13 May HomeStake Venture Partners
Interview with Bill Stoddart, Co-Founder of HomeStake Founders Fund
In 2017 when I joined the Just Economy Institute, the cohort was dominated by women, with a strong representation of people of color. In fact, it is the one finance space I’ve experienced where being a cis-white male was not the norm. But Bill Stoddart joined in our cohort with curiosity. Here was a guy who had left teaching high school to start a career in finance in order to pursue his belief that money can be stewarded toward positive social and environmental outcomes and that community investment is an important component in building community equity.
Over the years, I collaborated with Bill to make an early investment in Chef GW Chew’s Something Better Foods (while I was at the Swift Foundation) with the assistance of Nina Sol Robinson, another Just Economy Institute Fellow and Runway Fund Director. Bill continues to innovate and find opportunities to bring investors and philanthropists together to invest in a local resilient economy whether it be in Montana or beyond, bringing his skills and talent to a just economy.
Jen: How was the HomeStake Founders Fund created?
Bill: We started our fund to address several issues. First, we found that with the disappearance of community banking, economic development in rural communities has trended toward becoming more extractive. Second, the only business model for growth financing (other than bank debt backed by personal guarantees) was the VC approach, which with its emphasis on control provisions and quick exits, it simply is not a fit for the vast majority of companies that provide the economic diversity to help our communities be more resilient.
Jen: How are your investment funds catalytic in a way that is different from other funds?
Bill: Primarily, our approach is centered on the needs of the business and building a relationship with them to help shepherd any capital investment that gets made. Further, we use revenue-based “convertible equity” term sheets that use business revenues to repay investors while still providing them with some upside should those companies take off. And because most of the investors are community members or folks who have an interest in community economic resilience, combined with an interest in helping founders maintain control of their businesses, our approach is aimed at building distributed opportunity, distributed ownership and distributed power among community stakeholders.
Jen: How do you describe the kind of non-financial returns the fund offers?
Bill: The key is outcomes. Who owns the business and who controls its growth and engagement with stakeholders and the surrounding community? Who is benefiting from the company’s growth and how is it impacting the surrounding community? How many of these non-VC businesses have been able to access necessary and “friendly” growth capital? How successfully have investment returns been distributed among community stakeholders rather than exported to larger, more concentrated and aggregated wealth centers?
Jen: Can you describe how you use integrated capital to do your work?
Bill: In our specific work, we don’t have a mechanism to integrate grant capital directly; however, we believe nonprofit technical assistance providers and CDFIs can be great partners in supporting the very businesses we’re trying to support. We also structure our investments to allow for them to work alongside other grant, debt and/or equity capital injections per the company’s capital plans. And by being willing and able to provide both debt and equity capital that fits a given business at a specific period in time while also structuring opportunities to bring in various types of grant funding and investment, we work to both support and provide integrated capital when it is welcome and necessary.
Jen: What is transformational about the businesses that you invest in?
Bill: The fact that we are able to help “ordinary” businesses grow (from organic farms and value-added agriculture producers to health care facilities and software companies) within our communities by providing relationship-based “investment banking” services, makes our approach transformational. We are able to help our communities support non-extractive businesses and provide for ongoing reinvestment – all of which support a thesis of distributed economic opportunity and community resilience that can be translated across other geographies.
Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?
Bill: Primarily we are working to address the issue of equity through more distributed opportunity, ownership and power, and our investment model centers control and ownership with founders and community stakeholders instead of outside investors or other non-aligned interests. In this sense our fund is centered in a cultural and community context which can be adapted to serve the various stakeholder groups who choose to deploy it.
Jen: What does a foundation or investor need to understand in order to invest in transformational businesses?
Bill: Transformational businesses (like our fund) are by definition “new and unique,” which is somewhat antithetical to the foundation of traditional investment in that which is “tried and true.” Yet, transformational ideas and approaches are exactly those that have provided for the greatest advancements in human history. The key is to consider the intended outcomes and how the underlying thesis and execution are aligned and have the potential to succeed in what is being claimed.
Jen: What do you tell people who think your fund is risky?
Bill: Well, all investment is risky. The question is how does one define risk? If risk is doing something different or working to create and develop approaches that challenge the status quo, then our fund may be considered too risky. If the definition of risk includes concern about the status quo, then we believe our fund is potentially a great fit.
Our fund also provides a frame for approaching investment in a structured and organized way and because we have taken the time to prove our model rather than just launching a concept at full scale right out of the gates, we have demonstrated our diligence and success by returning investor capital while helping our portfolio businesses grow. And lastly, we believe our approach complements existing portfolios because our fund is generally uncorrelated with public equity and fixed income markets.
|Investment thesis / What is your rationale for your approach to investing?||We promote distributed economic opportunity and greater community resilience through an investment model based on solid relationships with our portfolio companies and commitment to helping those businesses expand free cash flow to build equity among founders and stakeholders.|
|Geography||Northern Rockies/Greater Northwest|
|# of Investments||13|
|Funds Raised||~ $6 million|
What’s on Bill’s Mind?
|Book||The Intention Experiment|
|Song||Wagon Wheel (learning it on guitar)|
|Podcast / Film||This American Life (Podcast)|