One investor finds her muse in healthy soil
We spoke with Evi Steyer, a VC investor and Next Gen Wealth Holder with a passion for building better food systems, and, in the process, hopefully addressing some of the core challenges of our age. In this interview, Evi shares her perspectives on how regenerative agriculture differs from conventional land management, what role VC capital plays in advancing the space, and how other wealth holders can consider embarking on their own journey to invest in food (and have some fun along the way!).
What initially got you interested in regenerative agriculture?
Regenerative agriculture, for me, is a place where a lot of the big issues I care about intersect. Earlier in my career, I came from a climate and large-scale conservation perspective; however, as I started digging into the management of working lands (think farms and ranches), I saw that working lands are the place where water impacts, climate impacts, community health, community prosperity, racial justice and the urban-rural divide intersect. I also started to see the potential for regenerative agriculture to address many of these issues. This might sound like a big statement, so here are just a few of the examples that made me excited about regen ag:
- Climate mitigation: I’m a big climate worrier, and many believe that one of the largest carbon sinks we have available are our soils. If we can build organic matter in the soils through regen practices, we can store carbon in the soil and transition from a carbon-intensive agricultural system to a net negative system. Regen ag has been shown to rebuild soil carbon faster than just letting the land lie fallow and allowing nature to take its course.
- More jobs in rural areas: regen ag is inherently regional and diverse in nature, so it works best when processing and value-add are close to the farms (rather than centralized far away). This can bring jobs and vitality to rural regions and restore the role of rural communities are stewards of our ecological commons.
- Empowering BIPOC communities: many of the practices we categorize as “regenerative” today grew out of the production methods of indigenous growers and farmers of color. Recognizing and empowering those communities and crucially returning land that was taken from them is a key piece of building a truly regenerative system.
Can you describe what you mean by “regenerative agriculture”?
Think of conventional, sustainable, and regenerative on a spectrum. Conventional is more of an extractive system designed to maximize yields at the expense of soil health, climate impacts, a good diet, racial and gender equity, worker wellbeing, and animal welfare. Sustainable focuses on developing systems that can perpetuate themselves over time by avoiding a many (but not all) of those externalities. Regenerative is about an approach that not only perpetuates itself over time, but improves soil, water, carbon, biodiversity cycles as well as social and environmental justice outcomes because it is mimicking those natural systems and cycles.
Moreover, regen practices help mitigate risk. They tend to be more resilient to climate impacts, market fluctuations, and other large-scale shocks like COVID-19. For instance, these producers tend to have more direct routes to consumers, so have less dependency on long, complex, and ultimately fragile supply chains.
One of the challenges in the regen space is that while there is some agreement around principles (for more on this, see the seven principles of regen agriculture), the details of the regenerative practices are inherently specific to the region where they are being practiced. This lack of definition can make it very difficult to do scalable things like provide certification or compensate for outcomes consistently.
How is this approach really that different?
To me, regenerative agriculture is a way of managing land and food production in a way that respects and learns from the cycles and systems of nature. This differs from conventional agriculture in a few key ways. The first is that regenerative ag is inherently focused on diversity – of crops, of rotations, and of people. On the flip side, conventional agriculture focuses on minimizing variables and then maximizing the remaining factors. The emphasis is on scaling the production of a specific crop or animal as quickly and simply as possible.
That difference then leads to another important difference: if you are trying to scale a commodity, from a financial perspective, you focus a lot on yields. With very narrow margins (a result of commodity prices, high input costs, and various middlemen taking cuts), the goal then becomes efficiency and scale. Regenerative ag is more focused on producing higher quality (and a more diverse) products, with low chemical use and other expensive inputs, which hopefully can command a higher price in the market. You end up with a more resilient business model with lower reliance on individual markets, and your margins as a business are much stronger.
What do you think it is going to take to get to scale for regenerative ag in the US?
We are going to need more flexible and modern financing methods. Traditionally, we’ve financed and insured producers and land with very subsidized, cookie cutter lending through the USDA and conventional banks. Even though soil health has been shown to be an important element of accurate insurance pricing, it has been difficult to get this recognized by the traditional insurance players (though there may be progress on this soon!).
The same is true for lenders, who typically do not have the flexibility to factor in the real financial differences of regenerative ag. We need smaller finance groups and startups to collect this kind of data and feed it to the bigger players. This more traditional model has also disenfranchised and taken the land from BIPOC communities. We need much more equitable and unbiased financing, and we need land reparations.
We also need regional education and training around regenerative farming methods, even through existing infrastructure like USDA technical assistance programs. Regenerative growing is an extremely entrepreneurial and complex job, and we should be working to attract the innovative minds who want to work on these problems.
How do you think VC capital fits best within the regenerative ag space?
Of course we need to find replicable models to get to scale. The tension is that we will need to move to a more distributed, regional system, so the traditional scaling of a uniform solution (with short time horizons) is inherently unfit. This model in many ways defies the traditional VC model, which is looking for scale only. Ideally, there are business models and solutions that can be replicated across these regional systems.
Some of the things that probably scale best between regions are fintech solutions, some regen-specific hardware, soil and ecosystem testing, compensation for ecosystem services, and grower-to-consumer marketplaces. I also think VC capital can be used on the development of biological inputs as we transition to more regenerative ag practices, at which point you begin naturally cycling critical nutrients through the practices that are being implemented.
One note on hardware. Everyone loves to invest in software because it is high margin and comfortable (you can access it from home!). But we need actual hardware transformation, both to enable growers and to collect the necessary data to run the software. Please don’t leave hardware out!
What are your thoughts on impact measurement?
Impact measurement is essential to bridge the gap between intentions and outcomes, which is particularly crucial in regen ag. So much of this is new (or a return to the old) that we need to closely monitor effects to ensure we are really having the impact we intended. Are your practices actually improving your biodiversity? What is actually going on with your water usage over time? Are you really funding a more diverse set of growers, or did that not play out how you thought it would?
More broadly in finance, I think we are getting a lot more rigorous about impact measurement. We’ve moved from ESG and screening for bad outcomes to specific impact KPIs. The next step is not just monitoring absolute impact but also benchmarking it against what else might have been achieved with that capital. We’re also seeing firms tie compensation to impact KPIs in the same way they do with financial returns. That for me is the ultimate sign of commitment.
The unintended benefit of all this impact measurement is that it will create a great dataset when combined with financial outcomes. The more rigorously we measure impact, the more thorough we can be when testing the hypothesis that investing in impactful companies is also just a better financial decision.
What do you think NextGen wealth holders should be considering when thinking about investing in regenerative agriculture?
It’s an exciting place to be investing, and there are a variety of capital needs. If I were beginning my journey, I would think about my needs and try to fit that to the various of capital needs in the space. For instance, maybe you don’t personally need VC returns and timelines. I would also find as many ways as possible to make sure diversity and inclusion are embedded into the framework of each investment strategy.
I would also work to develop relationships with producers. There’s often a gap between what sounds good and what works well for growers. It’s also just really fun to get to know producers. When I get out on the land, I feel more nourished and alive – I can point to things I’ve purchased or invested in and I know where they came from and the story behind them.
I’m hopeful that the VC community, as well as NextGen Wealth holders, will continue to see the opportunity to channel investment into a more resilient and equitable food system. We need more creative thinkers – and doers – willing to roll up their sleeves, ask the hard questions, and deploy the appropriate capital.
