avril 2021

At Tapestry, this is one of the most common questions we are asked. Organizations are often first introduced to the concept of community bonds by seeing them in action, coming to learn about them as an investor, or because they have been searching for alternative forms of financing. When they approach us, they are curious to learn how bonds can work for their unique set of circumstances. 

While every organization and project is unique, there are five main criteria that typically apply across the board. We always begin by walking organizations through a simple checklist to see if their team and board should invest the time to explore this opportunity in greater detail. In this article, we will walk you through the checklist below, step by step.

The organization is a non-profit, charity or co-operative

Community Bonds are a social finance tool that allow organizations to raise capital from their community of supporters. Just like a regular bond you might purchase – say a Canada Savings Bond – these bonds are repayable, and have a fixed term and a set interest rate. 

There are two main features that differentiate community bonds and traditional bonds. The first is that in addition to a financial return, community bonds generate an environmental and/or social return. The second, is that community bonds can only be issued by non-profits, charities and co-operatives (both for-profit and non-profit).

In Canada, the sale of bonds is regulated at the provincial level by the provincial securities commissions, and at the federal level by the Canada Revenue Agency. These agencies have strict requirements for private companies that want to sell securities to the public, and the process is complex and expensive. 

Charities and non-profits, however, are exempt from these requirements under National Instrument 45-106 s. 2.38, and are able to issue community bonds so long as they can guarantee:

• They are a non-profit organized exclusively for education, benevolent, fraternal, charitable, religious and recreational purposes
• No commission or other remuneration will paid in connection with the sale of the security

Co-operatives go through a slightly modified process under the Co-operative Corporation Act, and their regulations vary among provinces. The process, however, remains straightforward and much less onerous than that of a private company.

In order to safeguard the interests of community bond investors, our documentation and process for issuing community bonds always meets the requirements set for co-operatives, regardless of whether we are working with a charity or non-profit. 

The organization is seeking to raise financing for the purchase or renovation of an asset

Technically speaking, there is no legal document stating that community bonds must be used towards the purchase of an asset. However, in our experience of managing over $70 million in community bonds, we have found that having these securities backed by an asset increases investor confidence, and hence the success of the campaign. This is particularly true for organizations that are issuing bonds for the first time and have not built a reputation and rapport with their investor base. 

Asset backed projects are also typically easier to build an inspirational story around. We’ve come to understand that investors like having a brick and mortar outcome – a tangible and physical project that resulted from their investment. While operational expenses are critical, they are rarely inspirational, and do not excite investors in the same way.

In some circumstances, if an organization has run several asset backed campaigns, and proved their ability to meet repayment schedules, they have gone on to raise capital for operational expenses.

The organization has a revenue model that allows them to repay their investors over time

While community bonds offer a social and/or environmental outcome, they are also a financial product, and issuers must have the capacity to repay the principal investment and pay out interest on schedule. 

For some organizations, income is generated through the operation of a social enterprise, for example by selling tickets, renting spaces or operating a shop. Others, and particularly those who are purchasing an asset to be used for office and administrative purposes, are able to redirect capital previously earmarked for rent payments. 

In almost all cases, community bonds will be only one piece of a larger financing puzzle. They are often used in tandem with donations, grants, interest free loans and traditional bank financing.

One appealing aspect of community bonds is that the issuer has the ability to set their bond terms in a way that will match their cash flow situation. For example, some organizations may prefer to have a longer term in order to pay off the principal investment or may decide to delay interest payments for a year or two while they get their project off the ground. 

We always work with our clients to find terms that work for their investors and their balance sheet.

The organization has a champion

What is a community champion? They are the natural leader of the project, pushing at every stage to make it come to fruition.

Tonya Surman, Founder and CEO of the Centre for Social Innovation (CSI)

In some cases there will be two champions, an internal lead who drives the project management, and a public face of the campaign, who will engage the media and publicly represent the organization.

In either case, a champion is critical to campaign success. Investors want to see a responsible and charismatic face behind their investments. They want to see someone who is passionate about the potential of the project and determined to see it come to life. This excitement is what inspires people to take the next step in learning about the project and investing their money.

The project is meaningful to your community of supporters

Of course, this probably goes without saying. If you want your community to invest, they will need to feel one of two things, or both. 

1) They are doing something positive and productive with their money. They are making a meaningful contribution to society while also making a fair financial return. 

2) They will personally benefit from seeing the project come to life. For example, they will benefit from improved access to services and spaces that meet their needs.  

In order to target the first group, the project needs to have a strong social impact and/or a positive impact on the environment. In order to target the second group, there must be a sizable group of people that stand to see their community (be it geographical or values based) benefit from the project’s development. 

This last criteria is the one that organizations tend to struggle to answer. That’s why we always help organizations interested in this model to dig deeper on this topic and begin to assess who their community truly is and understand what their appetite for investment might be. 

Once an organization has been through this checklist and feels comfortable that they fit within these criteria, the next step in assessing a community bond campaign is to participate in a community bond workshop hosted by Tapestry. 

During the 3-hour, online workshop, you will have the chance to bring together your team and board to learn more about community bonds, see how community bonds have worked for other organizations, understand how investors make decisions, and understand what a campaign budget and resource plan might look like. Upon completion of the workshop, Tapestry provides a readiness assessment to help your team and board make a decision about whether or not community bonds are an appropriate financing tool for your project. 

If you think your organization might have a project that fits these criteria, get in touch with us at info@tapestry.captial.ca. 

To say this past year has been tough would be a massive understatement. We’ve all been stretched to our limits balancing childcare, social isolation and economic challenges, just to name a few. 

But we are a resilient bunch. Across Canada, communities and social purpose organizations have been rallying together to provide critical social services. Non-profits and charities, in particular, have worked tirelessly to fill the void by providing food, mental health support, housing, and so much more. 

At Tapestry, we are always on the hunt for good news, and now that we’re a full year into the pandemic, we feel we are all well overdue for some.

So what’s been the silver lining of the pandemic?

The pandemic, as difficult as it has been, has undeniably prompted a dramatic shift towards collectivism. Movements to support local and community initiatives have triggered the attention of the masses. We’ve all seen the hashtags to #supportlocal, had an old friend ring up out of the blue, or offered to collect groceries for a neighbour. These are all signs that despite social distancing, social cohesion appears stronger than it has in recent years. 

The same has been true in the world of finance. Now, more than ever, we are seeing that investors aren’t just interested in a financial return. They also want a tangible social outcome, and a positive impact that’s visible in their own community.  

Even amid lockdowns and widespread restrictions, the past year was a great success in community financing. In 2020 alone, Tapestry supported raising $18.3 million in community investment for Canadian non-profits, co-ops, and charities. This investment is creating spaces for marginalized youth, producing clean energy, and supporting the growth of social purpose organizations.

Now that’s not to say that COVID hasn’t created new hurdles for Tapestry and our clients. It has. But like everyone, we are learning to adapt, and in the process becoming more productive and efficient. 

We thought we would take this opportunity, on the anniversary of the pandemic, to share some of the lessons we’ve learned from a year of lockdowns and restrictions.

A chance to redefine community

As a result of the pandemic, we’ve all been forced online like never before. Our clients, in particular, have had to double-down on their digital tactics. Where in-person events used to be the modus operandi for meeting potential investors and selling community bonds, Zoom calls are the new norm. 

We are lucky to be working in a sector that is nimble and flexible. Our clients were quick to adapt, and made the move online seamlessly. And in doing so, they found some unexpected benefits. 

Going digital, has meant much greater reach. Events no longer have geographic restrictions and can be accessed by potential investors all across Canada. This has hugely increased the pool of impact investors for our clients. 

Online events are also more accessible. There is no longer the need to arrange transportation or child-care. Anyone can join in so long as they have an internet connection and a few minutes to listen. The other plus? Putting together an online event is much more time efficient, and there is the added benefit that content can be recorded and repurposed.

SKETCH Working Arts just completed their bond sales campaign, raising $1.4 million – all during the pandemic. “Interestingly, 80% of their investors were new to the organization,” shares Satyameet (Sattu) Singh, one of Tapestry’s Campaign Managers. “Pushing digital strategies can really help non-profits expand their presence to new supporters.”

This has made us, and our clients, think more deeply about who our communities truly are. Are they a group of individuals living in the same region? Or is it a much broader community of beliefs? With digital connectivity tools abound, the opportunity exists to bring online and offline communities together as never before.

Take advantage of the amazing tools at hand

We have had to pivot in the way we work with our clients, and the ways in which our clients interact with their potential bond investors. One major change has been an even greater shift to making use of online tools. And there are so many great ones! 

With team members working from home, team management platforms have become ever more important. We are big fans of Trello, which allows our clients’ teams to follow along on their campaign progress, interact, and respond to other teammates all on one interface. “It’s highly interactive and keeps everyone on that same page. It also reduces the need for a lot of back and forth on email – saving all of us time,” says Sattu

With investor leads coming in from a multitude of digital streams, the importance of tracking incoming traffic is also critical. We train our clients to use a great customer relationship management (CRM) tool called Pipedrive. “We help our clients to integrate Pipedrive with as many entry points as possible, so that no potential investor lead is lost,” says Sattu. “Once a lead is in Pipedrive, we work with our clients to make sure that they are providing the necessary content and touch points to move that lead along to becoming an investor in their project.”

Our clients are also all set up to sell community bonds directly to investors online. We provide our clients with a clean and streamlined campaign website, which gives investors access to a simple investment platform to make their purchase quick and easy. 

“All of these tools mean that campaigns can be optimized quickly, and can reduce resource requirements significantly,” says Sattu. “Nowadays we can have a campaign up and running in about 2 months, and we are working really hard to reduce costs and make community financing available to a wider array of organizations.”

We can’t meet in person but we can still make meaningful connections

It’s true that we live in an age where we can easily connect online, but that doesn’t necessarily mean that the connections we make over the internet are the same as in-person meetings. “We need to be very aware of this,” say Sattu “being online, we need to take extra care to read the room, gauge interest and build trust.” 

“This may mean adding in additional touch points for potential investors, to ensure that they feel informed” shares Sattu. “We encourage our clients not to just rely on email but to pick up the phone.”

“We also suggest that our clients ask their potential investors what form of communication they prefer,” says Sattu, “we want potential investors to feel comfortable.”

Let’s rebuild this post-pandemic economy to be more sustainable

We know that Covid-19 is changing society in complex ways. We also know that there will be winners and losers in this pandemic, and that those who are most adversely impacted are also those with the fewest resources to cope. 

As we focus on the post-pandemic recovery, we should all be thinking hard about the economy we want to see on the other side. Is it the old norm that concentrates wealth in the hands of a few? Or are we interested in creating a more inclusive and sustainable system?

If you are interested in the greater conversation on this ‘Next Economy’, check out our friends at the Centre for Social Innovation (CSI), who are doing amazing work on intentionally building a more equitable system.

We know that innovative forms of financing will be integral to building the next economy. We envision financing that 1) involves and rewards communities, 2) funds meaningful and quantifiable impact, and 3) creates financial sustainability and power for non-profits and charities that provide such critical services to society. 

“We promote this idea at both the government level but also on a grassroots level,” says Sattu thoughtfully, “we encourage non-profits where appropriate and possible, to consider seeking investment from their own community, to feed wealth back into that community, and to change the cycle of grant dependence.”

If you are a non-profit, charity or co-operative interested in financing a project with the support of your community, reach out to us at info@tapestrycapital.ca.