3c hapter - Index of

168 Locavesting
When the cooperative struggled with cash fl ow in the late 1990s,
it couldn’t fi nd reasonable terms from banks. Instead, it turned to
friends and family. It created a new class of nonvoting preferred
shares, dubbed Class C, that paid an 8 percent dividend and raised
$3 million. That was followed by the Freedom Fund, a series of shortterm
loans to a small group of members and nonmembers. The
fund raised about $1.7 million and paid lenders up to 14 percent
interest. The Freedom Fund, says Eric Newman, Organic Valley’s
vice president of sales “was critical to our stability and growth.”
Organic Valley was growing quickly, and in 2004 it needed to
raise more capital. The co-op’s fi rst impulse was to try and raise
a couple of million dollars from “green” funds that might be
attracted to its mission, recalls Diane Gloede, Organic Valley’s
investor relations manager. The co- op created a new series of
nonvoting preferred shares, called Class E and priced at $50,
that would pay a 6 percent annual dividend. The mutual funds,
however, weren’t interested if the shares weren’t registered and
publicly traded. So Organic Valley turned to another potentially
simpatico group: the residents of its hometown, La Farge, a sleepy
Kickapoo River town with a population of around 800. The co- op
took out ads in local newspapers and, by time the year was out,
had sold almost $3 million worth of shares to area investors.
Buoyed by the reception, the co- op broadened its advertising
to a radius of 60 or so miles around La Farge and promptly raised
another $3 million the next year then $4 million the following year.
Reaching out to its core customers, the co- op began advertising
the shares in food co- op publications around the country and was
inundated with buyers. By the time it closed the offering in January
2010, Organic Valley had raised an impressive $43 million from
1,780 investors in 40 states and the District of Columbia.
The funds were used to position Organic Valley for its next
stage of growth. The co- op built its fi rst real headquarters, consolidating
eight different leased locations around the area, and erected
a state- of- the- art distribution center. It also invested in hardware and
software systems. Between 2004, when the Class E shares were introduced,
and 2010, when the offering was closed, Organic Valley’s
sales tripled from $208 million to more than $600 million.