Nature: How Does It Nurture Your Finance?

A rooster with colorful feathers and a hen in nature.
Chickens in nature! ©2013 Sonora Ortiz

Surplus.

A fascinating idea in what for me is a new context.

I recently discovered the word used in the work I do with folks in the cooperative movement. Surplus generates from work, cooperative, worker-owners control the surplus they create with a democratic voice.

The word, ‘surplus,’ is a necessary part of the language for cooperatives. It sets a unique relationship of the worker to his or her labor.

As I learn about cooperatives, I apply this idea of surplus to the structures in other alternative economy systems.

This includes Slow Money with its sensitivity to nature.

How Slow Money Grounds Social Justice Work

Though I am no less committed to hearing new values and listening to new voices through this justice and equity work, I appreciate the grounding character of the Slow Money approach, its sensitivity to earth’s wisdom and the depth that gives me insights into the barriers inherent in social justice work.

While working with investment and social justice, I  recognize the wealth gap and barriers to asset accumulation. I find privilege and patriarchal structures in our social norms and I come to understand the way they function within today’s laws.

The social justice work sits on a framework of people driven values.

While trying to make sense of my learnings and understanding, I find myself engaged more deeply with the Slow Money values where I first learned about ethical investing.

Slow Money Answers

Slow Money gives me rich answers to the ideas around:

  1. surplus
  2. distribution of the surplus through nature’s abundance instead of economic scarcity
  3. redistribution of the surplus through diverse, locally based infrastructure
  4. barriers to food access
  5. worker equity

This is intersectional investing at its best. Let me share a little about the Slow Money work where I started my ethical journey and WIK.

Soil Health

Slow Money minded investors invest as if food, farms, and fertility (health of the soil), matter. Soil health is a driving value for Slow Money investments. Finding ways to deploy patient capital to local entrepreneurs is the Slow Money minded investor’s holy grail.

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From the entrepreneur side, investor ready regenerative business models are key to healthy, future economies.

This is a holistic, inclusive, diverse model.

Time and pace are the differentiators for the Slow Money minded investor.

Nature and Limits

Slow Money minded investors embrace the limits set by nature. By committing to investment themes designed to prioritize food, farm, soil health, and human relationships, they create the change they want to see in the world. Focusing on impact creates responsible and ethical investments.

Time and pace are not arbitrary methods to regulate money.

Slow Money minded investors harness time and pace to honor mother nature while mirroring the cadence of her creation.

As part of this awareness, Slow Money minded investors find financial instruments and propose they complement nature’s tempo in a variety of ways. One way is through revenue-based financing. The narrative around revenue-based financing tools speaks to a holistic, responsive agriculture, not a mechanized, single bottom line agribusiness.

Chicken & Egg

I often tell the story of the chicken and the egg to illustrate the need for flexible financial tools to the new Slow Money member.

Regardless of whether the chicken or the egg came first, the industrial farm with its ubiquitous industrial light controls for predictable egg laying and production.

The hen is barely necessary.

Day in and day out, season in and season out, hens lay. Spreadsheets, budgets, and other controlled inputs decide the number of eggs.

Profits, in this idealized scenario, are mostly, always predictable.

Alternatively, the sustainable farmer commits to the rhythms of the seasons. Longer shadows and colder months mean a change of focus, a rest for the hen from egg laying and a break from egg collecting for the farmer.

It also means a slow in the income stream.

Community Building and Investment

Spring and summer with the high sun overhead is the time of birth, eager egg-laying hens, abundance and improved cash flow.

But what of investment need?

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What of the sustainable farmer who wants to engage folks living around their farm with local investment?

Whether an improvement project based on purchasing a new group of chickens, putting up fencing, buying an egg collector or any other farm-based project, what is the best way to set investment terms for the farmer and the community?

Grants, debt, equity?

What is the right financial tool for the farmer who wants to engage the community in a new relationship that transcends transactions, connects people to their food and to the farms where it’s grown?

The royalty note, a form of revenue-based financing and generative capital, may be the answer.

Financial Tools and Their Limits

Every form of capital has its benefits, but knowing their limitations is important.

  1. Grants may be available, but landing one is difficult. Business sustainability becomes a question and grants can set up a relationship of dependence. Besides. a focus on finding the next gift of money can take away from business growth and innovation.
  2. Debt financing is burdensome to an entrepreneur. The fixed payment of a loan doesn’t respect uncertain cash flow or the vagaries of nature.
  3. Values-driven business owners aren’t comfortable with early-stage equity. In addition to being difficult to find, these social entrepreneurs know equity financing may result in giving up control over their mission.

Royalty Notes

Fiddling, if you will, with the payback schedule, the royalty note addresses these concerns.

The royalty note is a debt instrument. A note with a payback schedule, the royalty note is different, however, because it opens to the beat of nature through the payback schedule.

Instead of a predetermined, mechanistic payback, the royalty note indexes payment to gross revenue.

To reference the story of our laying hen: when eggs are scarce so are investor payments.

This financial construction means the entrepreneur:

  1. isn’t subject to a demanding fixed payment schedule
  2. aligns the investors’ risk with the entrepreneurs’ risk as both have an eye to revenue.

I’ve heard the royalty note described as both a debt instrument with an equity kicker and as self-liquidating equity.  I think these descriptions are telling.

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Slow Money Minded Investment

This royalty note, as used for Slow Money minded investments, suggests a narrative of finance designed around nature. It teaches a specific viewpoint.

And the lessons learned expand with mindful reapplication.

Royalty notes work with not only sustainable food businesses, but for any seasonal work whether retail, crafts or manufacturing.

In fact, the royalty note works for any small business or startup dealing with unpredictable cash flow and a tangible product.

However, grounding the royalty note in a holistic narrative is a wise place to start.

With an environmental lens, we embrace both risk and uncertainty in a way we can’t do from within the financial paradigm and the business model approach.

Appropriate Velocity

One of many favorite quotes in the Inquires into the Nature of Slow Money is from David Orr:

There is an appropriate velocity for water set by geology, soils, vegetation and ecological relationship in a given landscape. There is an appropriate velocity for money that corresponds to  long-term needs of communities rooted in particular places and to the necessity of preserving ecological capital….”

Orr’s words suggest we can move outside our human-based frameworks whether social justice, startup or economics to serve nature with our financial tools. On the face, deconstructing and reconstructing financial tools to serve nature hits a discord. Capitalism structured for an industrial age is the opposite of a holistic system with nature at its center.

But this restructuring of our tools, when surrounded by a richer language around money and labor that includes and necessitates the commons, is a healthy start. While delineating financial risk, business model risk, team risk, and a nature-based uncertainty we can begin to create an opportunity for deeper innovation while we harness market solutions for social change around a continuum of interests and issues.

What do you think about using the royalty note to serve nature?

Did considering time as an element in your financial instruments make you consider other ways you might make financial tools reflect their role in supporting the planet?

I’d love to hear in the comments.

 

 

 

 

 

 

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