People's Community market social enterprise funding

Raising Capital

When it Comes to Funding, This Social Enterprise Gets Creative

Anne Field | January 27, 2017

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Opening a grocery store in a food desert in West Oakland is not easy—just ask Brahm Ahmadi. Despite strong community support, he’s had to get creative to when it comes to funding and building his social enterprise. After several years, he’s finally nearing his goal, having raised money from the community and partnered with a local developer. When his People’s Community Market finally opens a year from now, Ahmadi wants it to be a community hub as well, offering services ranging from food preparation workshops to soft skills job training for employees.

It’s hard to pay for those programs, however, when you’re going to operate a supermarket with razor-thin margins in a low-income area that can’t support premium prices. So Ahmadi was forced to get creative again. He recently announced the formation of FreshLife Foundation, a nonprofit with the mission of running the community programs and raising money from outside funders to pay for them.

The group is a separate entity from the market; the only official overlap is that Ahmadi is on both boards.

A dual nonprofit-forprofit structure has been used by other business, such as Kepler’s Books in Menlo Park, a socially-minded bookstore about 30 miles south of Oakland. As part of a restructuring in 2012, Kepler’s created a non-profit to handle its literary and community events, offloading that expense from the for-profit but low-margin bookstore.

Ahmadi’s first preference was to link up with an existing nonprofit, but he couldn’t find anyone with the right fit. Either the group was so big, he feared his services wouldn’t receive sufficient attention, or it was small enough that the project likely would overwhelm the organization. Eventually, he decided the only answer was to take the DIY route.

The first step is to form a three-year strategic plan, with a year-by-year programming blueprint. Programs will focus on nutrition, food selection and the like, along with incentives for healthy eating, but also will include training for employees in such topics as financial literacy.

“These are skills that anyone needs to succeed, but the underprivileged population usually doesn’t have the chance to learn,” says Ahmadi. Programs will be added gradually, expanding hand-in-hand with the growth of the market.

People's Community Market social enterprise funding
Rendering of People’s Community Market (source: Lowney Architecture)

To get the programs up and running, Ahmadi recently launched a crowdfunding campaign on GoFundMe. The original goal was to raise $50,000, but a family foundation stepped up with a $25,000 grant, so the goal is now $25,000.

At some point down the road, if People’s Community Market starts making a profit, it could sign a contract to pay FreshLife for some services. That, of course, won’t be for quite a while, since the founders haven’t yet started construction.

Ahmadi founded the enterprise in 2010 to fill a gaping hole in the market. More than 25,000 people in West Oakland don’t have access to fresh, affordable food. That translates into $43 million in grocery spending each year that flows out of the neighborhood.

The idea attracted a lot of community support and media attention, but Ahmadi ran into obstacles, including finding impact investors and the skyrocketing price of Bay Area real estate. Last year, he finally closed on a 16,000 square-foot-property, with some help from the East Bay Asian Local Development Corporation.

Ahmadi is in the midst of getting planning approval from the city and working on construction drawings. And he’s closing a $6.5 million debt financing round, which will pay for construction and other capital expenditures.  He’s already raised about $3.4 million in equity from a direct public offeringwhich is still ongoing—and other investors. The goal is to break ground in May and open for business by the end of the year or first quarter 2018. Eventually he’d like the store to be owned by its employees.

We could use more  creative thinking like that.

Related: How the JOBS Act Gets it Wrong—and DPOs Get it Right

Old School Crowdfunding: Meet the Direct Public Offering

Anne Field is a New York-based journalist who writes about social enterprise and impact investing. A version of this article originally appeared on her Not Only For Profit blog on Forbes.com.

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