The AFI Way |
The "AFI Way" is our approach to thinking about business in general, and funding sustainable companies more specifically. We're deeply indebted to Jed Emerson, Fran Seagull, Woody Tasch, Joel Salatin, Michael Shuman & Carlo Petrini for their pioneering work in this area.
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The Purpose of Business |
It used to be that the purpose of business was singular: increase shareholder value.
Of course it wasn't really that. On family farms it was to care for the land and the animals, and hopefully send the kids to college. At the local doctor's office it was to help the community stay or get well. At the coffee shop it was to make the best pie in the area and serve it up in a friendly place. And at the big corporations it was to serve up the biggest executive pay and perks possible without the shareholders squealing too much. But somehow this idea that the only, only purpose of business was to make money for the owners latched on to our business schools, our politicians, our overall society, and even our own individual morality, like a hungry tick on a fat dog. We reject that thinking. More and more people, including us, see the purpose of the for-profit enterprise as a potent organizing structure to improve the world. While staying cash-flow positive, because the team and the bills need to be paid, and paid fairly. And while creating the opportunity for real wealth-building for the founders and entrepreneurs, for the pursuit of the American Dream, for the kid's college and the retirement nest egg, and even for some interesting travel, some fine wine, and some cool guitars. |
What is "Impact" |
What a great question. Is "impact" giving away a pair of shoes every time someone buys one, wrecking the shoe industry on some distant continent? Or is it minding the soil so maximum carbon is sequestered while minimum water is wasted? Or providing second-chance employment? Or substantially improving how quickly packaging biodegrades?
It could be a million things. We think of it as building "positive externalities" into your core business model. And, reducing or eliminating "negative externalities". We're looking for entrepreneurs that not only have that "impact" hard-wired into their and their company's DNA, but also have the managerial skill and discipline to implement the Deming Circle of Plan, Do, Check, & Act to rigorously create, track, and improve that impact. |
Impact Investing for Individuals |
In 2015, the Global Impact Investment Network (GIIN) and J.P. Morgan released a study estimating that there are $60B of assets under management dedicated to "Impact Investing" around the world. Impact investing is considered a subset of the larger "sustainable, responsible, and impact investing" (SRI) market, which the Forum for Sustainable and Responsible Investment (US SIF) estimates in their 2014 report to be $6.57 trillion - in the US alone - at the start of 2014.
That's a lot of money! Why haven't I heard about this earlier? Probably because the vast majority of impact investing is done by the very largest of the large international financial institutions, by giant pension funds, by sovereign wealth funds, by large foundations, and by governmental entities. Much of the activity has been in sweeping projects in developing countries. It has not been sport for the likes of us. AFI is trying to change that. We bring "impact investing" - the opportunity to select and invest in specific private for-profit companies who value doing good as much as doing well - to accredited individuals, as well as family offices and foundations wishing to experiment on a limited scale. Our goal is to help local investors learn how to invest in good, clean, & fair for-profit local sustainable food companies here in Central Texas. We'll provide curated deal flow, you choose which deals to participate in and which (if any) entrepreneurs to help as a mentor or domain expert. If it works as planned, we'll all earn market yields and current cash flow, and do something good with at least a portion of our investable portfolios. |
Is Growth Really Necessary? |
Like the idea that the only purpose of business is to increase shareholder wealth, we've bought into a collective illusion that businesses must "grow or die."
Really? What exactly is wrong with a nice business, say 6 or 8 people who like each other, work well together, are improving the world while living well and throwing off positive cash flow? What's wrong with that staying like that forever? We talked to a successful organic farming couple in the Hill Country east of Austin who were happy to tour us through their operation, talk markets and weather and neighbors and soil, who had no desire whatsoever to grow their business. Any why would they? They worked hard, vacationed often, produced nutritious food, and had successful kids and money in the bank. Silicon Valley tech-style investing obsesses about big: big markets, big risks, big growth, big raises, big valuations, and big fees. We like small. Is a company that raises $50k to grow from 2 team members to 4, and say a half a million dollars in revenue - with positive cash flow - by producing healthy food and social good a "win"? We most definitely think so! |
BootStrap + |
"BootstrapPlus" is what we call our approach to sensible business growth and financing. It's like bootstrapping, but with a little help. It's the idea of taking as little capital as necessary, retaining as much control as possible, targeting a "milestone" that defines an important turning point in your business, and becoming cash-positive while hitting that milestone. Then doing that again!
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Custom Capital Stack |
"Capital Stack", also known as "Capital Structure" refers to all the different types of financing a firm uses and their relationship to each other. Most financial intermediaries want to sell you what they're offering: banks have loans, VC's have equity, etc. We work with companies to figure out an optimal blend of different kinds of money - maybe grants or crowdfunding or internally-generated cash flow or investor capital - to fuel their plans.
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