Highlight: How Seed Funding is Helping Americans Invest in Rural Innovation: Food, Farms and Fisheries
Coastal Enterprises, Inc. (CEI), a Maine-based, private non-profit Community Development Corporation and Community Development Finance Institution received EDA RIS Seed Fund Support in 2015 to drive investments in food, farm, fisheries, and bio-based businesses. The fund’s purpose is broader than the usual venture fund. This is a social venture fund that provides needed capital for rural businesses and creates jobs for rural economies. The fund generates a return for investors, adds value to Maine-grown products, and leverages powerful market-level change in the food system and other natural resource-based economies.
CEI has a 40-year history of significant impacts on the Maine economy and is responsible for over $1.30 billion in business investments across the state. However, until recently, most of these investments were made as traditional small business loans through their revolving loan fund, and other debt investment vehicles. Through this experience, CEI staff saw an opportunity to better support some of the higher-growth natural resource businesses that were not a fit for regular business loans. With a 2015 Seed Fund Support grant from EDA, and in partnership with the Maine Center for Business and Economic Research, CEI studied and evaluated a number of equity investment models that might work to support their target business profile. With this research in place, CEI launched a pilot program with a small, discrete group of funders and investors to test an equity-based seed fund model before taking it public.
The pilot fund was successful, making $865,000 worth of investments in seven early-stage companies and creating and retaining 156 jobs. It proved that CEI’s mission-driven model to create quality jobs, environmentally sustainable businesses, and shared prosperity could create viable investment returns for growth-focused investors.
In addition to funding natural-resource businesses in rural areas, CEI created means of supporting business and continuing the mission of the fund. They built a menu of statewide business technical assistance options to support fund clients, which leverages existing resources to help businesses expand and develop future strategies. They have also developed a curriculum on using equity financing and are offering training to potential clients in the natural resources sector. With lessons from this first seed fund, CEI is now fundraising for their next seed fund, while continuing to cultivate a pipeline of potential investors.
Impactful investing that works for both the investor and the business requires extra effort and collaboration across all vested parties. CEI brought their experience, research, and connections together to the Natural Resource Business Seed Capital Fund that has served as a great example for the industry, a great success for rural Maine, and most importantly, a valuable investment tool for investors looking for meaningful returns and businesses seeking hard to find capital.