We recently sat down with Dave Cooper of Montcalm Capital (an SVC Member Company) to talk about their investment philosophy, investing in companies using debt instead of equity, and why VC Money is not the only funding available (contrary to popular belief). Read on to learn more from Dave about what other funding options are available for mission-driven companies:
Tell me about what you do at Montcalm- what is your expertise, and what excites you most about your company?
I’m a co-founder and managing partner at Montcalm Capital, an affiliate of Montcalm TCR (Tools for Care and Renewal) a Registered Investment Advisor. Montcalm Capital is a new economy investor that generates value and well-being for people and planet.
Montcalm TCR is a wealth management firm that blends expert investing with new economy sustainability and independent vision, and Trevor TCR, for philanthropy and grants.
At Montcalm, we collaborate with investors, investment funds, and investor networks. Our goal is to finance small to medium enterprise sectors oriented around energy, water, food & agriculture, gender, inclusion and health.
We view investing, wealth management, and philanthropy as whole financial process around the basic tools for resilience and renewal. We look at investing from the vantage point of, “What do you need to have a healthy lifestyle?” Our goal is for our clients and entrepreneurs to not be stressed by finances, have good portfolio investments based on need and lifestyle, and most importantly, align with their values.
That’s an exciting place to be a part of, because we’re making financial decisions built around the balanced equation for what is right for the individual and the planet.
What is Holly’s background and why did she decide to launch Montcalm?
Holly has a career in wealth management. She began in the big machine of Goldman Sachs. Ultimately, it’s where she learned the lessons of risk-management, specific to securities, derivatives and fixed income. As a practice, we don’t invest in equity, but rather, we create a customized portfolio that ultimately builds financial sustainability. For 20 years, Holly’s mission has been to manage client relationships with a particular strategy for keeping economic sustainability at the center of her work. That’s why Montcalm is a B Corp.
Montcalm Capital invests in companies using debt instead of equity – describe your typical debt model and how can this be less extractive for entrepreneurs?
The basic model around Montcalm Capital is senior debt. We do rigorous due diligence on our portfolio companies, and build an economic debt facility that is the right size and pricing for the stage of the company.
Underwriting cash flows (revenue-based financing) means that we’re focused on the ability to support the debt, and the timing of the debt. We understand companies growing into contracts, so we build financial relationships as a capital partner. We take consideration of the stage of the company, their ability to repay, and at what time points, then create a revenue model and build a repayment schedule or capital cost structure that fits with the company’s needs.
We’re also mindful that investors have a hurdle rate, so we look to invest in companies that meet those objectives as well. In many cases, there will be multiple stakeholders in our transactions with multiple yields.
The cost of capital model includes multiple stakeholders with deviations in yield expectations to deliver a cost of capital that the company can afford. Our investments model the complexities of all stakeholder requirements to achieve a win-win.
Explain your criteria for investing, how does social impact play into your process and how you determine which companies in which to invest?
Everything we do is purpose-driven. I don’t say we only invest in impact, but rather, we invest in companies that are mission-driven and delivering on social and environmental change. Fundamentally, we go through a screen: if the company is extractive, it wouldn’t be something we would invest in.
We go through a filter that analyzes how companies have achieved a solution set around the UN Sustainable Development Goals, and ask if it is following the trajectory of SRI and ESG.
Can you speak to the variety of ways in which a company can raise capital in values-aligned ways? What are some alternatives to conventional fundraising?
Companies get stuck in the Venture Capital (“VC”) model, which is not the right way to go all the time. It’s not the right governance, and it is highly dilutive. But it depends on what stage the company is at. Not everyone is at the right stage for a VC, and not every founder is the right kind of character/personality for a VC.
The myth is that if you need money, get a VC. But the fact of the matter is, VC only supplies 3% of capital. 80% originates from other financing sources, and some comes from grants and foundations. I’d recommend this Forbes article to read more on this topic.
Many businesses in early to middle stage need to build a financial structure that fits in order to find capital. Not one size fits all. To secure financing there must be a strategy and connections. It is really hard work, and it takes people who understand the landscape through and through.
Founders need to find someone who understands how to do it, a professional who understands the integrated resources.
How best can SVC members get to know you and Montcalm? (Will you be at any events? Do you have a website with newsletter items etc?)