12 X 12 connects retirees and other investors moving to the Triangle region of North Carolina with young farmers and local food entrepreneurs in that community. The mission of 12 X 12 is to strengthen community while promoting economic development by linking human and ﬁnancial capital across generations.
We know that many young people today command those crucial forces of enterprise – ingenuity, invention, hard work and thrift – the true springs of economic growth. Yet most lack the ﬁnancial resources needed to support their vision and to undertake a new business. 12 X 12 enables these local farmers/food entrepreneurs to use the power of their new ideas to solve problems and change the world.
12 X 12 also offers recent transplants to North Carolina, as well as anyone else who wishes to participate in this innovative program, a way to connect to their community and to the green, sustainable economy that is ﬂourishing in NC. 12 X 12 helps retirees connect to dynamic young people who can beneﬁt from their wisdom as well as their cash.
12 X 12 is an extension of Slow Money NC, a key player in the national Slow Money movement. Across the USA, thousands of Americans are afﬁrming a new direction for the local food economy. And they are connecting to Slow Money.
Inspired by the vision of Woody Tasch’s Inquiries into the Nature of Slow Money: Investing As If Food, Farms and Fertility Mattered, published in 2008, Slow Money is bringing people together around a new conversation about money that is too fast, about ﬁnance that is disconnected from people and place, and about how we can begin ﬁxing our economy from the ground up… starting with food.
Through Slow Money National Gatherings, regional events and local activities, more than $21 million has been invested in hundreds of small food enterprises around the United States over the past three years. Seventeen local Slow Money chapters (including one in France) and several investment clubs have formed. Slow Money events have attracted thousands of people from 36 states and 9 countries. Almost 24,000 people have signed the Slow Money Principles. The ﬁrst international Slow Money investment—a $20,000 loan to a solar dairy in Switzerland—has been made. Inquiries about chapter formation have been received from Canada, Australia and Japan.
In North Carolina Slow Money NC is putting these ideas into action in a big way. As of 2014, over 125 loans have been made to 55+ Slow Money North Carolina food entrepreneurs and/or local food businesses around the state totaling over $700K. Thanks to the irrepressible leadership of Carol Peppe Hewitt, Slow Money NC is one of the most dynamic local chapters of Slow Money in the USA.
HOW THIS WORKS
12 X 12 investments typically are loans with a 12-year grace period before repayments begin. Repayments then take another 12 years.
Thus, it requires both investors and entrepreneurs to take a long-term perspective that is beyond the parameters of most banks, government programs or not-for profit organizations. While we welcome and accept with gratitude, any donations, 12 X 12 itself receives no cash for investments and makes no loans; we are but a matchmaker.
At the heart of each new connection is a 12 X 12 “peer-to-peer” direct transaction. While the terms of each contract are worked out by the parties themselves, typically the retiree social investor gives the young social entrepreneur $6,000 (or a multiple or fraction thereof.) After 12 years the the entrepreneur begins a 12-year repayment period.
In a world where there is no inﬂation the entrepreneur would pay back $1,000 per year. The investor would have doubled his money in 24 years. That’s a 3% compound annual return.
Our hope is that the 12 X 12 entrepreneurs can create business models that:
1. use the planet’s resources of soil, water, air, and energy sustainably
2. serve and delight customers with quality food produced with integrity, and
3. treat employees, suppliers and competitors fairly.
Our hope is that investors will experience great satisfaction from the connection to, and involvement with, these compelling young entrepreneurs pursuing high-risk endeavors with potentially world-changing beneﬁts.
Financially, the return on investment is patterned like a longevity annuity, though the payment is not guaranteed by an insurance company, and payments last for only 12 years, not for life.
A 12 X 12 investment may provide welcome income to the retiree
whose savings, which seemed ample at age 64, no longer generate enough purchasing power at age 77, due to higher-than-anticipated levels of spending and inﬂation.
Inﬂation is an issue for retirees trying to preserve the purchasing power of the savings accumulated from a lifetime of working over perhaps several decades of retirement.
Therefore, repayments will be indexed for inﬂation using the best measure we have: the chain-weighted Consumer Price Index compiled by the U.S. Bureau of Labor Statistics.
For example, if inﬂation rose 3% a year for 12 years, then the ﬁrst payment in year 13 would be $1,426 instead of $1,000. Subsequent payments would rise with each year’s inﬂation as measured by the chain-weighted CPI. This is only fair. Without adjustment the retirees would receive $1,000 but it would only have the purchasing power that $690 had when the loan was made. By indexing the payment amount to inﬂation the retirees don’t lose out and the entrepreneurs don’t beneﬁt merely from changes in the level of prices.
Entrepreneurs must learn not to be harmed by inﬂation and are in a good position to protect themselves. As the purchasing power of the dollar falls entrepreneurs must raise the selling price of their services or goods to keep pace. If they do, they will be able to generate the cash needed to repay their investors in real terms, that is, adjusted for inﬂation. The investor’s annual return will be 3% plus the inﬂation rate over the 24-year span of the investment.
HOW 12 X 12 GOT STARTED
On November 5, 2012 The Abundance Foundation of Chatham County NC held a Pecha Kucha night at the Top of the Hill Back Bar in Chapel Hill. As Paul Finkel, an early and invaluable member of the Slow Money NC community, was leaving after a ﬁne evening, he spoke with Mary DeMare who was working the door. She had been the first General Manager of Chatham Marketplace, our wonderful local grocery co-op; and was then working for the Abundance Foundation and at a retail store in Pittsboro. She and her partner Dan Shields have started Fatty Owl Farm and were raising rabbits. Mary explained to Paul that with their low-wage jobs it would take them at least 3 years to save the $8,000 they needed to expand their operation.
He was stunned. Here was so much talent, and while there are always obstacles to pursuing one’s dream, the most daunting for Mary and Dan was a relatively small amount of start-up capital. And here was so much “human capital” as economists would say, that was locked into a “sub-optimal” use. And “human capital”– people like Mary and Dan who have the skills, passion, intellect, and initiative to add more value to our economy and community–is not easy to find. Add to that a compelling and business-worthy vision– to bring more rabbit meat to an eager and ready customer base of professional chefs and home cooks–and their business model just made sense. All they needed was an angel investor to provide the ﬁnancial capital to jump-start their expansion. Paul decided he would like to be that investor. So he went home, ran the numbers, and proposed a new, untried, but inventive financing structure.
Then he met with Carol Peppe Hewitt, co-founder and leader of Slow Money NC, and she liked the concept as well. They decided to tuck this under the widening umbrella of Slow Money NC, and in January 2013 Slow Money NC lender and 12 X 12 Founder, Paul Finkel, made the first ever 12 X 12 Slow Money NC loan to Mary and Dan for $9,000 – a 24-year loan with the first repayment starting in 2025!
It wasn’t long before Paul found, yet another talented farm team that had a grand scheme but inadequate capitalization. 12 X 12 Slow Money NC loan #2 went to Jason and Haruka Oatis of Edible Earthscapes farm for a walk behind tiller.
WHERE WE ARE NOW
The idea is novel. To some it may sound bizarre. But to its creator, retired financial executive, Paul Finkel, it just made good long-term investing sense.
We are happy to meet and talk with young entrepreneurs and retiree investors about this new investment tool. Send an email to firstname.lastname@example.org and we can connect you to Paul to talk more about this history-making new concept.
Either way, let us know who you are so we can add you to our fast-growing list of supporters and friends of Slow Money NC who are interested in this exciting new investment model.