Tapestry Capital

The journey to community ownership

In 2007, three music lovers based in Bristol – Matt Otridge, Peter Wright, and Paul Horlick – launched The Croft, a live music venue that hosts bands of all genres every night of the week. Within the first few years of operation, their neighbourhood became a popular location for its cultural offerings, and it began to gentrify rapidly. The Croft was threatened by various challenges, but most prominently by developers and rising rents.

Matt, Peter, and Paul knew that once their lease ended, they would not be able to afford the venue anymore. Even amidst the gentrification, they had never changed their business model. What they cared most about was showcasing great music for everyone to enjoy. 

Understanding that they needed a sustainable, long-term solution, they made the decision to purchase a building rather than lease. In 2012, they reopened as Exchange, and in 2017, converted into a community benefit society – a non-profit entity that exists for social purpose. Exchange was already operating with a community-focused approach, so having a legal structure that fit their values just made sense. 

In 2018, Exchange made the bold leap to shift to a community ownership model. The owners believed that conventional lenders were more interested in maximizing their return on investment than supporting Exchange to grow, so they turned to their community. They issued a community share offer and raised £300,000 from over 400 community members in just under two months. Individuals and institutions invested anywhere from £250 to £100,000. You can view Exchange’s community share offer document from 2018 here. 

The impact of the community share offer

Exchange used funds from the community share offer to improve the venue’s sustainability and accessibility. They built new stages, improved the lighting and sound systems, and built an accessible toilet. In fact, the funds helped them become the first grassroots music venue in the United Kingdom to achieve the Gold award on the Attitude is Everything Live Events Access Charter, an accessibility award for venues in the United Kingdom. As of Feb 2023, they are also in the process of retrofitting the entire roof with solar panels!

On top of the venue’s improvements, Exchange embedded long term sustainability into the business model. With over 400 co-owners, the venue will continue to exist, even if one of the original owners decided to step away.

Exchange is a community benefit society… but what exactly does that mean? 

A community benefit society is a legal, not-for-profit entity in the United Kingdom whose purpose is to serve the interests of the community. Similar legal forms are only legislated in two provinces in Canada, including British Columbia’s “Community Contribution Company” and “Benefit Company” and Nova Scotia’s “Community Interest Company”. Community benefit societies may be compared to co-operatives in Canada, however, co-operatives serve the interests of their members rather than the broader community. There are four key characteristics of a community benefit society: 

1. Purpose: A community benefit society’s business must be entirely for the benefit of the community
2. Membership: A community benefit society issues shares for community members to invest in the business and become owners, or members. They operate on the one-member-one-vote principle which ensures equal say for all members regardless of how much they invested. No one member is granted greater rights or benefits because they invested more money into the business. 
3. Application of profits: Any profit generated by the community benefit society must be used for the benefit of the community. Profits cannot be distributed to its members, unlike in a co-operative. 
4. Use of assets: Assets must be used for the benefit of the community. There is an asset lock which means if a community benefit society is sold, for example, its assets must continue to be used for the benefit of the community rather than distributing them to members. 

More Than Music

Exchange is certainly a music venue, yes, but it’s so much more than that. It’s a record shop and recording studio for local promoters and record labels. It’s a coffee shop and bar that offers sustainable, local coffee and snacks. It’s an event space for the community to host workshops, plays, flea markets, art exhibitions, conferences, and pop-up kitchens. Exchange is a pillar of its community, providing real social and cultural value.

It’s no surprise that community members rallied together to invest in Exchange’s future!

Photo credits: Exchange, www.exchangebristol.com 

About this Blog Series

Hi, my name is Jasleen Bahia, and I was once an Intern at Tapestry Community Capital. I am now completing my degree in business with a focus on social finance, and I’m currently doing a semester abroad in Europe. While here, I am Tapestry’s Ambassador to the UK. This blog series documents my adventure abroad learning about the social finance ecosystem in the UK and connecting it to our growing community investment marketplace in Canada. I am eager to find out what we can learn, replicate and share!

In the UK, the pub is more than just a place to sip on a beer – it’s a unique social center, and often the heart of community life in villages and towns. So the fact that hundreds of communities around the UK have rallied to take joint ownership and save their pubs should come as no surprise. In 2021 alone, 15 community pubs raised £3.9 million from their communities in the UK to purchase their local joints.

To learn more about how community pubs operate, their impact in the community, and the financing models that have allowed communities to save these important spaces, I spoke with Chris Cowcher from the Plunkett Foundation, a national charity that supports rural communities across the UK to tackle the issues they face through community business. 

What is a community pub?

A community pub, or community-owned pub, is a business owned and operated by people within the community for local benefit. Individuals become owners by investing in the pub’s community shares. They invest as little as £1 or a maximum of £100,000 and become a shareholder, or member, of the pub. Members then create a centrally-elected committee that is responsible for the governance and maintenance of the pub. The committee elects management and staff to run the day-to-day operations. 

Community pubs have proven themselves to be sustainable businesses. In 2020, despite widespread pandemic closures, only one out of 147 community pubs closed. And the sector continues to experience steady growth. 

Plunkett Foundation encourages rural assets into community ownership so that they can generate greater social, economic, and environmental impact. To best serve the needs of locals, community pubs expand their offerings beyond food and drink. For example, many community pubs offer meeting spaces, host community clubs and bands, or operate cafes and post offices within the pub. It’s clear that they’re not just community pubs – they’re community hubs. 

How are community pubs financed? 

The largest barrier to establishing a community pub is the initial capital needed to purchase and set up the pub building. In 2021, the average cost of purchasing a community pub was £314,000 and the average set-up cost was £244,000. Community pubs are most often financed using community shares. According to Chris, there are two important reasons why the community share model is a good fit. First, significant amounts of capital can be raised quickly. Second, community shares amass collective membership from many people in the community, with pubs averaging 200 members. They also return wealth to the communities that support them – Chris shared that the current rate of return for a community pub investment ranges from 2-3%.

What can we learn?

Community-owned businesses are sustainable businesses. Despite the COVID-19 pandemic and cost of living crisis in the UK, community pubs experienced continual growth. Community pubs in the UK present a strong case for the economic value and social benefit that emerges from expanding the community-owned enterprise sector. 

Having a dedicated program of support for community-owned businesses is game-changing. For instance, Plunkett offered a program in England called “More Than A Pub” which provided groups with business development support and funding to enable community ownership of pubs. This program grew the sector by 50% over five years and England now has the highest density of community pubs in the UK. The UK Community Ownership Fund is another initiative by the government which has allocated £150 million over five years to the ownership of assets at risk of being lost to the community. Community pubs have been the largest beneficiaries in early rounds of this initiative. 

Success breeds success. Plunkett has seen a cluster effect where community businesses are more likely to locate themselves in areas with other successful community businesses so they can inspire and learn from each other. It can be scary to be one of the first organizations to adopt a new structure or financing model, but know that change can bring immense benefits AND you’ll be inspiring many others to follow suit. With resources and guidance from organizations like Plunkett and Tapestry, you’ll be well positioned to achieve your goals. 

About this Blog Series

Hi, my name is Jasleen Bahia, and I was once an Intern at Tapestry Community Capital. I am now completing my degree in business with a focus on social finance, and I’m currently doing a semester abroad in Europe. While here, I am Tapestry’s Ambassador to the UK. This blog series documents my adventure abroad learning about the social finance ecosystem in the UK and connecting it to our growing community investment marketplace in Canada. I am eager to find out what we can learn, replicate and share!

In the United Kingdom, Music Venue Trust has launched the ‘Own Our Venues’ campaign, giving music supporters across the country a new opportunity to invest in the spaces they love. The campaign, which has garnered support from figures like Ed Sheeran and Sony Music, offers a prime example of how community investment can serve to rescue and maintain vital community assets. 

To better understand Music Venue Trust and the ‘Own Our Venues’ campaign, I spoke with Matt Ottridge, the Music Venue Trust Ownership Coordinator. 

The challenge faced by grassroots music venues

Over the last twenty years, many independent music venues in the United Kingdom have shut down. Mark Davyd, Founder of Music Venue Trust, says the main reason for closure is that people who run the independent music venues do not own their premises, and the landlords who do own them don’t care about the impact the venue is delivering. Music venues are often at the mercy of commercial landlords and rising rents, and this issue of ownership is underscored by other challenges such as noise complaints and chronic underinvestment. 

According to Music Venue Trust, 93% of grassroots music venues are tenants with an average lease of 18 months. This prevents venues fully investing in their spaces because there is uncertainty about how long they will be able to stay put. 

The ‘Own Our Venues’ campaign 

Since 2014, Music Venue Trust has advocated for the protection, security, and improvement of UK grassroots music venues for the benefit of venues, communities, and artists. They provide free legal advice, a network for music venues to connect and collaborate, and a multitude of online resources to guide music venue operators. The ‘Own Our Venues’ campaign is one of the organization’s recent initiatives. 

The aim of the ‘Own Our Venues’ campaign is to change the ownership model of grassroots music venues. Instead of private landlords owning the spaces and leasing them to music venue operators, Music Venue Trust has set up a community benefit organization, Music Venue Properties, that will purchase the spaces and rent them back to current operators. The value to independent music venues? First and foremost, a landlord who understands their sector. Matt mentions that Music Venue Properties will work with operators, giving them greater assurance over the length of their lease, reduce rents, make contributions to insurance and repairs, help with accessing grants, and analyze their operational models. Music venue operators will develop the security and confidence they need to create and maintain incredible venues that are pillars of their communities.  

Individuals and organizations can purchase community shares issued by Music Venue Properties for as little as £200 and up to £100,000. This investment will fund the purchase of an initial nine music venue properties. In exchange, investors receive a 3% annual return on their investment, become a co-owner of the society and its assets, and play a critical role in saving the independent music venues they love! 

Community financing has saved local pubs, shops, and post offices, amongst other enterprises, and now it’s time for the model to be applied to music venues, too. For more information on the ‘Own Our Venues’ campaign, visit www.musicvenueproperties.com. 

About this Blog Series

Hi, my name is Jasleen Bahia, and I was once an Intern at Tapestry Community Capital. I am now completing my degree in business with a focus on social finance, and I’m currently doing a semester abroad in Europe. While here, I am Tapestry’s Ambassador to the UK. This blog series documents my adventure abroad learning about the social finance ecosystem in the UK and connecting it to our growing community investment marketplace in Canada. I am eager to find out what we can learn, replicate and share!

The UK’s social investment ecosystem is proof of the immense growth potential of community bonds in Canada. Recently, I had the pleasure of speaking with Ashley Wang from Social Finance UK and Annie Constable from Good Finance to learn more about the UK’s social investment marketplace. Below are three lessons that we can learn from our UK counterparts.

1. Working with leaders in the social investment ecosystem will help non-profits, charities, and co-operatives address knowledge and capacity gaps

In the UK, Big Society Capital is the leading financial institution dedicated to social investment in the UK. Big Society Capital and Access – the Foundation for Social Investment created an organization called Good Finance to address a large knowledge gap they had observed in the social investment ecosystem. Good Finance’s website is home to jargon-busting tools, case studies, and a directory to connect organizations with investors. 

Similarly, in Canada, Tapestry helps organizations to learn about the community bond model and determine whether it’s a good fit for their project. We provide organizations with the resources and tools to fill knowledge and capacity gaps. From understanding terminology, to launching your community bond campaign, we support you every step of the way in whatever capacity you need. Our goal is to ensure that the path to integrating community bonds into your organization is as seamless as possible. 

2. Community investment provides a flexible source of financing

Increasingly, organizations are seeking creative sources of financing that give them the operational flexibility to do what they need to do to achieve their goals. Grants, while providing free capital, can often impose strict requirements that limit project dimensions, and ultimately the impact a project can have. They can also be tedious, time consuming, and unsustainable. For many organizations, terms set by banks and traditional funders won’t be favorable, and often this financing will only provide a portion of the needed capital for a project. 

This is why many organizations in the UK have turned to social investment tools, such as charity bonds, as an alternative. Charity bonds can be seen as the UK equivalent of a community bond (read another blog on this here). Social investment tools are a sustainable solution for organizations to raise the capital they need, and enable individuals to diversify their investment portfolio while creating impact in the community. The massive demand for flexible finance in the UK has brought many impactful investment opportunities to the market and this is sure to happen in Canada as well. 

3. The government has played a critical role in catalyzing the adoption of social investment tools

In the early 2000s, the UK had a build up of dormant account assets – the result of forgotten assets in long-lost bank accounts and insurance policies. In 2008, Parliament passed the Dormant Bank and Building Society Accounts Act which directed a large portion of these assets to social investment. Big Society Capital (BSC), was launched with £400 million of dormant account funds. The UK government also offers the Social Investment Tax Relief which is a 30% tax break for individuals who invest in social enterprises, charities, or community businesses.

As of June 2022, the Bank of Canada announced that it is sitting on nearly $1.1 billion in dormant account assets. Right now, this money sits idle with the Bank of Canada for 30-100 years depending on how much is in the account. After that, the money is considered forfeited and is transferred back to the government’s spending accounts. Imagine if Canada implemented a similar act to the UK and directed even 10% of this capital to social investment (that’s $110 million)! Evidently, government initiatives, politicians’ support, and advocacy from organizations can help catalyze the adoption of social investment tools. 

In recent years, the Government of Canada has signaled their support for the social impact market. The launch of the $755 million Social Finance Fund has been a major milestone. This capital is supporting social purpose organizations to become investment ready and bring investment products to the Canadian public. At Tapestry, we are supporting many organizations with funding provided through the Social Finance Fund Investment Readiness Program. To stay up to date on funding opportunities and application deadlines, visit the Community Foundations of Canada website here. 

About this Blog Series

Hi, my name is Jasleen Bahia, and I was once an Intern at Tapestry Community Capital. I am now completing my degree in business with a focus on social finance, and I’m currently doing a semester abroad in Europe. While here, I am Tapestry’s Ambassador to the UK. This blog series documents my adventure abroad learning about the social finance ecosystem in the UK and connecting it to our growing community investment marketplace in Canada. I am eager to find out what we can learn, replicate and share!

Cover photo credit: Co-operative UK

Charity bonds, the UK equivalent of community bonds, have taken off rapidly in recent years. From 2012-2020, the charity bond market grew by a remarkable 62x! The size of the market is now estimated to be around £337 million – an astronomical leap from the mere £5.4 million in 2012. More than 30 organizations have seized the opportunity to issue charity bonds and raise capital from their communities of supporters. 

In this article, we explore the immense growth of charity bonds in the UK and what this could mean for community bonds in Canada. 

Let’s start off by understanding the similarities and differences between charity bonds in the UK and community bonds in Canada. 

Similarities

• Interest-bearing loans, with a fixed interest rate and a fixed term
• Used to finance socially and/or environmentally impactful projects
• Organization issuing the bond must have a source of revenue that will enable them to repay investors
• More flexible than bank financing because terms are set by issuers and funds are raised from supporters 
• Engage a variety of investors (individuals, foundations, trusts, etc.) 
• Can be held in tax-advantaged accounts 

Differences

The table below highlights key differences between charity bonds and community bonds: 

A market to trade charity bonds

In 2014, the first charity bond was publicly listed on the London Stock Exchange, and many have since followed suit. Being able to list on a public market has provided charities and social enterprises with access to a bigger market, allowing them to reach their investment target more efficiently.

Organizations do not issue their charity bonds directly on the stock exchange. Rather, they go through a “special purpose vehicle” called the Retail Charity Bonds Plc. (RCB). RCB is governed by an independent board of directors who reviews applications from charities and social enterprises. Upon approval, RCB issues the charity bonds on the London Stock Exchange, and then investors can buy and trade the bonds in the secondary market just like any other bond or stock. Fun fact: most organizations can raise their required financing within 1-2 weeks after they launch an offer! 

Community bonds are not yet tradable in Canada, however, as the market continues to grow rapidly, we are hopeful of such initiatives. Based on the UK experience, it’s clearly a win-win for investors and social purpose organizations.

Building confidence has been critical

In 2014, Big Society Capital launched the Charity Bond Support Fund, in collaboration with Rathbones. The purpose of the fund was to co-invest in campaigns alongside retail and institutional investors when campaigns were not fully subscribed. This had a dual purpose – to give confidence to issuers that they would reach their targeted investment goal, but also to give confidence to investors. The initial fund was £30 million, but has since grown to £163 million with a diverse array of investors engaged.

The emergence of sales platforms has helped the community investment market to grow

Many community investment platforms have been developed in the UK to a) encourage organizations to use social finance tools and b) encourage individuals to invest in social finance tools. For example, Ethex is a non-profit community investment platform that connects social purpose organizations with investors. In 2020, Ethex and Energise Africa raised a total of £100 million of people-powered finance to benefit over 200 community-oriented projects. 

Such sales platforms have brought charity bonds into the mainstream by making the investment process simple yet professional. It is now easier than ever to invest with impact in the UK.

By learning from partners, both near and far, we at Tapestry continue to foster community bonds as a mainstream form of financing and an avenue to invest in society.

About this Blog Series

Hi, my name is Jasleen Bahia, and I was once an Intern at Tapestry Community Capital. I am now completing my degree in business with a focus on social finance, and I’m currently doing a semester abroad in Europe. While here, I am Tapestry’s Ambassador to the UK. This blog series documents my adventure abroad learning about the social finance ecosystem in the UK and connecting it to our growing community investment marketplace in Canada. I am eager to find out what we can learn, replicate and share!