VERGE Capital was created to mobilize capital – simply said, money – to help support organizations who aim to solve complex problems in our community. We began as a collective to find ways for local investors to make investments that have both a financial return and a positive social and environmental impact. So how did we do it and what was the impact? Here’s how we got started, found the money and we have engaged our community in the social finance movement.
Cultivating community interest
We started the process to build a social finance program for London with an understanding of who we wanted to serve and who in the community could help us. Our very first activity was to host a half-day social finance roundtable conversation with key organizations that were interested in exploring how we might create a community-based social finance framework to leverage community capital for social enterprise investment. Out of this gathering, the members formed Social Finance London, the precursor to VERGE Capital.
Engaging our community to develop a sense of awareness around new economic models, while rallying a renewed generation of asset activators has been an important part of building VERGE. A lot of our work has been presenting, teaching and discussing social finance and impact investment. We have held events that engage community members to to see social finance in action like London’s Social Economy. The list of audiences includes angel investors, nonprofit leaders, investment professionals, students, economic development corporations, and collaborator board members, our teams and even our families and friends. We have seen that once people learn about the possibilities of impact investing they see how it aligns with their values and how it is a fit for them.
Building a network of support
After a few years of sharing education on social finance in London, we received seed funding from the Government of Ontario. This funding launched our Startup Fund in 2015 allowing us to expand our work supporting social enterprises to include access to capital. While this funding enabled our Startup Fund, the conditions to setup that fund were created before this strategy. We received support from Goodwill Impact Loan who provided a template on how we could collaborate with our local credit union, Libro Credit Union, to start a community loan fund. In addition, we had support from our VERGE collaborators, including Sisters of St. Joseph and London Community Foundation, matching our operational dollars, and catalytic donation from Ursuline Sisters of Chatham matching lending dollars. We can’t say that this is a replicable template, as the context was unique and the relationships were developed before VERGE or Social Finance London had ever been dreamed of, yet we know it is possible. You can read even more about how we worked with multiple partners to develop community support for social finance here.
It wouldn’t have been possible for us to build VERGE without the support of our partners. Having a credit union willing to lend their expertise for loan administration and sharing in the risk is key for us. Without Libro Credit Union we would not have been able to offer the funds we did. Additionally, the government funding we received for operational funding and risk capital enabled us to get other donations, grants and investments.
All of the above organizations, and the people in the roles for supporting and making decisions, all shared in a collective vision that resulted in a national leading place-based social finance intermediary – a notion we only dreamed of prior to our public launch. Also being connected to the local, provincial, national and global social entrepreneurship ecosystems contributed to our success.
Establishing new investment models
Impact investing is not like traditional investments since the market and financial products don’t exist. Our work at VERGE was to figure out how to make it possible for people to invest. A key component of this process was understanding the regulatory environment. Early in our social finance learning journey, we were able to test a community bond structure, that helped Pillar borrow money from the community that we needed to develop and launch Innovation Works, a social innovation shared space modelled after the Centre for Social Innovation in Toronto.
The community bond is a fairly easy structure to implement and it provides the opportunity for all community members to participate, even in a small way. The bond was a five-year investment with three percent interest paid each year. We raised $1 million from 47 investors for our bond and learned there was an interest in investing funds, not just donating like in traditional philanthropy.
Our Breakthrough Fund, also seeded by an Ontario government grant, was the realization of our vision of redirecting investment capital for local impact. To launch this fund, we also received support from SVX, the VERGE collaborative, and early adopter impact investors in the fund development process. We hired Miller Thomson with the leadership of Susan Manwaring to determine which legal structure would fit best and work within the limits and regulations that govern financial markets. We created a structure that had no precedent in our community allowing us to pool nearly $2.3 million in investment capital from 20 investors.
Today, we are on the cusp of scaling our current model and innovating new ones, which includes a Conservation Impact Bond and other products as part of our VERGE 3.0 strategy. We are encouraged by the interest in and support of social finance in our community and we continue to balance the needs of those needing money and those willing to invest.