Dishing the Dirt Here & There

Thanks to its national and global potential, Local Dirt, a Madison-based online business that links farmers with consumers interested in local food, is gradually growing into an entity that belies its own name. That's fine with proprietor Heather Hilleren, whose biggest challenge is simply getting the word out because wherever she does, use of the software-as-a-service business tends to take off. If there was a simple way to explain the disruptive innovation behind the site, she'd certainly use it.

Hilleren has been good naturedly scolded at agricultural conferences like Future Farmers of America, where people ask why they've never heard of Local Dirt. It's not for lack of trying. While government grants of $500,000 and $600,000, respectively, are used to develop the site, a $1 million venture capital commitment from O'Reilly Alpha Tech Ventures in San Francisco and Boston-based Peak Ridge Capital is being used for marketing and outreach.

As Hilleren explains, getting the word out is more painstaking than people think. "Wording is really tricky, so we're always looking for ways to talk about it," she acknowledged. "So often, people say to us, 'Oh, it will be nice when you come to New York.' Well, we're already in New York. You can use the software anywhere you are."

The misconceptions are not solely geographic. Some people compare Local Dirt to eBay when it's not an auction site. Others think its website simply lists things and that interested farmers, food producers, distributors, and buyers have to call each other. Still others erroneously think Local Dirt handles shipping. So the biggest challenge in its messaging, Hilleren said, "is actually letting people know exactly what we do, which is free online marketing that also enables them to sell online."

At the moment, the service is primarily used in the Midwest, especially Madison, and by people in the Bay Area of California, where one VC partner is based, and (somewhat surprisingly) by people in North Carolina. "The site takes off when people become motivated about it and start to use it," she said. "In North Carolina, they somehow heard about us, and they picked it up."

That gives Hilleren, who has an MBA from the UW Business School, an idea of the far-reaching potential of Local Dirt. In her marketing thrust, she leaves nothing to chance, even social networking sites like

Twitter. Since many rural areas have limited broadband service, which still is a limiting factor in use of the online exchange, you'll see her at conferences and working through agricultural extension agents, local food nonprofits, and organizations like Marin Organic in California.

"We've tried a lot of different things to see what actually works," she explained. "We found that when it really takes off, it's because somebody hears that somebody else is making money by using the site. That seems to be what does the trick."

As part of her business model, she only charges wholesale buyers and sellers, who pay an annual fee of $360.

Jason Smith, of Peak Ridge Capital's Madison office, said investors liked Local Dirt's globally scalable business model and the fact that management had a lot of good relationships, both on the technical and agricultural sides. Among the people now serving on the board of Local Dirt is K.V. Rao, a co-founder of Zuora, the online subscription-billing company that quickly achieved multi-million dollar sales. Smith called the addition of Rao "a real win" for Local Dirt.

He's also pleased that no other entity is doing exactly what Local Dirt is doing. Most nonprofits or state organizations provide some information or an information portal, but he said only Local Dirt is closing the loop between buyer and seller.

Regarding the preferred exit strategy, Smith said: "I don't think that the local food supply is one of the spaces where larger food distributors are operating, but I think it complements what they are doing, and there can be many synergies, as we've already seen. Obviously, I can't get into existing strategic relationships that we have with larger players, but I can tell you that they exist."

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