Starting a business is hard enough. But try doing it in a war-torn country short on infrastructure and long on danger.
For Kimberly Jung, a former army engineer officer who led a platoon and served on reconstruction teams in Afghanistan, those challenges come with the territory. Jung is CEO and cofounder—along with three other vets, two of them women—of Rumi Spice, a year-old company that works with rural Afghan farmers to produce saffron for sale in the U.S.
Together, they are trying to achieve what untold billions in U.S. aid has failed to accomplish: economic stability. “We’re building the foundation of peace through commerce,” says Jung.
Jung (pictured above) and her team are among a new breed of veteran-entrepreneurs that are going on to establish businesses, often with a social impact. And an ecosystem is emerging, from accelerators to funders, to support their unique needs.
New Challenges for Vets
Veterans have always gravitated towards entrepreneurship. After World War II, roughly half of all returning veterans went on to own or operate a business, according to Syracuse University’s Institute for Veterans and Military Families. But the Greatest Generation faced fewer challenges, at least when it came to funding: the economy was booming, community banks were thriving, and loans were plentiful.
Military veterans returning from recent conflicts in Iraq and Afghanistan faced a starkly different environment: an economy roiled by financial crisis, consolidation and regulation in the banking industry that left fewer banks willing to make small business loans, and a proliferation of pay day lenders eager to pick up the slack.
At the same time, veterans entrepreneurs lack access to the well established support networks enjoyed by their venture-backed civilian peers. Just 25% of the post-9/11 generation of veterans have gone on to start businesses. (For more, see this infographic)
Yet for all the hurdles, today’s veterans may be uniquely suited for entrepreneurship, says Mark L. Rockefeller, a former air force officer who served in Iraq and is now CEO of Streetshares, a lending platform for veteran entrepreneurs. They’re comfortable with technology and are used to being decisive in complex, uncertain conditions, he notes. And as Millennials, many are looking for meaning in their lives. “Those that have self selected to be in the service will self select to have a social impact,” he says.
Streetshares is part of a growing ecosystem offering crucial support to today’s veterans as they transition into civilian lives as entrepreneurs. Since it was founded in 2014 by Rockefeller and Mickey Konson, a former executive with Capital One, the company has made more than 250 loans totaling nearly $5 million to veteran-owned businesses, at interest rates ranging from 6% to the mid-20’s.
Like many online peer-to-peer lenders these days, Streetshares allows individuals to invest (at least those that meet the accredited investor definition). However, quite uniquely, almost half of its investors are veterans themselves looking to support their peers. Streetshares itself loans the first 5% of each loan, giving it the “skin in the game” that many online lenders avoid.
Business in Afghanistan is rooted in the concept of “wasta,” or reputation and goodwill
That model gives Streetshares a leg up, says Rockefeller, who’s found that default rates plunge by 50% when a veteran loan is backed by a veteran funder. “When they’re in the trenches, these guys and gals would do anything for each other. It’s the same with lending,” he says.
Streetshares has lent to businesses such as Combat Flip Flops, a vet-owned company that makes footwear and other products in conflict areas and donates a part of its sales to causes, such as educational programs for Afghan girls or landmine clearing efforts. Another borrower is the Janz Corporation, a vet-owned company that makes portable medical equipment designed for emergency response on the battlefield.
Other sources of capital for military veterans include Veteran’s Opportunity Fund, a venture capital firm based in Maryland, and Hivers & Strivers, a group of angels investors with military backgrounds that led a recent $100,000 seed round for Rumi Spice. In addition, accelerators such as Vet-Tech, Victory Spark, Bunker Labs and a program run by the Dept. of Veterans Affairs cater to veterans.
Giving Rural Farmers an Export Market
Rumi Spice grew out of Jung’s experience in Afghanistan, where she conducted outreach to women living in rural provinces. She found they did not want to talk about politics, but more pressing concerns such as hygiene and economic development. After returning from service and completing an MBA at Harvard, Jung was talking with a friend and army colleague, Keith Alaniz, when the pair hit on the idea for their venture, named after the Persian poet Rumi. Two other colleagues from Afghanistan, Emily Miller and Carol Wang, joined them.
The cofounders wanted to offer Afghan farmers an alternative to growing poppies for opium. Both crops—poppies and the crocus flowers from which saffron is made—thrive in the arid climate. Afghanistan makes some of the highest quality saffron available in the world, and farmers can make up to six times more money growing saffron due to the high levels of manual labor required to process it (it takes about 200,000 crocus stigmas to create one pound of saffron). But rural famers have lacked access to export markets for the spice, giving them little incentive to grow it.
Rumi Spice’s mission is to connect those farmers with global markets, starting with the U.S. Its saffron is already carried by high-end stores and restaurants, including Daniel and the Union Square Hospitality Group in New York. The company has just completed construction of a processing facility in Afghanistan that will employ local workers to process the flowers it buys from farmers into valuable saffron. And Jung and her team are looking to expand into other spices.
Rocks and Reputations
When it comes to funding, Jung has demonstrated the fast thinking resourcefulness that Rockefeller attributes to today’s veterans. After winning a business plan competition which netted a small sum, she and her team raised about $33,000 on Kickstarter, enough to get the processing center in Afghanistan up and running and to hire a guard. The Hivers & Strivers funding allowed the company to build the new facility and will help it expand.
“Hivers & Strivers and the veterans behind it have been a rock to the veteran entrepreneur community,” says Jung, who adds that the group provided not just seed capital but valuable connections.
Jung recently flew to Afghanistan to oversee the crocus harvest and nurture relationships with her farmers, who now number 34. Her trip also included a cooking session with Afghan women, where they shared their favorite saffron recipes. “They work with us because we have good relationships with them,” she says.
That’s all part of doing business in Afghanistan, says Jung, which is rooted in the concept of “wasta,” or reputation and goodwill. The same might be said for the deep bonds that connect the veteran community of entrepreneurs and funders.