Enterprise Financing for WealthWorks Value Chains: Overview & Guide

WealthWorks Initiative

Author +
Marjorie Kelly

Year: 2014

A primary goal of this report is provide a broader overview of larger questions of value chain finance—such as how various kind of capital (philanthropic, government, private) can work together to help entire value chains thrive; what role the coordinator plays in attracting finance for the whole chain; and how operating inside a value chain might reduce risk for enterprises and investors. These broad issues are inseparable from more specific issues of enterprise finance—such as which approach to use—because investing inside a value chain is in key ways different from investing in isolated individual enterprises.

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This report was written after two years of work with rural value chains in the Deep South and Appalachia, through the Accelerating Impact project led by Tellus Institute; this project is part of the larger WealthWorks initiative, financed by the Ford Foundation, in which Tellus has participated in various capacities for five years. The WealthWorks initiative is a multi-stakeholder initiative to articulate and test a new systems approach to rural development that keeps wealth local, is sustainable, and includes the excluded. For the Accelerating Impact project, Tellus was asked to do assessments of the financing needs of eight to ten value chains, help them advance toward their financing goals, and synthesize the common lessons involved. The insights offered here are drawn from the real-life experience of these projects, which spanned industries from sustainable wood and energy efficiency to housing, tourism, and food. On occasion, this report also draws on projects outside the WealthWorks initiative, for the relevant lessons they provide. 

This report is one in a series produced by Tellus Institute on financing value chains. Others in this series are Financing the Evolving Role of the Value Chain Coordinator; and Guide to Rural Crowdfunding. An additional report will focus on telling your business story effectively. 

Table of Contents:

1. Focusing in on Enterprise Finance
2. The Promise of Stakeholder Approaches
3. Investing Inside a WealthWorks Value Chain
 •  Are there investments in common infrastructure that can help an entire value chain to thrive?
•  Are there particular investment approaches that can help unlock potential across entire value chains?
•  What is the role of the coordinator in attracting financing for the whole value chain?
•  Does it help to attract investments if value chain enterprises are both profitable and creating multiple forms of wealth?
•  How do various kinds of financing blend to make a value chain work?
•  Are there ways that operating inside a value chain can reduce risk – for investors, for enterprise, and for the broader value chain itself?
•  How can a central coordinator use various innovative stakeholder approaches to finance an emerging sector?
4. The Myths of Stakeholder Finance
•  Myth No. 1: The problem is rural areas have limited access to financial capital
•  Myth No. 2: The way for foundations to support value chains is with traditional grants
•  Myth No. 3: Once value chain projects are operating, then it’s time to think about reaching out to investors
•  Myth No. 4: Attracting impact investments is about getting the names of the right people to approach
5. Building Blocks of Success
•  Understanding the life cycle of value chains and enterprises
•  Being investment ready
6. Selecting the Right Stakeholder Approach
•  Crowdfunding
•  Community loan funds
•  Slow Money
•  Local angel investors
•  Impact investors
•  Direct Public Offering
•  Cooperative financing
•  Royalty financing
7. Conclusions and Recommendations
•  Where is stakeholder investment now occurring and where is it needed? What are the gaps?
•  What will it take to encourage the investments that are needed?