Flexible Capital Fund, L3C

Interview with Janice St. Onge, President and Board Member, for the Flexible Capital Fund, L3C

I met Janice through the Just Economy Institute alumnae network. She is full of energy for integrated capital approaches and her work at the Flexible Capital Fund is an illustration of the tenets of flexible capital for place-based integrated capital.

Jen: How was the Flexible Capital Fund created?

Janice:The Flexible Capital Fund, L3C recognizes that companies in rural areas, like Vermont, tend to be smaller and work on a less than a global scale. These rural companies may need a form of “equity” to fuel growth but need it in lesser amounts and perhaps at lower returns than traditional venture capital requires. The Flex Fund offers growing Vermont companies capital which balances equity features and returns with the realities of Vermont’s small business environment. We are about investing in companies that are ‘built to last’ (vs. ‘built to flip’), and that contribute to their communities, mitigate climate change and build healthy local food systems.

Jen: How are your investment funds catalytic in a way that is different from other funds?

Janice: We are a high-touch investor that provides business advisory capacity and instant access to our networks. We work with our companies to help them build diverse teams (governance, advisory and staff) and provide living wages. We invest in people – not businesses.

Our ability to provide flexible and patient risk capital is a direct result of the flexibility of the capital we raised to launch and grow the fund.  We are somewhat unique in that we have raised both patient equity investment from impact investors (individuals, philanthropic and for profit) as well as grant capital through the Community Development Financial Institution (CDFI) Fund.  Flexible dollars in result in the ability to provide flexible dollars out to small, growing businesses, and support them with business coaching.

In Vermont, we know how to build relationships – and how to play well in the sandbox. Vermont is too small not to. Mentoring and business advisory support is key. We offer a holistic approach – combining investment dollars with business assistance (reduces risk). And, we believe in bringing humanity, innovation and empathy to our work.

Our board of managers and investment committee have a breadth of experience in lending and equity investing and we bring a strong network of business coaches to the table. The leadership team brings 10 years of fund and portfolio management experience and deep knowledge of near equity instruments like revenue-based financing. We have a commitment to innovation using new, equitable investment structures that work for both our portfolio companies and the Fund.  We were using revenue based financing as an investment structure 10 years ago when no one else had heard of this structure, and to date remain the only Vermont-based fund offering revenue based financing.

We’ve also learned how to network with others in the region to amplify our impact and have strong relationships with other CDFI partners throughout New England for co-investment/ syndication opportunities.  We recently worked with 2 other CDFIs in NH and Maine to complete our largest investment of $1.0MM with Encore Renewable Energy. And, through the CDFI Fund we have received grants for lending, loan-loss reserves and business assistance, all of which helps mitigate our investor risk.

In addition, we are focused on financial, social and environmental impact – making positive change. We believe that diversity and inclusion are a business imperative, and racial, ethnic and gender diversity leads to better financial outcomes, customer experience and employee retention. And lastly, we are committed to linking our investor members to the entrepreneurs growing their food, creating their energy & supporting their communities.

Eleanor Leger, Founder & CEO of Eden Specialty Ciders, a biodynamic orchard and cidery located in rural Vermont crafting unique ciders and supporting sustainable apple growers in Vermont and the region (Picture credit: Erica Houskeeper).

Jen: How do you describe the kind of non-financial returns the fund offers?

Janice: As mentioned above, we offer our investor members a direct connection to the companies we invest in. Our investment dollars support companies that (1) pay a living wage; (2) mitigate climate change; (3) and are building local food systems in Vermont and the region. This all translates into keeping local dollars circulating in their own communities, reduced carbon emissions, etc.

Jen: Can you describe how you use integrated capital to do your work?

Janice: As a small impact investment fund, we offer flexible risk capital that takes the form of revenue-based financing, subordinated debt with a revenue kickers, self-liquidating equity instruments and convertible debt. We want to be sure we offer the right match of capital for the company’s stage of growth, scale they want to grow to, and market they sell into. We combine financial capital with human capital and advisory capacity to help our companies grow and stay in Vermont – we are true partners in their success (or failure). We also work with philanthropic partners when grant funds might be needed to facilitate a particular business need (e.g. technical assistance, bridge financing, etc). We have strong relationships with our philanthropic community in Vermont and the region.

Jen: What is transformational about the businesses that you invest in? 

Janice: Our entrepreneurs and their companies are creating solutions to climate change through reducing carbon emissions, innovative battery storage solutions, for example. They are also creating new food system models that have weathered COVID-19 to date by reducing food miles traveled, focusing on local production and plant based solutions – and aggregation and distribution models that are critical to shorten the food supply chain. And, they are committed to building teams that are diverse in gender, race, ethnicity, sexual orientation, etc. Some recent statistics on our portfolio companies include:

  • Spent over $51M on local purchases over the last 10 years
  • 13 (of 17) companies are still in operation at the end of 2019
  • Employed over 230 Vermonters
  • In 2019, our portfolio companies had a Wage Ratio of between 1.4 to 4.3 times the lowest pay. According to the Economic Policy Institute, in 2019, the ratio of CEO-to-typical-worker compensation (including stock options & bonuses) was 320- to-1!
  • In 2019 alone, renewable energy projects offset >48,108 tons of CO2, the equivalent of the power needs of 9,368 homes
  • In 2019, 8.2 million pounds of food waste was diverted from landfills

Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?

Janice: As the Fund has matured, we have begun to focus on investing in diverse teams as one of the criteria we look at when working with entrepreneurs. Additionally, we recently revised our investment policies to ensure that our selection criteria, operations and policies are in alignment with our values around social and racial justice. Our Board of Managers is gender diverse (4 of the 5 Board members are women and one is BIPOC). We are committed to working directly with all our portfolio companies to address racial, social and environmental justice at all levels of their operations.

Meg Donahue and Lisa Lorimer Donahue, co-founders of MamaSezz Foods, Inc., a whole food, plant based online meal delivery company (Picture credit: Erica Houskeeper).

Jen: What does a foundation or investor need to understand in order to invest in transformational businesses?

Janice: We invest in people – not businesses – first. And transformational businesses are paving the way for others, so there is inherent risk when you are leading the way in a nascent technology or market.  We’re aware that failure is as much a part of investing as is success (and returns). We also treat entrepreneurs as people – even when things go wrong. We all need help sometimes. Empathy, understanding and humanity is required.

Jen: What do you tell people who think your fund is risky?

Janice: We have experience, and we are continuous learners.   We’ve originated more than $6.0 million in loans and investments in 17 companies over the last 10 years. Our focus is on revenue-based financing – a self-liquidating investment structure, which unlike equity, doesn’t require a sale or exit. We are a high touch investor and work in partnership with our entrepreneurs to provide advisory capacity as needed to help them grow. We have a strong foundation in collaboration and have built relationships with other value-aligned investors in NH and Maine to help secure additional funding for our companies when needed. We also have strong governance with a dedicated Board of Managers who bring investing, financial management and fund management skills to the table.  And, we have a strong fund management partner with the non-profit Vermont Sustainable Jobs Fund, Inc. (www.vsjf.org) who have a diverse network of skilled people in support of operations.

Flexible Capital Fund, L3C

Investment thesis / What is your rationale for your approach to investing? We use a placed-based, integrated capital approach to our work of investing in food system, forest products and clean technology entrepreneurs.  These entrepreneurs and their teams are the ones bringing about systems change in re-localizing food systems, mitigating climate change and creating resilient communities. 
Geography Vermont – expanding into New England states with Fund 2.0 (2022-23)
Year Founded 2011
# of Investments 29
Funds Raised $5,085,000  – $3,660,000 in equity; $1,425,000 in CDFI / grants


What’s on Janice’s Mind?

Book:   The Overstory, by Richard Powers. Speaking truth to the fact that we are all connected – people, animals, trees. 
Song:   Il Mondo, by Il Volo 
Podcast / Film:  Podcast, Where is my mind? by Mark Gober