The Flexible Capital Fund, L3C (the "Flex Fund") provides risk capital in the form of revenue-based financing to growing companies in Vermont's food system, forestry and clean technology sectors. These businesses are critical to helping put food on our table, heat in our homes and businesses, and providing clean, renewable energy for our communities — "essential" businesses in my mind.
Over the past weeks, the Flex Fund has been hosting weekly calls with our portfolio company entrepreneurs offering them an opportunity to connect as a community, discuss business pivots needed during this crisis, talk about what challenges they are experiencing, what resources they'd like to share or need, and how we might help them through this time. During our calls, we've been bringing in subject matter experts to share perspectives and advice. Lawrence Miller joined our call recently to bring perspective as a business coach, entrepreneur, investor and former senior advisor on health care reform for our governor, as well as former Vermont secretary of commerce and community development.
Miller wrote in a daily update on COVID-19 for the business community, "What we learned post-Irene was that all debt wasn't a great solution for all businesses. We need to be thinking about equity and near equity solutions for balance sheets that can't just take on a bunch more debt, regardless of federal guarantee or extended repayment terms."
My takeaway is that there will be a lot of low-cost debt out there being made available to entrepreneurs trying to survive. And, we'll need it. We'll need every kind of capital to get us through this economic challenge. But too much of one thing isn't always good. For many businesses accessing low cost debt, there is the unintended consequence of businesses becoming over-leveraged to the point where it isn't COVID-19 that shuts their doors, but rather too much debt (even if it's zero percent interest). We need now, and will need in the future, more flexible equity and equity-like financing instruments (and investors) to support businesses that are critical to our communities and food system infrastructure. We will also need this kind of capital to be patient. There just isn't enough of that kind of risk capital right now. And, we have a chance to change how that capital is deployed — in a more just, equitable and impactful way — where investors and entrepreneurs are on equal standing and working in partnership to grow businesses that do good rather than harm.
Other things I'm seeing and hearing is that our entrepreneurs need advisory capacity in legal and financial affairs (e.g., managing cash flow, layoffs, etc.), and in crisis communication and marketing. It's critical that businesses proactively communicate with their staff, vendors, investors, customers and connect with them in a human way — as we are all in this together. We really need to remember the human side to all of this — the entrepreneurs, farmers, business owners are people. And, right now I think the biggest need for our entrepreneurs is for personal coaches and wellness practitioners. They can't navigate their business through these times if they aren't well emotionally and physically. They have to first ensure they themselves are healthy, then their family, and then their organization and stakeholders.
Advice to Entrepreneurs
Some good words of advice to entrepreneurs from a Social Venture Network webinar I was on recently about COVID-19 with Josh Knauer of Jumpscale:
- Don't ignore your own physical/emotional needs; be ready for the marathon — not just the sprint; practice self-kindness and breathe;
- Take action — but don't rush;
- Seek counsel and advice from your ecosystem;
- Think about how your company's products/services can be of help in the crisis; helping society as a whole; sell at a fair price, but don't give away;
- Talk to your elders who may have been through the crisis."
What can the philanthropic community do?
- Support business and health advisory organizations. We need capable, competent advisors working one on one with these entrepreneurs to support them in emergency planning, business model pivot, communication and messaging to their stakeholders — as well as mental health/personal wellness.
- Continue (and increase) financial support for intermediaries offering alternative financing beyond straight debt — e.g., help with loan loss reserves for creatively structured debt, or additional capital for equity investment structured in alignment with a company's business model.
- Don't hold back. Now more than ever, we need you to use your program related investment and mission related investment dollars to invest alongside other intermediaries and investors using equity as the investment structure and in support of the critical impact businesses that need risk capital to survive and then grow when we get through this crisis.
- Grants to support community building among entrepreneurs — e.g., CEO groups, bringing in expertise to support groups of entrepreneurs in webinars, discussions, etc.
What can we all do?
One thing that we all can do to help entrepreneurs that are essential to a vibrant economy is to use our own networks to remind people during these uncertain times to support our local businesses. They were here for us before COVID-19 and we want them to be here for us after. Every time we make a purchase, we make an investment. Let's invest in our local businesses that are feeding us, keeping us warm, and keeping the lights on. Let's all use our voices, our social media and network power to encourage our friends, colleagues, family, customers, vendors, acquaintances to shop online at our portfolio companies' websites, to order pick-up or delivery, or buy a gift card, and then "tell a friend." Pay it forward.
Janice St. Onge is president of the Flexible Capital Fund, a mission investment fund providing risk capital to growing businesses in Vermont's food system, forestry and clean technology sectors. The opinions expressed by columnists do not necessarily reflect the views of the Brattleboro Reformer.