Insights from Innovators
Over the years, we’ve had clients from across the US complete a wide variety of capital raises. We followed up with a few of them to hear about their experiences and the advice they would offer other businesses considering a public raise.
Mission Driven Finance
What does Mission Driven Finance do and what are its guiding principles?
Mission Driven Finance is an impact investment firm dedicated to building a financial system that ensures good businesses have sufficient, affordable access to capital. Built from the ground up with a single purpose—to make it easy to invest in your community—all our funds and structured products are designed to close financial gaps that will close opportunity gaps. We work with local and national investors to help them create the impact they want, and work with businesses and community partners to help them get the capital they need.
We have three guiding principles:
Community Connected Capital – We use a network mindset to source, underwrite, and support investments. This helps us build solutions for and with the community.
Employers as Change Agents – Impact isn’t just for nonprofits. We believe small businesses are critical components of thriving communities, and help them to intentionally use their operating expenses to create positive change.
Strength in Diversity – We’re stronger together, as a team and as a society. Diversity is not an afterthought for us but rather core to our ability to source deal flow and underwrite effectively. With a variety of lived and worked experiences, the team is collectively able to recognize untapped market opportunities and partner sensitively with traditionally underserved communities, supporting our vision of an inclusive economy that is strong and resilient.
What inspired your work and mission?
Communities need good businesses, and good businesses need capital. But the financial systems, structures, and policies in America have both intentionally and unintentionally restricted access to capital and opportunity. The result is significant wealth inequality that hinders social mobility, dampens economic growth, and fosters conditions for political instability–Mission Driven Finance can change that.
We saw bold visions, innovative enterprises, and great community programs seeking capital on the one hand, and a growing pool of impact-intrigued investors on the other, but little to connect them. So we built a team with deep impact and finance skills, and intentional diversity of thought and experience to bridge the divide between community projects and investors.
While there are increasing responsible options in public markets, these have limited intentionality and typically mean moving money out of your regional economy. Investors are hungry to support initiatives in their own backyard or issues they’re passionate about, but have few opportunities to do so. Mission Driven Finance exists for this reason: to make investing in your community a great investment.
You can read our entire interview with Mission Driven Finance in our blog.
Boston Residents Create Well-Paid Sustainable Jobs
CERO is a worker-owned cooperative on a mission to encourage composting and create jobs in the low-income Boston neighborhoods of Roxbury, Dorchester, and East Boston. It’s a small but unusually diverse team: two of the five worker-owners are African-American, two are Latinas, and one is white. Setting the minimum investment in their DPO at just $2,500—open to any resident of Massachusetts—by the end of the year CERO had raised the $100,000 they needed to go into a bank for a loan. In January 2015 they did just that, receiving a $100,000 line of credit from the Cooperative Fund of New England. Listen to our interview with CERO here.
How can an owner sell a growing, highly profitable business to the workers when they can’t pay what the business is worth? With our help, Real Pickles raised $500,000 in just two month through a Direct Public Offering, or DPO, in which it sold non-voting preferred stock to investors in Vermont and Massachusetts. Real Pickles was able to convert to a worker-owned co-op — instead of leaving the business, the former owners became equal co-owners, with more time for life. Read a detailed case study.
Sonoma West Publishers
Small Town Newspaper Uses Their Own Readers to Raise Capital
Rollie Atkinson of Sonoma West Publishers describes the outcome of their 2018 DPO, “we made a big push in the final weeks with advertising in our own newspapers to reach our DPO goal of $400,000. We actually went over the goal and we ended up with just over 200 local community investors. We can now look forward to a year of lots of community and reader outreach, new journalism projects and strengthening of partnerships around our mission of informing, educating and building our local communities.”
Why did you choose to do a direct public offering (DPO) to raise capital for the fund?
The DPO funding model allows for a broad base of local and smaller community investors. Readers and local businesses gain an extra connection and added sense of pride in the local newspaper. The DPO structure is superior to seeking a commercial bank loan or taking on larger minority partners. The structure also allows for continued independence for our editorial voice.
What were the long-term benefits of a doing a DPO?
New community investors will become better connected to our local journalism efforts via a series of live events, investor-only meetings and periodic reports from the publisher. Long term, we may seek another DPO campaign in the future, depending on the successful growth and sustainability the current investments produce or support.
Did any of the outcomes surprise you?
We weren’t too sure what to expect, since we were the first newspaper in the country to launch a DPO. We experienced some slow periods of acquiring investors, but lately as we reach our expire date, we are gaining investors almost daily.
What were some of the challenges you faced and how did you overcome them?
We are a small corporation, owned by a husband and wife. We did not hire or do any outreach for marketing or other support. We relied on our own website and newspaper announcements and some word-of-mouth from early investors. We never encountered any opposition or criticisms. Quite the opposite, we met with lots of enthusiasm and encouragement, but not everyone who said they would invest has ended up writing a check.
What were your favorite aspects of the DPO process?
We received very personal testimonials in support of our journalism and our journalists. Many investors said we are invaluable in defending democracy. Journalism is hard work, with low pay. The DPO campaign allowed us to explain our roles in the local community and a free society.
Could you share 3 pieces of advice for other groups considering a DPO?
1) Be ready with your marketing plan early. Don’t wait for state approval because the 12 months can go very fast.
2) Enlist marketing and campaign help form your best friends or local associates. Test your messages early and often.
3) Don’t be afraid to ask for money and don’t be afraid to ask multiple times of the same people.
You can read our full interview with Sonoma West here.
Cutting Edge Capital is a strategic practice of Cutting Edge Counsel.
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