Fund 2.0 - Flexible Capital Fund

The Flexible Capital Fund, L3C (the Flex Fund) is for-profit, impact investment fund and Community Development Financial Institution (“CDFI”) with over 11 years of impact investing experience. We are a women-led and run intermediary with over 60% women as member investors and women comprising four of our five Board of Managers and two of our three investment committee seats. The Flex Fund provides flexible risk capital in the form of revenue based financing, debt and equity, to companies in Vermont and New England’s food system, forestry and climate technology sectors. These are the companies that align with our mission of “creating healthy food systems, preserving working lands, building resilient communities and addressing climate change through regenerative solutions and equitable workplaces.” We are the only CDFI in New England with a focus on revenue based financing as an alternative to equity investment.

We launched the Flex Fund in 2011 just after the Great Recession and, as we look ahead to 2022, it’s likely we’ll end this version of the Flex Fund in similar times. We’ve seen our portfolio entrepreneurs and CEOs weather the Great Recession, lack of access to risk capital, an ongoing global health pandemic, increasing wage pressures, supply chain challenges, and personal loss.

We’ve learned some valuable lessons from doing this work, and directly from these brave and innovative entrepreneurs:

Yes, it is possible to have financial returns while having positive impact!
A larger fund size is essential to cover true cost of managing fund.
Impact investment capital is needed now more than ever!
Collaboration among investment partners and across geographic lines is critical.
We need all kinds of capital, grants, debt, equity, and everything in between working together to solve our most pressing issues.
Companies benefit from longer payback times to maximize impact.
We invest in people, not companies. Empathy, understanding and humanity is required.
Investing is a team sport!

We invest in people and their companies that are “built to last” versus “built to flip.” Empathy, understanding, and humanity are all required in this work. In 2021, the Flex Fund was honored to be named by Integrated Capital Investing as among the Transformative 25 Funds of 2021. This list of funds, banks and initiatives who are making the finance system work for people and planet is meant to be an inspiration to philanthropists, investors and entrepreneurs seeking to learning about innovative finance. And in 2022, the Flex Fund received Vermont Businesses for Social Responsibility’s Innovation and Inspiration Award for small business.

Since 2011, the Flex Fund has made 45 investments totaling $9 million in 24 different companies operating in the sustainable food systems, forest products and clean technology sectors. Eighty percent (80%) or $7.1 million of the funds Flex Fund direct investments while the remaining $1.9 million was facilitated by the Fund’s management, but outsourced to mission-aligned, third parties through participation agreements.

Over the life of the Flex Fund, our investments helped our portfolio companies leverage almost $187 million in debt, equity and grants resulting in a leveraging ratio of $32.11 for every dollar invested. Even when eliminating the two portfolio companies with outsized leveraging, the Flex Fund’s investments have leveraged about nine dollars for each invested dollar.

During the last 11 years, the Flex Fund’s portfolio companies have spent about 30¢ of every dollar of sales to purchase goods from local vendors. This has amounted to over $85 million in local purchasing!

Our portfolio companies have weathered the pandemic but still face supply chain, workforce and inflationary challenges. In the last few years, we’ve seen a surge in people buying local and sustainably produced food as we stay closer to home and understand the value of having a local supply chain. We understand that climate change impacts everyone regardless of socio-economic status, race, ethnicity or gender.

The opportunity to keep capital flowing is now.

COVID-19 has exposed weaknesses in food supply chain, created more demand for local/regional products & processing.
Climate Change creates need for alternative, cleaner energy sources.
Gender equity and environmental sustainability are intertwined.
Generational wealth transfer and millennials are spurring demand for investing in alignment with values. ($50 trillion will be changing hands by 2050).
Sustainability & waste management are now mainstream risk management practices.
Racial and social inequity leading to increased need for investments that support diversity, equity & inclusion in society.

At the Flex Fund, we believe that innovative financing tools, used with intention, can be a part of the answer. So, we intend to raise additional capital to scale our investment in entrepreneurs (who would not otherwise have access to risk capital), go further faster as they build healthy, local food systems and mitigate climate change – while creating a more just, equitable, and sustainable economy in Vermont and New England.

To learn more about what’s next for us, contact Janice St. Onge, President at janice@flexiblecapitalfund.com or (802) 828-0398.