When Mark Jaffe started The Fresh Connection, connecting local small farms with different outposts in New York City, he had limited funding and no business training. But with his real world experience he knew what the farm-to-table food craze was missing and he set off on a mission to fill the gap. Hungry spoke with Mark about financing challenges and finding his niche in the local food movement.
HM: HOW DID YOU GET INTO THE FOOD DELIVERY AND LOGISTICS BUSINESS?
MJ: Growing up in the suburbs of New York City, I thought my food came from the supermarket, and never really thought about it beyond that. I started getting really interested in where my food came from while attending school in the Pacific Northwest.
Then, in 2008 I was living in Brooklyn, and I got this job driving a truck for a food distributor. It was a job just to have a job. But it brought me closer to my interest in food and farming.
There I saw there was this huge gap in the local food system. Demand for local produce was really ramping up. But people were not putting the proper amount of thought into figuring out how they were going to get the produce from Point A to Point B. They thought it was a given.
So, in 2012, I started doing part-time deliveries out of the back of my car. By 2013, I was working for myself full-time. I focus on that last mile—getting food from the farmers to places throughout the city.
HM: DIDN’T THE LARGER FOOD DISTRIBUTORS ALREADY HAVE THIS COVERED?
MJ: They weren’t paying attention to this niche. Large distributors are not traditionally interested in smaller farms—it’s not worth it to them. And the culture of large distributors is very different. The produce takes the distributor’s label. It may be marketed as “local,” but you lose that direct farm to customer transparency.
So smaller farmers often have to do deliveries themselves. This takes time away from the actual farming. Many farmers get to the farmer’s markets but don’t want to spend their day driving around making deliveries. So I fill that gap.
HM: HOW DID YOU SET UP YOUR ORIGINAL NETWORK OF FARMERS AND WHOLESALERS?
MJ: I work as a third party freight handler, so I’m working with farmers who have the customers in wholesale or business and need someone to make the deliveries.
Some of my business came from connections I had from working previously in the industry. But a lot of it came from word of mouth. I would go to Union Square, talk to the farmers who had wholesale accounts. I participated in local food conferences and events.
HM: SO, NO BUSINESS SCHOOLING?
MJ: I did do this business boot camp through the Fair Food Fund in 2014. It was helpful to me, being able to wrap my head around a break even analysis, formulating my production. It would have helped to go into the business with someone who had business experience. But I’ve always been a trial by fire kind of person, so I just started doing it. I’ve taken my share of bumps as I’ve gone along.
HM: HOW DO YOU GET FUNDING?
MJ: I got $10,000 in seed money from my folks and have gotten some injections of help from them as well as my fiancée as I’ve gone along. I’ve also gotten a few loans for operating revenue from Accion, Kiva Zip and OnDeck. I’m in the process of starting to raise some more legit financing now. My next stage of growth is to move into a proper warehouse space so I can carry more products from more varied producers.
HM: CAN YOU TALK A LITTLE MORE ABOUT THE DIFFERENT LENDING OPTIONS YOU USED?
MJ: Accion is a micro lender that does lending for small businesses that have trouble getting loans from traditional lenders. A client of mine suggested them. It’s a 12% interest rate though. I just made the last payment.
Kiva is a crowd funding sourcing lender. You get 30 independent people from your network to lend to you, then Kiva opens it up to their lending circle. They do matching of different kinds, so a lot of the contributions I got ended up being tripled. There’s no interest.
OnDeck is an easy access lender with an onerous repayment schedule. I went to them in a tough time. It’s a fast approval process, but they take a daily withdrawal from my bank account, it’s a higher rate and a 9 month repayment plan.
I found out about OnDeck through Fundera which is a platform for researching financing opportunities. You put in what you need and they tell you what companies have the loan products that fit your needs.
HM: ARE YOU TURNING A PROFIT OR TAKING SALARY?
MJ: I was on pace to turn a profit last year but one of my main client’s business torpedoed which torpedoed my production for all of last year. We’re on pace again to move into profit this year.
But since I started doing this full time I’ve been taking a salary. It’s what needed to happen—I didn’t have any money lined up.
HM: WHAT HAS BEEN YOUR GREATEST CHALLENGE?
MJ: It’s something inherent in the food industry in general and specifically in distribution—it’s a low margin, high volume business. I started out not properly capitalized, so getting enough capital to do the volume I need is my biggest challenge.
We’ve got projections that show healthy growth in the next 5 years. Everyone thinks it’s a great idea, but it’s not the kind of thing that’s super sexy to investors. It’s a patient investment with slow profits.
I could continue to bootstrap it—give the lowest investment for the lowest return, but for real growth we need investors. Investments can come from different sources—even from the city, state or federal level. I have a federal grant which helps. It’s a matter of getting the timing right, capturing private and public funds.
HM: WHAT ADVICE WOULD YOU GIVE YOURSELF IF YOU COULD GO BACK TO THE BEGINNING?
MJ: I would tell myself to find someone to partner with on this. Don’t go it alone. I got my hands dirty and jumped right in and made a name for myself. But, on the other hand, better preparation and partnering with someone who had business skills might have made a difference.
HM: SOUNDS LIKE YOU’RE REALLY PASSIONATE ABOUT WHAT YOU DO.
MJ: I really enjoy being part of the underbelly of the city, what makes it run. I love going in the early morning hours to the restaurants before they open, feeling the pulse of the city. I love being a part of all that.