This is the fourth in a series of Q&As with JEI Fellows about the path they’ve taken to financial activism and what they’ve learned along the way. For this post, we interviewed Janice St. Onge, president of the Flexible Capital Fund, about strategies for building community wealth, her work in rural New England, how investors can be more effective partners to local entrepreneurs, and her lessons learned.
The Flexible Capital Fund invests in growing Vermont companies that fill a gap or strengthen the supply chain in sustainable agriculture and food systems, forest products, renewable energy, clean technology, and other natural resource sectors.
JEI: How would you describe your community wealth building work?
JSO: I run the Vermont-based Flexible Capital Fund, L3C. We are an impact investment fund and Community Development Financial Institution (CDFI) whose mission is to create healthy food systems, preserve working lands, build resilient communities, and address climate change through regenerative solutions and by fostering equitable workplaces. Where others see risk, we see opportunity. At the Flex Fund, we believe that innovative financing tools, used with intention, can be a part of the answer to community wealth building. And we’re currently scaling our investment footprint to all of rural New England so that entrepreneurs who would not otherwise have access to risk capital can go further faster.
JEI: What are you doing that brings something new to the table in terms of community wealth building? What value are you seeing from that?
JSO: The Flex Fund takes an integrated capital approach and provides flexible financing in a variety of structures—from debt to revenue-based financing (RBF) to equity—to help businesses in New England’s food system, forest products, and climate change solutions markets grow.
When we started the Flexible Capital Fund in 2011, there was only one other organization in New England using RBF as an alternative to equity investment for growing mission-oriented businesses. We have had to do a lot of educating on what RBF is and how it can benefit growing companies in a rural state like Vermont. I got a lot of deer-in-the-headlights looks from the lending and investing community. On the entrepreneur side, I heard, “Wow, that seems like an expensive interest rate.” I’d explain that RBF loans don’t have an interest rate, and that repayment is based on a percentage of revenue over time. Our returns are really a function of the time value of money.
Our capital is less expensive than equity, though it can be more costly than a bank loan. However, a bank or lender has primary claim to a company’s assets, like equipment and real estate, and if a business can’t pay back the loan from cash flow, the bank has the right to sell the assets. With RBF, we don’t necessarily require a personal guarantee or hard assets. Payments are flexible and based on a percentage of revenue rather than a fixed principal and interest payment. And we don’t dilute ownership or ask for a role in decision making like equity investors do. This makes RBF a great alternative to equity for growing businesses in rural New England.
Now, 12 years in, RBF is gaining momentum as a type of capital that can help entrepreneurs grow in a more sustainable way at the pace that makes the most sense for them in the rural areas where they operate and in the communities they support.
JEI: Can you tell us about a project or aspect of a project that you’re proud of? We’d love to hear a community success story.
JSO: I’m proud of all our portfolio companies that are doing the hard work every day of providing products and services that feed us in a healthy (and delicious) way, create healthy living spaces, produce renewable energy, reduce waste, and cut down the carbon emissions of infrastructure materials. They’re paying living wages and creating wealth in the communities where they reside.
Encore Renewable Energy, based in Burlington, Vermont, is a great example. Encore’s revenue was inconsistent. Its solar projects required up-front work leading to construction and sale, and its project timelines often changed. Encore was in a steep growth phase and there were holes on the team that needed filling. In the past, Encore had self-financed new hires, but it was bumping up against its capacity to self-fund relative to the opportunity it saw in the solar development market.
We provided RBF-structured financing in 2016 and 2019 that allowed Encore’s payments to mirror its cash flow. Following our integrated capital strategy, we also brought in mission-aligned CDFI partners and a private investor to ensure Encore had the capital it needed.
Encore’s team viewed our capital as catalytic, and during our investment, the company more than tripled its revenue, quadrupled the number of high-quality jobs, grew a more diverse workforce, and raised significant additional capital from other lenders and investors.
Encore’s environmental impact to date is equivalent to eliminating 1.6 million barrels of oil.
JEI: What lessons can you share about what it takes to be an effective partner to people seeking to build community wealth?
JSO: First, invest in people, not companies. Be more than a checkbook. Relationships matter. Get to know an entrepreneur and their team before you write the check. Then keep in mind that entrepreneurs and their teams are doing the hard work. When funds and economic development entities say, “we created X number of jobs,” let’s be honest—they didn’t create the jobs, the entrepreneurs did. And sometimes job creation isn’t a good measure of success. Sometimes stuff happens. To keep the doors open, entrepreneurs may have to let people go. That’s a really hard thing—for everyone.
Second, financial returns aren’t the end all, be all. There is no Planet B. While growth is good, growth for growth’s sake is not sustainable. Investors’ goals need to change to include social and environmental returns. And more investors need to take a systems-level perspective if we want a future for our children and their children on this planet with limited resources. Failure is part of this work. As investors, we need to talk about it and learn from it. When things don’t go as planned, and a business needs to wind down, we can find ways to do this with dignity and respect for what the entrepreneur built.
And third, our experience over the last decade—through a recession and global pandemic—has taught us that impact companies need more time than a traditional venture funding model offers to build their business and create the change that we and our entrepreneurs envision. Systems change takes time. This quote from an essay by William McAskill on longtermism sums it up: “We live at the very beginning of history, in its most distant past. What we do now will affect untold numbers of future people. We need to act wisely.”
JEI: What other advice do you have for leaders who want to support community wealth building?
JSO: Invest with diversity in mind. Diversity among investors and entrepreneurs leads to better financial, social, and environmental returns. If you haven’t read The XX Edge by Patience Marime-Ball and Ruth Shaber, M.D., pick up a copy. Data shows that gender-inclusive and diverse teams are 21% more likely to outperform their peers in profitability, and new companies with a female founder performed 63% better than those with all-male teams over an observed 10-year period.
Entrepreneurs are not superhuman. Mental health is important. We need to bring empathy, understanding, vulnerability, and humanity to our work as investors. Entrepreneurship is a deeply personal journey, and it can be difficult for entrepreneurs to separate their identity from the business they’re trying to create.
We need all kinds of capital across the continuum. We found that taking an integrated capital approach—using a combination of financial, human, and social capital—ensures our companies have the right financing as they grow, at whatever pace makes sense.
Finally, you can’t change systems without saying goodbye to those that aren’t working. We all—philanthropists, investors, lenders, policy makers, government, individuals, and entrepreneurs—need to take risks with our capital and activate our voices.
Janice St. Onge is President of the Flexible Capital Fund, L3C (“Flex Fund”), a mission based investment fund providing flexible risk capital to Vermont’s food system, forestry and clean technology businesses. As President of the Flex Fund, Janice manages all facets of the Fund’s operations, including raising capital, deal flow, due diligence, and portfolio/financial management. Janice brings economic and business development as well as financial expertise to the organization, having served in the technology, financial services, higher education and state government sectors during her 25+ year career.
Previously, Janice served as Director of the Vermont Business Center at the University of Vermont and Technology Business Development Director for Vermont’s Department of Economic Development. She received the 2001 National Tibbetts Award in recognition for her outreach work with the Small Business Innovation Research program in Vermont. As Assistant Vice President at Peoples Bank, she originated and managed a $21 million commercial loan portfolio. Janice is a graduate of the University of Utah with a B.A. in Marketing and is an alumnus of the Snelling Center for Government’s Vermont Leadership Institute. She recently helped launch the Vermont Women’s Investors Network, and serves on the Vermont Small Business Development Center Advisory Board and the Clean Energy Development Fund Board. She is a founding member of Slow Money Vermont’s Organizing Committee. A Stowe, Vermont resident, Janice was co-founder of the Stowe Energy and Climate Action Network and a former International Ski Federation (FIS) World Cup Freestyle Skiing Judge.
