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Bay Area Catholic’s startup aims to put Pope Francis’ ideals into practice

December 10, 2015
Valerie Schmalz

A former Silicon Valley venture capitalist has co-founded a company, Shared-X, which is designed to make money for investors while at the same time lifting subsistence farmers out of poverty.

This concept, sometimes called “impact capitalism,” has gained traction recently. It was the subject of a Jan. 17, 2013, Harvard Business Review essay “Social Impact Investing Will Be the New Venture Capital” and was endorsed by Pope Francis at a pontifical conference dedicated to the concept.

The idea of impact capitalism is that for-profit companies look to generate attractive investor returns while also doing good – not as an after-thought, but as a central part of their business plans. It combines the efficiencies and profits of the private sector with philanthropic objectives.

American John Denniston and Peruvian Tony Salas formed Shared-X to implement this approach, by tackling the “yield gap” in farm production – beginning with the production of high-value agricultural products, including organic bananas, specialty coffee and aromatic cocoa. Shared-X has purchased six midsized farms in Peru, the start of an agricultural endeavor that will sell crops directly to retailers at specialty food premium prices. Shared-X is already selling its organic bananas and specialty coffee.

“Subsistence farmers eat what they make,” Denniston said. “That’s a formula for poverty. The Shared-X model is intended to increase food production and farmer profits. In many emerging countries, there’s not a food shortage, only a shortage of prosperity.”

Crops in the developed world achieve approximately 80 percent of their theoretical yield potential; in the developing world, that figure is only 20 percent on average, Denniston said. “In the agricultural business, this production differential is known as the ‘yield gap.’ The Shared-X business plan is to collapse the yield gap – beginning in Peru – by deploying proven, advanced and sustainable farming techniques,” said Denniston, who is also president of the board of directors of the St. Vincent de Paul Society of San Mateo County.

Farms on or near the equator have an inherent yield advantage over farms distant from the equator because they receive more solar radiation, a key determinant of crop productivity, Denniston said.

Shared-X lifts subsistence farmers out of poverty by providing them three items: the seeds of high-performing crop varieties; a suite of advanced, sustainable farming techniques specifically applicable to the crop; and marketing assistance by selling “their harvest side-by-side with ours for a premium price” to a retailer or others up the distribution chain, Denniston said.

Shared-X purchases midsized farms from midtier farmers or wealthy landowners, never from smallholder farmers, Denniston said. The Shared-X business model resembles a wagon wheel of sorts, with the farm owned by Shared-X forming the hub, and the series of 1 or 2 hectare farms owned by subsistence farmers representing the spokes, Denniston said.

“The yield gap is a vitally important statistic relative to the alleviation of poverty worldwide because 70 percent of the world’s poor live in rural areas where farming is the main job opportunity,” Denniston said. “Closing the yield gap injects prosperity into these communities.”

Today, two of the Shared X farms in operation – an organic banana farm and a specialty coffee farm – are producing dramatically higher yields than their smallholder farmer neighbors, Denniston said.

Denniston, chairman of Shared X, and Salas, chief executive officer, bring broad experience to their company. Denniston is a former partner in the venture capital firm Kleiner Perkins.

For the past 18 years, Salas has been CEO of a Latin American agricultural consulting/management firm, with a client list that includes Dole, USAID, the World Bank, the country of Germany, and Chiquita. Before that, Salas served as the equivalent of the Peru undersecretary of agriculture. He earned his master’s and doctorate in agricultural sciences from North Carolina State University, and his MBA with a specialization in agriculture and food business from Purdue University.

Forbes Magazine writer Giovanni Rodriguez specifically praised Denniston and Salas’ firm in a July article “Can Silicon Valley Leaders Help Solve The Global Food Challenge?”

Noting the yield gap, and that some studies project a looming food scarcity for the 9 to 10 billon people expected to populate the world in 2050 that will not be solved solely by improving distribution, Rodriquez writes: “to meet the growing global demand for food this century, we will all need to get smarter about how we produce and distribute food. But where others see shared problems, people like Denniston see shared opportunity. “

Pope Francis praised the concept of impact investing in a June 14, 2014, address to participants in a conference promoted by the Pontifical Council for Justice and Peace on “Impact Investing for the Poor.”

“Christians are called to rediscover, experience and proclaim to all this precious and primordial unity between profit and solidarity. How much the contemporary world needs to rediscover this beautiful truth!” Pope Francis said.

Denniston called Shared X “an example of the type of business innovation Pope Francis is urging us to implement.”

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