition to organic and regenerative practices, with a range of customisable options to suit individual needs including flexible repayment plans, revenue sharing, crop share, interest-only loans, deferrals and unique collateral packages.
- Succession or Farm Transfer Loans — financing the transfer of land/ business from one generation to the next.
- Downpayment Assistance Loans (commencing later in 2023) — finance to help with the purchase of land or businesses for farmers lacking the equity or cash to do it with a standard mortgage.
To develop their model, the Mad Capital team spent a lot of time engaging with farmers to understand their specific and individual finance needs. They then crunched the numbers to develop financial models and looked to innovative finance mechanisms in other industries including micro-hydro, solar and construction loans.
They are thinking pragmatically and ambitiously about investment structures for the future.
When we spoke with Brandon Welch, the Director of Capital at Mad Agriculture, we were able to drill down into some of the detail of their work and learnings, including:
- Initially Mad Capital was targeting high single digits for ROI 'which was a little high out of the gates'. Now it is mid single digits, and they've gotten creative with financial structures to drive higher returns for investors who take on more risks.
- The importance of thinking long-term, bringing in creative players and being prepared to share risk: ‘We need longer-term debt or equity and the risk needs to be more appropriately shared — that's what we try to do with the revenue share model. We haven’t had enough creative actors move into the space in ag to drive things along’.
- Government/philanthropic funding in set up was catalytic: ‘Our first $10 million fund was only viable because of a government grant that covered us pulling it all together’.
This case study is an extract from Regenerating Investment in Food and Farming: A Roadmap.