Move over HOV lanes, Toronto-based social enterprises are the next big news related to the Toronto Pan Am/Parapan Am Games 2015Read More ›
Insights from the Slow Money National Gathering – Part 1
A few weeks ago, over 700 attendees from five countries and the vast majority of US states met at the third annual Slow Money National Gathering.
Slow Money is a principled movement to drive patient capital towards local, sustainable food enterprises, farms, and food systems. The movement represents an intriguing grassroots subset of the impact investing sector, focused on the practical ability of individuals to invest in the very soil of their local communities, as a means of achieving a healthy, resilient, restorative economy and society. For a more fulsome description, you can view Slow Money principles in pictures or words.
In contrast to its name, the Slow Money movement seems to be moving quickly since its official founding in late 2008. There are a number of insights gleaned from the National Gathering, offering lessons for careful consideration amongst social finance practitioners in Canada.
The Slow Money movement is moving capital. Beyond moving people and changing minds, Slow Money is moving capital into viable enterprises. Since last year, over $9 million has been invested in local, sustainable food enterprises across the United States. A total of $4 million was invested in ventures that pitched to the delegates at last year’s gathering, and $5 million has been invested directly from local Slow Money chapters.
There are many viable local impact investment opportunities in sustainable food and agriculture. The Slow Money entrepreneurs showcase featured 30 high potential enterprises from the United States and Canada. (Foodtree of Vancouver was our lone representative.) At first glance, the vast majority of these ventures demonstrated positive impact, presented bankable business models, and offered attractive investment opportunities. These presentations further cemented a view that sustainable agriculture will lead the way for opportunities in the impact investing industry, alongside renewable energy (including energy efficiency) and affordable housing.
In addition, the entrepreneurs showcase also raised an interesting prospect for potential local investment opportunities, particularly in Ontario. The broader agriculture sector in Ontario employs 164,000 Ontarians, and the sustainable agriculture movement is growing deep roots in the province, driven by innovative, dedicated entrepreneurs, motivated investors, and membership organizations from the Ontario Federation of Agriculture to the Organic Council of Ontario. The presenters at Slow Money had much in common with emerging enterprises in Ontario and across the country. A viable and sizable local sustainable food sector offers great potential to invest in agriculture enterprises that addresses its needs.
Ultimately, these first two insights give hope to those seeking to build and identify the pipeline of impact investment opportunities in Canada.
Local investors are experimenting with innovative, high potential financing models. There also may be interesting lessons learned from some of the financial models pursued by Slow Money movers, including grant financed investment funds and local investment clubs. One of the interesting financial models presented at the conference was the Soil Trust, an investment vehicle that will provide guarantees, seed capital, and co-investment capital for Slow Money investors and funds that are emerging around the country. What is most intriguing about the Trust is that it is a non-profit investment fund that is entirely grant-financed by small donations from individuals (target: ~$25 per person) that are aggregated for larger scale investments. The objective is to create a permanent, self-sustaining fund that is at least partially financed on the returns generated by its investments.
The conference also profiled relatively small-scale investment clubs for local, sustainable food enterprises placing capital in deals sizes of between $5,000 and $20,000. These investment clubs, like the No Small Potatoes Investment Club, allow individuals (retail investors) to pool capital in relatively small amounts (~$5,000) to provide larger amounts of financing to potential ventures while spreading risk amongst a larger group of investors.
In general, these financing models seek to maximize the ability of individuals to invest, which is one of the current structural barriers of the impact investing movement in Canada and around the world. Although exploratory work would need to be done to ensure compliance and shape these models for a Canadian context, these examples could present relatively simple models to organize impact investing within appropriate securities regulations. For example, instead of creating or contracting higher cost intermediaries, foundations could form sector or region specific impact investment clubs to pool due diligence resources and investible assets to make direct investments in individual ventures and/or larger opportunities. Importantly, there are allowances in existing securities regulations in Canada for private investment clubs [PDF], but more research would be needed to determine their applicability for foundations or retail investors.
Part II of this post will explore how to build a coalition around a slow food movement, and ways to get foundations involved. Stay tuned!