Community Investment Fund Structures
NC3 has been researching, supporting, and advocating for the development of community investment funds (CIFs) for years. In 2019, we developed an ebook, Community Investment Funds: A How-To Guide for Building Local Wealth, Equity, and Justice, and an accompanying Community Investment Fund Toolkit. In 2021, we brought a proposal to the Securities and Exchange Commission as well as the Senate Banking Committee for what we called a 21st Century Community Investment Fund.
Diversified Community Investment Fund (DCIF)
Something must have sparked your interest in raising community capital—an entrepreneurial idea, a dilapidated building in your downtown, or a new concept for your business. Whatever it is, the more passion you and your team have for it, the more you believe in it and see layered benefits for your community, the easier it will be to engage support and capital.
One consideration to keep in mind is that a community capital raise will more likely be successful if the project already has some traction in your community. Raising start-up funds from a broad cross-section of your community before the venture has revenues or significant assets may be hard. Friends and family, alongside traditional funding sources, may give you just what you need to launch and generate some revenue to then power your next step with community capital.
Aligned Community Investment Fund (ACIF)
Other projects may not have a direct tie to real estate. For these, a second fund structure allows any company that is primarily in a non-securities business to have an investment fund. An ACIF can be created by any community-based organization, such as an entrepreneurial support organization (ESO), to raise capital publicly from community members and deploy some of that capital via investments into its client businesses or other businesses in the community. Just like the DCIF, the profits generated by the ACIF’s investments can be distributed back to its community investors, creating a wealth-building opportunity for all alongside a strong local economy.