Thoughts from my first ever Series A funding investment
It was quite a venture.
Hey reader,
Today’s essay is the story of my inaugural time participating in a Series A funding round, where I invested in a private company for the first time. I don’t know if it was the right decision or not. But I feel good about having had the experience.
At the very least, investing is one way to maintain a remote-first lifestyle, and it’s something I’ve enjoyed diving into over the last decade or so. Note that this is not intended to be financial advice or encouragement, simply a recap of my recent experience.
Community shoutouts
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This week’s resource is the Need to Know newsletter for Quartz, one of my favorite digital publications. Right now the newsletter is focused on COP 27 in Egypt, though it and Quartz more broadly cover the economics of the future of work in the most comprehensive and enjoyable way I’ve found. I’ve been a subscriber for about 2.5 years and look forward to their content daily.
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Now, let’s plant some seeds.
Thoughts from my first ever Series A funding investment
Not long ago, I invested in a Series A funding round for Steward Holdings, Inc., a public benefit corporation (B-Corp) based in Delaware. I hadn’t planned to do so. But after immense research and a lot of second-guessing, I put a four-figure amount into Steward Holdings, Inc. in exchange for a small number of shares of the private company.
This was a learning process for me, as I’d never invested in a privately-held company before. Here is the process, and what I learned by going through it.
How this investment came to be
Steward lends money to regenerative agriculture businesses and small farms to help them scale towards profitability. The company seeks “lenders” to loan money on 9-month terms, with a 4 percent return on the money loaned. The company then lends that money to the small businesses that apply and meet its standards for funding.
The company is a Certified B-Corp, a company that functions with a mission to make the world better. According to Bcorporation.net, obtaining B-Corp certification is a “designation that a business is meeting high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.”
Here is Steward’s mission, as per its Instagram bio:
Equipping regenerative farms & food producers with the capital they need to grow.
I first learned of Steward about 18 months ago through an article on the future of food systems (my wife Alisha has worked her entire career towards building more sustainable food systems, so I’ve become quite adept at least at acting like I know what I’m talking about in regards to these issues and the broader conversation).
After following Steward on Instagram for a while and reading its newsletter, I trusted that the company was following its mission statement and showed promise. About nine months ago I put $1,000 into its primary lending fund as a test to see how the process works. So far, it’s worked as promised — I’ve received quarterly payouts of interest from the loan. I’d planned to add more funding into the next loan term, but then a fork in the road emerged.
This fall, the company sent out a newsletter noting that it was looking for both accredited and a limited number of non-accredited investors to purchase shares in the company, in order to help it reach further scalability. I am a non-accredited investor, as I don’t meet the requirements to be accredited (net worth of over $1 million excluding primary residence and annual income over $200,000, or working as a licensed investment professional.)
I responded and asked for information, and was sent a Private Placement Memorandum, or PPM. Here is an example PPM. Though, the PPM I received from Steward contained much more information than this example.
The PPM noted that the company would accept investments for about a month after I received it. After reading through this document I decided to hold off and see what happened over the coming weeks.
How the Series A funding process went
To be straightforward, I’d replied to Steward’s ask for investors without fully understanding what a Series A funding round is. My research after expressing interest led me to understand this much:
Companies seeking funding after seed capital (the initial round of funding used to get a start-up business off the ground) often embark on public or private funding rounds. Private funding rounds are tracked using the letters A, B, or C, with “Series A” being the company’s first round of venture funding following the initial seed funding.
This attracted me to the offer knowing that I’d be among the first investors. I also suspected, without facts to confirm this, that this would be the only round that would allow non-accredited investors to participate. This is likely correct, as research shows that dealing with non-accredited investors can be expensive and time-consuming, only to lead to smaller investments from people who aren’t as experienced.
I certainly fit that bill.
Over the next two weeks, my mindset on whether or not to invest shifted at least once per day. A few days before the funding round closed, I received another email from the company following up on my PPM and asking if I planned to invest.
I still held off, for one more night. I slept on the decision one last time, mulling over these pros and cons:
Pros:
I firmly believe in the company’s mission, as agriculture is responsible for 24 percent of global greenhouse gas emissions.
Reshaping the food system is the only way to drastically cut those emissions and make all life on this planet healthier as a result.
Steward has a great business model that helps so many people. There is absolutely potential for massive growth there.
Based on my income level and non-accredited status, the company set a bar on how much I could invest. The minimum investment was about 25% of this bar, so I could invest a small amount without the risk of it impacting my family’s lifestyle, even if the company pulled a Sam Bankman-Fried which resulted in its complete collapse.
I’d gain the experience of having participated in venture funding for the first time, a massive step forward in my goal of impact investment.
This would diversify my portfolio beyond the stock market, REITs, and my house.
Cons:
The company has not yet demonstrated significant financial growth. I worried that this investment round was a ruse to keep the company going.
The money I would invest would be pulled from my savings toward an electric vehicle.
I might lose it all and never see that money again.
Making the decision to invest
In the morning, I headed to my coworking space. This certainly worked in Steward’s favor, as I find coworking spaces to be very inspiring and motivating. I’m better able to think clearly and forward in coworking spaces than anywhere else.
At the end of the work day, I revisited the PPM and the email chain with Steward. I said, “Fuck it, let’s go.”
No risk, no reward, right?
The paperwork was entirely digital and hosted on the company’s website. I worked through it, including signing the required agreements and risk waivers, in about 15 minutes. It involved identity and bank account verification, as well as reading through what the shares entitled me to, agreeing to their cost, and affirming that this investment would not cause me financial ruin if it were to go belly-up.
All in all, it was much simpler than I’d anticipated.
After inputting my bank account details for the wire transfer of funds, I actually breathed a sigh of relief. I felt confident in the decision, knowing that at the very least I’d put my money where my mouth is. There’s more dignity in having tried and lost than having sat on the sidelines wondering, “what if.”
Time will reveal the ultimate wiseness or foolishness of this decision.
Mountain Remote news and further reading
The often overlooked truth of digital nomadism is that it can have a negative impact on local communities when not done properly. This article from McSweeny’s, entitled “My remote job gives me the freedom to displace people all over the world,” takes a hilarious look.
If you haven’t watched “The Scale of Hope,” a Patagonia film that documents the life of climber and former White House Climate Advisor Molly Kawahata, I recommend checking it out. It’s riveting and inspiring.
Thanks for reading, see you next week!