On August 25, 2021, Janice sat down with Andrea Armeni and Curt Lyon of Transform Finance, alongside Deborah Frieze of the Boston Impact Initiative. The transcript of the discussion is below.

Andrea Armeni: Good morning and good afternoon, everyone. My name is Andrea Armeni. I'm the executive director at Transform Finance. I am excited to welcome you all to today's webinar. It's the seventh conversation in a discussion series on grassroots community engaged investment. Many of you have been attending some of the prior sessions. If you have not or if you want to revisit them, you can find on our website the recordings, as well as some write ups. Today, we will be talking specifically about community capital funds. I will turn it over in a second to my colleague, Curt Lyon, that will lead that discussion. I just wanted to express my thanks to Deborah Frieze and to Janice Shade for joining us today as presenters. They've been doing amazing work for a long time in this space. It's a great pleasure to have them here.

On the practical side, as we get started, please do keep yourself on mute. That will avoid embarrassment for everyone. If you have questions, comments, or otherwise, please drop them in the chat, either to everyone, or just to me or to Curt or speakers. We will handle them after their opening presentations. You can also raise your hand using whatever function it is these days on Zoom, and as time allows, we will unmute you and have you present. So, with that, I will turn it over to Curt. Thank you, Curt, for leading this discussion, and thanks again to our speakers and to all the participants for joining us today.

Curt Lyon: Thanks, Andrea. Hello, everyone. It's great to be here. I can't believe this is the seventh and final session of our discussion series. We'll have a note of reflection at the end. Hopefully we don't tear up here. It's been a really awesome series. Thanks for coming. Today, we have two amazing speakers. We have Deborah Frieze of the Boston Impact Initiative, and Janice Shade, at the initiative for Local Capital. Today, we're going to be talking about community capital funds. I'm just going to say a couple of quick words, and then we'll really get into a discussion with our speakers, and hopefully throughout, y'all will be thinking of questions and comments that you might want to ask during the about 30 minutes or so Q&A or open discussion that we have towards the last half of the session. Definitely keep in mind and put whatever thoughts you have in the chat.

Before we get into it, just as a quick reminder or introduction for some folks who might just be joining this discussion series now about grassroots community engaged investment, what it is. We wrote this report about GCEI earlier this year, that it's really covering all sorts of investments across lots of different sectors and types of investment that have a practice of input decision making power or ownership from grassroots stakeholders, so community organizations, residents of a given community, whether that's based on a neighborhood or a city, other geography, or a type of person that fund is serving in particular, or project is serving in particular. We're really interested in exploring how capital can be shifted in terms of the decision making power and how that's deployed. That's what the report in this series is all about.

On the next slide here, we have of a table that we put together in the report that compares GCEI to non GCEI, so more traditional place based investments that don't have these measures of co-governance and design with community stakeholders. There's a bunch of stuff here, but really in the gist, talking about the idea that process matters in deploying capital, and giving the voice and vote to community stakeholders, the ability to shape goals, to insert their political goals and local organizing goals into the investment process, and having that align. That really leads to this idea of building power for place based movements, to combine traditional organizing and policy work with this investment flank.

In some cases, as will definitely come up today, that involves what we call economic participation, so community members being able to invest their own money into projects, that can be an important element. There's always an explicit racial equity or racial justice lens in this work that we were looking at that showed up in all of the projects we surveyed in our report. There's this idea of building capacity and buy in for the community members participating in these projects, which has all sorts of spillover effects into civic engagement and business development and creating spaces for community organizing to come together. So, having that kind of buy in really helps establish those power building components, but also to help attract investors and create momentum for businesses or housing units that are being created during these investments.

Then lastly, there's these account accountability ideas. So, holding outside institutions accountable who are supporting projects, whether those are funders, investors, like CDFIs, or other kind of institutional stakeholders, so usually having a relationship that allows community members or grassroots organizations to hold certain powers and make sure that the mission stays aligned with their priorities. That's a really important part of all GCEI projects. If you want to go to the next slide, Andrea, we're going to be talking about community capital funds today.

By this term, we really use it loosely in this context to describe projects that have recurring forms of investment. A big distinction we saw is that there's a lot of one off real estate or other kinds of development projects, whether it's refitting a building for community purposes, creating a new housing unit or building that's going to be used for some kind of community need, those are one off investments. But when we talk about funds, we're talking about recurring forms of capital, where the investments make a return, come back into the fund, and continue to invest into other sorts of projects, whether that's businesses, real estate, infrastructure, community gardens, land use of different kinds. We see a lot of variety in terms of what these kinds of capital funds are trying to invest in and trying to create in their communities.

A couple quick important points just in terms of framing, in our survey, we found some funds that took money from community investors, typically really small amounts. That's definitely a really important part for some projects, but some of them don't. We're really looking at a broader lens of the types of capital stack that are forming the money that these funds use to in turn invest into other projects. That's an important part, and you might be able to get into some of the differences there when funds take money from community members or not. We've definitely covered that in some other sessions earlier, too, especially the real estate one a couple weeks ago. Then lastly, in the GCEI context, we're really focusing on that design and governance by grassroots organizations or community members.

There are definitely place based funds out there that are doing amazing work, but don't necessarily have a governance component that just didn't fall under the scope of what we were looking at, because we're really interested in how those relationships can be shifted around to build power through that decision making. Here are some examples of funds that we saw on our report. There are plenty more out there. Hopefully we can mention a few others that we haven't talked about in this series so far. Fortunately, our two speakers have worked on a really wide variety of funds and other projects that will really round out the discussion here, and bring in some new stories and examples, lift up the work of those who are really building this work on the ground.

Now we will move into introducing our speakers. For each of you, Deborah and Janice, we'll ask who you are, who are you? What is your organization or organizations do? Secondly, why are you working on community capital funds? How does this fall into your theory of change and helping communities that you work with develop their theory of change through these capital funds? We'll give you a few minutes each. Why don't we start with Deborah, and then we'll move to Janice?

Deborah Frieze: Thanks, Curt. I just want to say, I have been riding alongside with this whole series, and it's been incredible to see these different funds and projects lifted up. I really appreciate, Andrea and Curt, the work you guys have been doing, because very few people are talking about power in the impact investing space. This is getting right to the heart of it. I think that there couldn't be a more important topic right now than discussing governance and power when it comes to allocating capital. Thank you for that. I'm excited about the response of the series, because all of you who are on this call and the others, we've got to start bringing this topic right into the heart of our investment allocation.

Let me dive into that. I am the founder and president of the Boston Impact Initiative, and we are a charitable loan fund that focuses on deploying integrated capital equity debt grants and everything in between, royalties, warrants, guarantees, whatever it might be, to close the racial wealth divide in our community, which is Eastern Massachusetts. I need to give a shout out to two folks that are here that I noticed in the participants, which are Jeff Rosen and Brian Becken, because I don't think we could have cracked our model if those two gentlemen hadn't done some of the pioneering work that they'd done, Jeff with PV Grows in Western Mass, a charitable loan fund that we modeled our fund after, and Brian in guiding us with our other pro bono lawyers who thought that we had to do a private equity offering for only accredited investors. Brian's like, "No, we can do this. We can have community ownership in these funds." That really was very formative.

We piloted this fund back in 2013 as a privately held LLC to demonstrate that it was possible to deploy capital in this way in our community. When we demonstrated that was the case with $3 million in 30 investments over four years, we then opened up the charitable loan fund and raised capital from community investors at the top of our capital stack, and we can get into all the details about that later, and then accredited investors, philanthropic investors, and a layering capital, so that those who can at least afford the risk get de-risked the most. But rather than focus on that, I also want to talk about, because we talked about this ownership, and there's governance, we are majority governed by community based organizations.

They control our board, and we identified organizations that we felt were core to advancing the work in Boston around building equitable and resilient economies. I also want to say that we are co-founders and help incubate the Boston Ujima Project. One of the conversations we may want to get into is the distinction between what I would call an our governance model, a kind of representative democracy, where community based organizations appoint people to our board, and then they appoint our investment committee, versus Ujima, which is direct democracy, where the community members vote and decide on the allocation of capital. We can talk about that later, about some of the conditions for each.

The other piece I should say is that we've been helping 11 other communities around the country learn how to do what we do. We built a integrated capital fund building cohort. The criteria was if you're doing a place based fund, you're deploying integrated capital to close the racial wealth divide, you belong in this cohort. But how it looks in New Mexico and how it looks in Atlanta are going to be extremely different than how it looks in Boston, so very re-localized. We'll explore that as well. Just to answer Curt's other question, which is why is this so important to me? Why do we decide to do this? I think that there's a lot of work being done on allocating capital with no power, which is often charity, right?

There's a lot of work being done on power with no capital, which is organizing activism and grassroots often. So, the critical work of tying these things together, if we want to do wealth building, we need to have both and power tied together so that we can change the ownership and control of assets and the direction about who decides how resources are going to flow in our community. That was a thing that we wanted to crack. So, I think this model and others like it are doing that. They're exactly intersecting capital and power so that we can really restructure ownership, not just income, not jobs, but deal with wealth and control and close the wealth divide, which is what we're focused on.

Curt Lyon: Thanks, Deborah. Let's send it over to Janice. Who are you? What does your organization do, and why are you in this work of community capital funds?

Janice Shade: Thanks. Well, that is a tough act to follow, I got to say. But I am Janice Shade. I am the founder and CEO of the Initiative for Local Capital. It's a nonprofit organization I started about three and a half years ago, and it actually grew out of my experience starting one of the first investment crowdfunding platforms in the country, and realizing back in 2015, 2016, as we were getting this platform up and running, how much interest there was in this new concept of crowdfunding, and how much education was needed for both entrepreneurs, and especially for those who want to invest in them. That's where the Initiative for Local Capital grew, out of that experience. Our mission is to provide that education, tools, resources, and networks for businesses who are wanting to learn how to increase their access to local capital, and also for what I like to call citizen investors to start to learn more about how they can direct their investible wealth into their neighbors' businesses in their community.

Over the last three and a half years, we've been doing a lot of work more on the investor education side, because that's where we need to see a lot more interest in these, or we need to see a lot more sophistication around the education that people bring to making these really important decisions of what you're doing with your money. Especially when it comes to making direct local investments, it's really different from taking your money and just putting it in a mutual fund that's managed by a professional manager and you can have that trust. How can we start to recreate some of these benefits that you find in public markets in directing investments directly into your community?

That's why I've been working so hard on the concept of community investment funds, which I believe is the next iteration of crowdfunding, is a way for people to come together, bring their money, investing together, having a little bit of professional management, ideally, but then also having input into how that money is deployed back out into the community for this virtuous cycle of wealth, as you're investing into businesses that are then growing, creating jobs, putting good products and services out there into the community, and repaying that money back into the fund that can be invested again into more and growing businesses.

A lot of the work that I've been doing lately, both through Local Cap, which is the short name I put on that, the nonprofit that I run, and also through the National Coalition for Community Capital, which is another nonprofit that I helped to fund in 2017 with Brian Becken, who Deborah mentioned, as well as several others, and I'm seeing some of their faces and names on this call too, so hello, everyone, through both this national focus through NC3 and through Local Cap, really trying to break down the barriers to make it easier for more communities to pursue this path of aggregating capital from citizen investors and deploying it out into their community.

Why is this important to me? I guess it all started with my own journey as an entrepreneur. I started my first business back in 2008, and wanted to do something like this, wanted to be able to get investments from a million moms into this mom entrepreneur, and was told by my attorney that pretty much, you can't do that. This is back in the day before Kickstarter, the term crowdfunding didn't really exist yet, but the idea did. I kept trying different ways to make it happen within the legal confines of the day. It was an interesting experience raising capital for a business in 2008, 2009, 2010 during a financial downturn, and I learned a lot. I learned a lot about what doesn't work for businesses like mine, that was meant to be a business that was built to last, to create good paying jobs, to put a good product out there into the world. The current financial systems really weren't a good fit.

Since shutting down that business in 2013, after five years of trying to make it work, that's really been the driving force for me, is trying to find ways to break down the barriers, to break down the barriers and raise up the awareness and the education for connecting those folks who want to invest according to their hearts and their values, and connecting them with the businesses that need them.

Curt Lyon: Wow. Thanks, Janice. It's really amazing to hear each of your stories and how you've come to for this work, and also to hear that it sounds like both of you are working on different aspects of this idea of community capital funds, Janice especially, working on the community investment fund piece with having the community investment portion, which hopefully we'll be able to explore a little bit today. Let's move in to a discussion. We have a couple of questions for our speakers, so we'll run through those, but I hope that jogs ideas. I see some chatter already, so please feel free to drop questions in the chat. Then in 10 or 15 minutes, we can turn to those questions specifically and have a robust discussion around what you all want to talk about with these great experts on the panel today.

First, I wanted to touch on this idea of governance, because both of you mentioned that in what you just were talking about with your own work. Both of you have worked with lots of different funds being created on the ground, and talking with folks who are doing this work. I'm curious, when you are in these conversations, how do you see the governance of these funds matching up with specific goals that the folks creating them want to achieve? How do you facilitate that process, or do you have any advice in terms of matching that governance and community goal? I'll start with Janice, and then Deborah, if you want to jump in after, we can do that.

Janice Shade: Yeah, sure. I mean, that's one of the big questions, is how to do this in a way that it doesn't get too unwieldy. It's a question that I've talked about a lot with several of the communities that I've worked with to help work towards a community investment fund. Usually, the community engagement typically tends to focus on values and mission alignment with the fund. So, how can you actually set up mechanisms for gauging that? Deborah will be able to give you a lot more specifics on how they're doing it in general, or doing it specifically. I've had more discussions in general with how people want to do that. We've seen a number of different ways, everything from somebody starting to think about, "There's got to be an app for that, and if there's not, we can create an app."

It's to allow anyone who has invested in the fund to participate in decisions to perhaps a different end of the spectrum, where the community of investors elects a committee who represent the investor base in making the decisions and being part of the investment committee that works with the portfolio manager. It's the latter that I'm seeing being considered more often, I think just because it's more readily available. I would love to, if anyone out there wants to work with me on how to develop an app, it's actually something, I'm going to give a little shameless plug, in my book that I wrote a couple years ago, called Moving Mountains, I actually wrote a little fairytale imagining what a community investment fund could look like with full input in the governance.

That was one of the things that I wrote about, was where the entire community could come together, watch the presentations by the companies that were being considered, and through an app, be able to give their diligence or perspective in to the final committee that was elected. It was kind of a hybrid of both. That's what I'd love to be able to see, and that's what I talk about a lot with communities as I'm talking with them. But I know Deborah will have some real specifics on how she's already doing it.

Deborah Frieze: Okay. Well, you just set me up, so I better tell a story. Here's an example, in our fund, for Boston Impact Initiative, I'm going to say something about Ujima as well. But for Boston Impact Initiative, which the aspiration is the intersection of grassroots organizing and financial rigor. Those don't naturally come together as bedfellows always. So, we were considering an investment locally in a equitable real estate fund. There was another fund in the Eastern Massachusetts area that we wanted to make an investment in. Because it wasn't a project, it was a fund, it had a lot of underlying projects in it. One of the values that we held is we never want to be on the wrong side of the table when it comes to community.

We went through, we did our due diligence on this investment, everything looked good, our investment committee gave it a thumbs up, and then we went to some community partners. This is before we were majority governed by community based organizations. This is the thing that caused us to make the change, which we went to some of our community partners in the housing justice space and said, "Look, we're about to do this investment. Any feedback?" They were like, "Yeah, we're protesting one of those parcels that's in that pool of investments." We're like, "That's it. We don't ever want to be in a situation where we are the ones making an assessment of an investment, and we don't have community voice at the table ensuring that we are aligned with grassroots community and political positioning that's happening in our neighborhoods." That's when we made the shift.

Now we have those organizations looking at everything. We actually will, often my staff when they find a deal will often call those board members. Those organizations elect board members control seats on our board, and we'll run things by them. This happened with a restaurant we wanted to invest in. Restaurants have sub minimum wage jobs in Massachusetts. Our community based organization said, "No way are we ever investing in something with a sub minimum wage job." We're like, "Are we cutting out the entire restaurant sector?" They're like, "Figure it out." We came together with this startup restaurant, we came up with a strategy that got all workers on salary, even though it was a startup, and got really creative. So, we get pushed by our community organizations and those representatives to structure deals that we might not have structured if we didn't have that accountability to community. That's how it works for us.

What I want to say about whether you're deciding to do that versus direct, and it's really convenient in Boston, because BII and Ujima Project, we have the same office, we sit on each other's investment companies and boards, we're doing it side by side, os we get to watch representative democracy versus direct democracy in action. The Ujima Project is incredible, because the community members get to decide what qualifies for consideration for an investment, and they get to decide and vote on what gets invested in. However, to do a project like that, you primarily have to be really good at community organizing popular education and getting out the vote, right? It's a very different set of activities than if you're primarily a financial organization. We've done 60 transactions over the past few years.

Ujima's process of getting transactions in, that's not the point. The point is community engagement. It may slow down on the transaction process as you wrestle with the conditions it takes to get people who are not financially fluent ready to be able to use their discernment, make decisions together, and finally, ultimately engage in voting on it. I think they're both critical experiments. I think they're really great when they're complimentary experiments. Just know that if you're interested in a direct democracy where the community governs all decision making, your primary work is community engagement and popular education. That's one of the major distinctions in how you decide to move forward.

Curt Lyon: Thanks, Deborah. Thanks, Janice. Really, really great to hear these two angles on that question of governance. I think that's super important. Thanks, folks, for putting some questions and comments in the chat. That's really helpful. We'll definitely try to cover all of these in just a few minutes when we jump to the audience questions. I wanted to ask both of you, because I think you each had interesting experiences with this question, but in terms of structuring the capital itself, Deborah, you mentioned the capital stack. Janice, you have been mentioning community investment. I'm curious how you think about structuring capital to match those goals that work with the government structure of the fund from all sorts of communities, investors, funders. You can take that pretty open-endedly, but, yeah, how do you think about structuring that capital stack for the funds? We can start with Deborah and then go to Janice.

Deborah Frieze: If it's okay, I think I'll share a slide, Curt, because that might be the easiest way for me to... okay. I'm going to show you how we structure the capital. Somebody needs to give me screen sharing, if that's possible, Andrea. Okay. The way that we structure the capital, and this is also where community investors really come into play, is what we're saying is, first of all, this is modeled on a $10 million fund. Our investment size is $50,000 to $250,000 per transaction. The community notes, what we call the community notes, which are for non-accredit investors, they sit at the top of the capital stack. They're senior to everyone else. That's number one. They have a three year 3% return. I want to say the investment range, the $2,000 to $25,000. So, again, because we're sister funds with Ujima, who's doing a much smaller investment size, like $50, $150, we divided up the market as focusing on the non-accredited institutions, let's say like a black church, for example, that's non-accredited. That's why our non-accredited numbers are a little higher.

What's really important here also is what we call the seniority percent, which is also the philanthropic reserve that protects those investors. We're suggesting that not only are non accredit investors senior to everybody else, we also guarantee at least 50% of their investments. So, if they invest $2,000 and everything goes terribly wrong, the most that they would ever lose is $1,000 dollars. We want to ensure that we are de-risking it the most for those who can least afford to take risk, as opposed to the conventional notion of risk and return, which says the more risk I take, the more return I should get. We're doing the opposite. They're followed by the accredited investors in two versions of three year, 3%, and a seven year, 4%. That makes up the majority of our fund. That's 8 million.

Then that's followed by a loan loss reserve that's made up a mix of philanthropic notes, five year 1% notes that are subordinate to everything else, and actually $1 million of straight grants. What that structure allows us to do is... sorry, let me come off of stop share. That ensures that we are bringing the non-accredited investors who may really not have disposable income, may not be able to afford risk, and ensuring that they are covered. The other thing I want to say is that even with something like COVID coming in as a black swan event, disrupting certainly the entrepreneurs primarily that we work with, we are still in a position at the moment of making all of our note holders whole.

We should be able to pay back even the philanthropic note holders, because as a charitable loan fund, we have a lot of flexibility around how we use philanthropy grants, recoverable grants, forgivable loans, et cetera, that allow us to respond to changes in the environment so that we're making sure that not only are we keeping our entrepreneurs getting the capital they need, but that we're making sure that our non-accredit investors get paid back.

Janice Shade: Cool. I want to underscore some things that Deborah just said, because the work, Deborah, that you and BII and Ujima have done is revolutionary, because it is starting to change the awareness and perception, especially of the larger institutional investors or accredited investors who can afford to come into this thing, and getting them to think differently about their expectation of risk and reward, as well as those of their fellow fund owners. So, you're doing just really important work that needs to be done on a much broader basis, because we need more of it to change that perception, especially at those accredited levels. Now, I want to talk a little bit more on this topic and bring in the element of time into the conversation. I'll give a couple examples of some things that I've seen.

By time, I mean as a community is perhaps getting ready to start a fund, they've got their committee together, organizing team together, they've got their investment thesis, they're starting to put some of the actual structures in place, a lot of times what happens is as they start to get down where the rubber hits the road and they have to start bringing in investors, the realization that it's probably going to be easier to bring in some of those big investors up front, it starts to sink in. I just want to put out there that that's not necessarily a bad thing. If you can get some of these community foundations, local businesses that might be looking to do some philanthropic investing to be your early lead investors, so to speak, it helps to get the fund launched, started, building a track record, helps your team start to feel their way into organizing and managing a portfolio and investments over the long term, and then build into your strategy ways to bring in the smaller investors.

It's a strategy that I've seen happen more often than not with very early stage or startup funds, and a variation on that theme is something that I found really interesting. There's an organization, I think it's called the Community Investment Trust. It's out in Oregon, in Portland. They did something really interesting also in this concept of timing of your capital stack, is they were looking to purchase, I think it was a rundown strip mall, and rehab it and turn it into places that were more affordable for local businesses to be able to come in and set up shop and repopulate this old rundown strip mall that would serve the community. As they were thinking through their capital stack, what they ended up is I think they had maybe two lead investors that came in and financed the fund upfront.

From the very beginning, that investment was designed to be short term. What happened, the way those two lead investors got paid back is that as the community started to invest, often in increments, people could be investing $10 a month over a number of years to make it easier for them to access entrance into the fund, that's how those two lead investors ended up getting paid back over time to the point where they were completely removed, paid back out of the fund, and now I'm pretty sure it's completely owned by citizens. That's another way of thinking about your capital stack over the course of time.

Curt Lyon: Thanks, Janice. Yeah. Great that you mentioned the work of the Community Investment Trust. We had John Haines from Mercy Corps, who's working on the real estate focus session just a few weeks ago. Deborah has mentioned Boston Ujima Project a couple times. We also had them on in July's session, so you can definitely check out the recordings on our website. Oh, Andrea sent a link. Thank you. I have one final question for our speakers, and then we'll move to the participant questions. Janice and Deborah, this is combining a couple of questions, but thinking about the work that you've done talking and working with folks who are really starting these projects, I'm wondering, where do community leaders start when they want to develop a fund, and what are the conditions for success that you've seen in your work? I know there's probably a lot there, but just some highlights would be really great for some folks who are watching who might be interested in starting this kind of work or supporting others in doing that. So, Janice, you can go first. And then we'll have Deborah wrap it up.

Janice Shade: Yeah. That's an easy one. The place that you start first is start with your team. It's of utmost importance to make sure that you have a robust and fully engaged and invested organizing team to help you start moving through this. I think I saw a reference somewhere in the chat, there's a handbook that Jeff Rosen, that Deborah mentioned before, Jeff Rosen and Solidago Foundation, along with NC3, supported the creation of a handbook, Community Investment Fund Handbook, a how to guide of how to go about setting things up. My chapter that I co-wrote was all about how do you actually go about doing this? That's item number one, is getting your team up and running. In addition to this handbook, I recently just finished a set of tools and resources to accompany and compliment the handbook that will be available on the NC3 website soon.

The most important item, I think, in that whole thing, I have all sorts of financial tools to help you model out the financials, also important, but just starting with the team builder matrix to really think through who's on your team, both in terms of the skillsets and experiences that they bring, but also the facets of your community that are being represented to make sure that you have a well-rounded team that is incorporating local government, community members, maybe it's the healthcare or the academic anchor institutions that can be very important to helping keep longevity and continuity on the team. But this team builder matrix helps you to think through and make sure that you're going to have that well-rounded team that's all committed, helps to get you all on the same page as you then move forward into developing your investment thesis and getting into the nitty gritty of the operations.

Deborah Frieze: Okay. Fantastic. Yes. You got to start with your team, what Janice said. I'm going to add a few things. I'm going to add three things, and maybe one shameless plug. We'll see. Trust, piloting and rapid prototyping, and flexible capital. Let me say something about trust, which is if you're going to do something that's community based, you have better trust and credibility with community. There's so many stories, and now Boston is a small town, I know it's a small city. When we step on each other's toes without talking about it in a very academic focused, competitive environment, you cause a lot of trouble. So, what's the credibility that you have when you step into community? How have you shown up in community? What is your relationship? Who's in it? Who's not in it? How do you show up in a spirit of cooperation instead of competition?

What I mean by that is right after we started the Boston Impact Initiative, the city of Boston commissioned a study that showed that there were already 350 capital providers and 250 technical assistance providers dedicated to helping minority and women owned businesses. Here comes BII saying, "Hey, we're going to do it too." So, showing up and saying, "We are not here to compete with you. We are here to be complimentary. We're here to be additional," meaning this is where the flexible capital comes in. We'll take a subordinate position to a bank. We'll provide the equity to a CDFI's debt. We'll provide the visibility study grant to the Angel Group. So, every single one of those stakeholders in the community is going to want to work with us. and the community is going to want to work with us. I would say trust matters more than anything.

Rapid piloting and prototyping, don't have to figure out your 20, 30, 50 million fund right off the bat. In fact, with our cohort, I mentioned the 11 communities that we're working with, it can be anything from do three deals, structure deals, even if you can't do them yourselves, you have to go to the local CDFI to have them execute it, finding the entrepreneurs, thinking about how do you do due diligence, structuring capital, making sure they get the money. Doing very rapid, granular, pragmatic work is what builds trust and creates the possibility of getting a community capital fund at more at a larger scale moving. I think that's really critical.

In terms of how to begin and how to learn, well, you could learn with our integrated capital card deck, which is 121 cards, eight suits, English, Spanish, that helps understand place based ecosystems, all the stakeholders, all the capital types, all the structure. We're also putting a curriculum together, and it's focused on, again, place based, integrated capital to close the racial wealth divide. But we're not the only ones. There's a lot of curriculum getting created over the past year that I've noticed and launched. So, you don't need to start from a blank sheet like we did back in 2013, not a blank sheet. Again, there were some pilot funds. There's a lot of really good materials out there that can accelerate the process. Networks like this can point you in that direction.

Curt Lyon: Great. Thanks, Deborah. Thanks for sharing the card game that you have. I think that's so awesome, Janice, also the tool kit that you mentioned. We can definitely share all these resources in our followup email after the call. There are a lot of questions coming in. I definitely want to make sure we touch on as many as we can here. There's a couple comments or questions around downtown Crenshaw. I can just say a couple of words, and then for folks who are more familiar than us, please feel free to share links or comments in the chat. But from my understanding, that's a project in Los Angeles that is really community driven from the bottom up, having organizers saying that they want to take this shopping mall off of the market that's currently in competition for being bought out by big investors, and having that become a community controlled space, pooling investment from community members and non-accredited investors to capture this project.

Okay. We have Clark on the call as legal counsel for downtown Crenshaw. Clark, you could please chime in the chat with anything that is relevant here. We'll move on, but if we want to return to downtown Crenshaw, we'd be happy to hear from you too, Clark. I think there's a really related question here from Donna around how some of these projects do power building within communities. So, enhancing the power in the broader community and society, not just doing the investment. I'm wondering, Deborah, Janice, if either of you want to speak to that question there, and as well, if anyone from the audience wants to speak up on that, feel free to just put in the chat that you want to be unmuted.

Deborah Frieze: Yeah. It's interesting, I come from being a serial entrepreneur and movement building work, but I had not done ever in my career any policy work. What I'll say about where our fund has started to connect into power building, I would last year in particular, when the Cares Act came out, we bumped straight up against policy, because the first iteration of that Act was really detrimental to the entrepreneurs that we serve, new majority entrepreneurs, and found ourselves, for the first time in my career, having to get very involved in policy, municipal, state and federal joined the page 30 coalition, which some of you may be familiar with, in response to the Cares Act at the federal level, and created the coalition for an equitable economy here in Boston hat was multiple stakeholders for the first time really coming together, the intermediaries, so the CDFIs, the CDCs, the banks, the angels, all the capital providers, all the technical assistance providers and community organizers coming together to say, how do we respond so that policy is reaching the folks and supporting the people, the first version of the Paycheck Protection Act?

I think that I'm witnessing the relationships that we've built. As a place based investor, you're talking about creating a lot of intimacy. You don't have an abstract investment thesis that could be anywhere in the world or anywhere in the country. It's very relational. So, these, you're starting to create a lot of strong ties in the community, and those strong ties move from financial capital, and by the way, when I say integrated capital, I mean financial capital, social capital, knowledge capital. It's all the work that wraps around an enterprise to help them be successful, including connecting them to suppliers and customers and having our portfolio have them be connected to each other. Right?

So, what you're doing is you're creating strong ties, and then as a collective, you're starting to look at how do we act and influence policy procurement, both government procurement, but also anchor procurement? So, you go after these bigger institutions together. We've seen a lot of success, for example, in our portfolio, going after Northeastern University, Boston University, with multiple companies together trying to enter into those companies with support from capital providers. Or another example would be our chamber of commerce put a program together to have big buyers, some of the biggest companies in Massachusetts procure from small BIPOC owned enterprises, and they didn't have the capital fulfill the contract, so then the capital providers come in to complete the cycle. When you're doing place based work, you can strengthen ties across stakeholder groups. Then I do think you're starting to really build up power, at least at the place based level.

Andrea Armeni: I was just going to chime in for a second to build on what Deborah was saying on Donna's question, enhancing the power of grassroots groups in their community or society generally. In the work as we documented it or as we saw it in the report that we put out earlier this year, we saw there's some groups that were along the spectrum of goals and thesis that range from a more democratic wealth building. Some had a power building thesis in terms of economic democracy, but some also had an explicit thesis around building what one would think of as political power. So, it's definitely present in some of the examples. The Real People's Fund in the East Bay in California would be an example of the latter, where by becoming an economic force, you become also a political force in a community that now the mayor and the planning department have to deal with.

There is another way in which we have seen it show up, at least anecdotally, in terms of people's willingness to engage with power in the political sense because of the experience of having voice and decision making over this type of investment. The very experience, my voice is recognized, it matters and it shapes my community in grassroots community engaged investment also then leads to higher turnout for voting and people running for office, we've heard, on the strength of this experience. Ujima has also stood out in that in terms of the tremendous amount of workshops and popular education that they do for folks that ultimately leads to that result. I appreciate your bringing up the piece on power that goes well beyond just that one project or one initiative.

That one can balance with what Terry Lewis was asking in terms of the direct democracy, who gets to vote and who votes? I see the second part of that question is who actually votes? Deborah, you might have more to add here from your experience with Ujima, but my sense is for Ujima, it's a very broad membership base, which is extremely affordable that gives you a right to vote as a resident from the working class communities, communities of color that are part of Ujima basin. What I found interesting, if I got it right, is that few people actually vote as compared to what one might expect in theory.

In the last iteration of Ujima's investment decision making for the allocations for the year, they experienced a much lower turnout than they would've thought, despite significant efforts in that regard. I think that's something that we need to contend a little bit in this space, right? The difference between our ideal or the aspiration to play a governance role, and the practice of actually being part of that. Sorry for the long detour here, but I think it is one of the more intriguing questions or open issues that is still on the table.

Janice Shade: Well, and before we leave the power discussion, I'd just like to offer a different facet on that and address the power of community investing to create better business owners and better business people in general. It comes down to something that I think I saw Arno Hesse is on this call, and it's something I learned from him five, six years ago. I can't remember how long. He called his line of sight investing. It's investing by people who can see right into the places where they're investing and vice versa. When you walk into a shop that is invested in by the fund of which you are investor, there's that sense of pride, and also that sense of accountability between the two. This is what is so much more powerful than philanthropic giving to businesses, that by creating an actual investment relationship that sets up an expectation about some return back on that investment, you're setting up the expectations of accountability both ways. It can lead to better business decisions as people take that to heart.

One of my favorite stories to illustrate this is from my Milk Money days, which it was a Vermont based intrastate crowdfunding platform. One of our earliest campaign companies I remember going through, we had to, back in, this is in the very early days when we were still getting up and running, and she had to personally sign every investment document from every investment that came in. She had done a great job. The CEO of this company had done a great job of circling up her friends and families to be the first ones investing in her campaign, so she knew a lot of the names as she was signing these investment documents. But the very first time we brought her a document from somebody she didn't know, it stopped her dead in her tracks.

It was for an investment of $250, and yet she stopped and looked at this and said, "I don't know who this person is." All of a sudden, she said, "I'm responsible for their money. I'm responsible for deploying their trust in me back out into my business in a responsible way." That to me was one of the best day of my time with Milk Money, because it created that sense of relationship and accountability between each other, which I believe is very powerful.

Curt Lyon: Thanks, Janice. I know we only have a couple minutes here. I just wanted to address a couple of the remaining questions. I have a question for you specifically, Janice, from Cando. Sorry. I might be mispronouncing your name. But you asked, "What about raising capital in and for communities that collectively perceive a lack of disposable income? Has that come up in the work that you do?"

Janice Shade: Yes, absolutely. In particular, I alluded to a fund that I did some work with, but I'll talk a little bit more directly about it today or right now is there's a nonprofit organization in north St. Louis called We Power. Probably about two years ago, they were starting to set up an accelerator for black and Latin X entrepreneurs in north St. Louis to help them bring their business plans up to speed and then get them up and running. One of the things they wanted to do was add on an investment fund for this. They were really interested in the idea of engaging community investors. This was one where we did run into the situation or the belief that this is a pretty risky thing. We're just getting this fund up and running. How can we ask some of these folks for whom $50 could be a pretty significant part of their savings into something that's so risky?

What we decided to do at first was that this was the fund that decided to start first, and to Deborah's point of starting early prototyping, let's just get this fund up and running. We've got some local businesses and philanthropic organizations that will fund us so that we can at least get some money out into our accelerator entrepreneurs right off the bat and get our feet wet with learning how to run a fund. Then we will transition into figuring out how to bring in more investors. Now, it's still a tricky thing when you are asking someone, like I said, where $50 might be a pretty big ask of their money to be putting into something that is not liquid and could be risky. So, getting at some of the ways that Deborah has been talking about with the way BII structures things to de-risk some of the investors that can at least afford the risk is a great way to take this path.

Another thing that I've been talking about a lot and starting to get some interest in, and would really like to work with a community on trying to figure out how to do it, is to engage local philanthropic organizations with helping to jumpstart some of the investment. Could we set up an arrangement where perhaps if someone's able to make a $10 investment per year, could a local philanthropy match that, almost giving a grant to the investor to get them up to whatever the fund minimum might be? So, it gets that investor going with whatever they have, and being matched by a philanthropic donor. It's an idea I keep tossing around out there. I'm sure there's some attorneys out there that tell me it can't be done. But as soon as an attorney tells me it can't be done, I go and figure out a way to make it happen, so I'm going to keep working on that one.

Curt Lyon: Thanks, Janice. I know we're just about at time. I want to see if Deborah has any quick thoughts before we do a quick wrap. We might go a minute or two over. Yeah. Deb?

Deborah Frieze: No, I'm just really appreciative of the conversation. I think the last thought I'd leave you with is the world of finance does tend to be very proprietary, closed door, et cetera. This work just needs to be open, transparent dialogue and trust building. It's all about relationship and only about relationship. So, really putting on our grassroots hats first and our finance hats only after that seems like the right relationship to be in.

Curt Lyon: Thanks, Deborah. That's a great segue into just a really quick closing remark. Just want to say thank you so much to everyone who's shown up to any of the webinars over the past few months. We really couldn't have done this without all the amazing speakers, not just Deborah and Janice, but all the folks who have been on. You can check out the recordings. We'll have links to all the speakers, organizations. But the speakers, and then you, the participants, for asking these questions, lifting stuff up to us, talking to each other, making connections. We're really, really grateful to have this community to be with and talking about such an important and exciting area of work. Really, the folks on the ground who are developing these projects, organizing, holding finance accountable, that is really the core of all of this, so we're really lucky to have such a great group of folks who are doing this work to help spread their word. Hopefully this a really good platform for them.

On that note, if there's any connections that you'd like to make through us, we'd be happy to introduce you to speakers or other participants. We'd really love to hear from you in terms of feedback, or if you want to learn how you can jump into this work, whether you are a funder, an investor, a grassroots organization who's trying to develop a project like this, we would love to just chat and see how we can help. We're going to be continuing to work on grassroots community engaged investment, hopefully working with some individuals across all these stakeholder groups in furthering these projects, making investments, building out different models, and just seeing how we can support and share the experiences of others in that process. Definitely stay tuned for more announcements from us, Transform Finance, around all of that follow on work. But in the meantime, we'll follow up on this webinar with some resources, and thank you from us once again. Yeah, we'll close there. Thanks for sticking around a couple minutes extra. Thanks again to Deborah and Janice for such an awesome discussion. Yeah. Until next time, folks.

Andrea Armeni: Thanks, all.