Heather Hilleren is the founder of Local Dirt, a Madison-based company that uses an interactive Web site to help farmers and other producers sell their food locally to restaurants, stores and consumers.
The company recently received more than $1 million in its first venture funding from Peak Ridge Capital's AgTech Fund, based in Boston, and O'Reilly AlphaTech Ventures in San Francisco. A previous grant of $600,000 came from the National Science Foundation.
What's your educational background?
I majored in education, so my first career was as a teacher. When I moved to Madison, I worked all over the place as a substitute. I ended up doing a year of kindergarten, a year of preschool handicapped, a year teaching seventh-grade computer in Middleton, and two years of second and first grade combined, and I worked at Whole Foods Market the whole time. I taught in the morning and closed the store at night. When I became a team leader at Whole Foods, I left the schools.
Did the idea for Local Dirt come from your time at Whole Foods?
I started there when the store first opened, and they had about two dozen local farmers they were buying from. As each year went by, you would think that they would develop more relationships and buy from more farmers. In fact, the opposite was happening. Each year they were dropping local farmers. It wasn't because of quality. It wasn't because customers didn't want it; even their own market research showed that customers preferred local even over organic. It wasn't the price. It was because it was so time-consuming to do it.
Every time the produce buyer would try to buy a local food, she would have to collect all the price sheets, just like corralling cats. She had them faxed in or e-mailed to her or dropped off. So, the buying day comes, and she lays out about 20 price sheets. She has to decide who she's going to buy from, what they have, what's the price. She gets her wish list together, then she plays phone tag with them all day long, asking, "Do you still have the product? Is it still the same price?" It would take her all day long to do this. If she got overwhelmed and busy, she would just go online and order from the regional distribution center.
I didn't think much more about it until I was going back to get my MBA, and I was working with a local food nonprofit. I told the nonprofit that Whole Foods wants to buy local products, but it's just too difficult and time-consuming.
I told the nonprofit, "If you get farmers to put products online so someone can just log in and buy from local farmers first, then fill in the gaps with the regional distribution center, that's what (Whole Foods) will do because that's what they really want to do. They want to buy local products."
But she said the group didn't have the time to do that. The more I thought about it, the more excited I got. So, a week before graduation, I started the company, not knowing how difficult it would be to get it all going.
What was the first obstacle?
The first obstacle was paying for it. I tried to get so many organizations to fund it, and nobody would. A National Science Foundation grant for $600,000 ended up funding it.
How does the site make money?
We do it by subscription. Access to the services for individuals, for small farms and farmers' markets is totally free. We only charge the wholesalers, large farms that deliver to grocery stores and the like. And we never take a percentage of the transaction.
That brings in enough money?
If we were just a Wisconsin project, no. But because we are a national site, yes, then it becomes sustainable.
How has the recession affected your business?
I would say more people are becoming aware of local food because local food supports their local community. The recession helped people stop and think about buying foods from New Zealand and Mexico — and why would you do that when you can support your neighbor? There's a myth that local food is expensive, but when you go to a farmers' market, for example, you do find deals, especially at the end of the day. When it's the peak of harvest season and there are tons of tomatoes out there, tomatoes can be less expensive. And some people think local is the same as organic, which it's not.
What is the difference between organic and local?
"Organic" is a growing practice — how you grow the product. "Local" just means proximity — how far away it is.
How is Local Dirt different from a traditional online exchange site?
For one thing, it's national, and it links up local-to-local. It's in real time. This is not a product like pens where you order 100 pens and the invoice is generated. Pens don't have a season. When you order 100 pounds of carrots, when the farmer goes out to the field, something may have happened. Something may have eaten some of the carrots, and you might not have 100 pounds of carrots. Or if it's tomatoes, it may be we have a couple cool days and they're not ripe, so they don't have them. It's a constant back and forth. The site is very robust. It does a lot. This is an online exchange for people to buy and sell local food, any way they want to use it, whether it's a buying club, or a farm cooperative or farmers' market. Our biggest challenge is that people don't understand and think it's a static site. It's so much more.
You are obviously passionate about your company.
If I won the lottery and could retire tomorrow, what would I do? This is what I'd be doing. I feel like the company is making such a difference in people's lives, especially for local farmers. I feel like it's making such an impact on the community. It is very difficult for farmers to be able to find a buyer that they don't know. When they connect up to a new buyer, it's just not the connection, but it's also the education that goes along with it, learning about how this food is grown and raised. You know, I've actually had the same career the whole time. I started out as a teacher; I was attracted to Whole Foods because of the education that went along with that; and now it's the same. I still feel I am bringing knowledge to people and helping them rediscover things.