Investment Strategies
Practical insights from 4 re:build sessions on implementing investment strategies in regenerative villages.
Overview
Investment Strategies are essential for regenerative village development, providing the capital structures and return mechanisms needed to attract and align investors with regenerative projects. Effective investment strategies balance financial returns with mission alignment, use diverse capital structures, and create clear pathways for investors to participate. This guide synthesizes knowledge from re:build gatherings to provide practical insights for implementing investment strategies in community projects.
Key Principles
Prefer cash flow over equity: Generally, prefer cash flow returns over equity when possible, as equity requires carrying it back and can complicate ownership structures. Even if cash flow returns cost more, they're often preferable to giving away equity.
Clarify investment offerings: Create clear investment offerings that explain how returns will be structured—whether through IRR (Internal Rate of Return), equity multiple, percentage returns, or cash flow distributions. Transparency builds investor confidence.
Comprehensive planning: Investors take projects more seriously when they demonstrate thorough planning, including detailed business plans, investment strategies, land feasibility studies, and real estate negotiations.
Equity for true partners: Only use equity for people who will be genuine partners in the project, not just passive investors. Equity should align with active participation and shared values.
Pre-sales reduce equity needs: Fund most development through pre-sales to reduce equity requirements and preserve more ownership for the community.
Methods and Approaches
Development planning process: The investment strategy development process includes land and site analysis, due diligence, choosing development type, selecting systems, market research, and detailed investment analysis with equity waterfalls, cash flow distributions, and partnership structures.
Investment analysis components: Detailed investment analysis includes equity waterfalls showing how returns flow to different investor classes, cash flow distributions over time, and partnership structures (limited partners, general partners) that define roles and responsibilities.
Return structures: Investment offerings can structure returns through various mechanisms:
- IRR (Internal Rate of Return): Annualized return percentage
- Equity multiple: Total return multiple (e.g., 2x means doubling investment)
- Percentage returns: Simple percentage-based returns
- Cash flow distributions: Ongoing income from operations
Pre-sales strategy: Pre-sales of lots, houses, or units can fund most development costs, reducing the need for equity investment and preserving community ownership. This approach requires strong market demand and clear value proposition.
Payment plans and partnerships: Offer payment plans or bring people in as equity partners to help with payment structures and create alignment between investors and the project.
Equity for operations: Some equity investment into operations can help build a professional team to support the project, providing the capacity needed for successful development.
Cash flow planning: Cash flow planning is critical—understand when you'll use cash, which determines how much money you need to raise and when. This informs your investment strategy and timing.
Benefits
Reduced equity dilution: Pre-sales and cash flow-based returns reduce the need for equity investment, preserving more ownership for the community and founders.
Clear return expectations: Structured investment offerings with clear return mechanisms help investors understand what to expect and build confidence in the project.
Operational capacity building: Equity investment into operations enables building a professional team to support the project, providing expertise and capacity needed for success.
Flexible capital structures: Multiple investment structures—cash flow returns, equity, payment plans, partnerships—provide flexibility to meet different investor needs and project requirements.
Investor alignment: Clear investment structures help attract aligned investors who understand and support the project's values and mission.
Reduced financial burden: Payment plans and partnership structures can help manage payment requirements while building investor relationships and alignment.
Key Insights
Comprehensive planning matters: Successful projects often include detailed business plans (sometimes 100+ pages), investment strategies, websites, initial land feasibility studies, and real estate negotiations. Investors take projects more seriously when they demonstrate thorough planning.
Development planning process: The process includes land and site analysis, due diligence, choosing development type, selecting systems, market research, and detailed investment analysis with equity waterfalls, cash flow distributions, and partnership structures.
Clarify investment offering: First, clarify your investment offering in clear terms. Create a deck that explains how returns will be structured—whether through IRR, equity multiple, or percentage returns. Impact-first investors typically target 4-8% annual returns after fees, while regenerative real asset funds benchmark against NCREIF Farmland Index showing 11.4% average annual returns over 25 years.
Pre-sales reduce equity needs: You don't have to give away a lot of equity if you fund most development through pre-sales, preserving more ownership for the community.
Equity for operations: Some equity investment into operations can help build a team to support the project, providing professional capacity and expertise.
Cash flow returns preferred: You can offer returns based on cash flow rather than equity, providing investors with ongoing income. This is often preferable to giving away equity, as equity requires carrying it back and can complicate ownership.
Payment plans and partnerships: Payment plans or bringing people in as equity partners can help with payment structures and create alignment between investors and the project.
Cash flow planning critical: Cash flow planning is critical—you need to think about when you'll use cash, which determines how much money you need to raise and when. This informs your investment strategy and fundraising timeline.
Typical investment terms: 3-year initial lock-up periods, 10+ year investment horizons, 1% management fees, 10% performance fees with high water marks are common in regenerative land investments.
Equity carries forward: The general problem with equity is that what you give, you carry it back. If there's any other way to incentivize investors, even if it costs double, prefer cash at some point instead of equity.
Examples and Case Studies
Successful regenerative villages demonstrate various investment strategies:
- Projects with detailed business plans (100+ pages), investment strategies, websites, land feasibility studies, and real estate negotiations that demonstrate comprehensive planning
- Investment structures using equity waterfalls, cash flow distributions, and partnership structures (limited partners, general partners) to define roles and returns
- Pre-sales strategies that fund most development costs, reducing equity needs and preserving community ownership
- Cash flow-based returns providing ongoing income to investors while maintaining community control
- Equity structures distributed to customers and stewards of nature through projects that align ownership with mission
- Payment plans and partnership structures that help manage payments while building investor alignment
Best Practices
- Prefer cash flow returns over equity: In general, the problem with equity is that what you give, you carry it back. If there's any other way to incentivize investors, even if it costs double, prefer cash at some point instead of equity
- Equity for true partners only: Only do equity for people who will be genuine partners in the project, not just passive investors
- Due diligence preparation: Prepare comprehensive due diligence including land title verification, zoning compliance, environmental site assessments, water rights documentation, soil quality surveys, and infrastructure feasibility studies
- Impact metrics for impact investors: For impact investors, add theory of change with measurable outcomes, IRIS+ metrics selection, SDG alignment mapping, and community governance structure documentation
- Risk mitigation: Address investor concerns about community stability—member turnover rates, governance conflict frequency, leadership succession planning, and financial transparency practices
- Legal structure clarity: Choose legal structure carefully—cooperatives attract mission-aligned investors but deter those seeking proportional control. Benefit Corporations provide legal protection for mission-driven decisions while accommodating traditional investors
- Comprehensive planning: Create detailed business plans, investment strategies, websites, land feasibility studies, and real estate negotiations to demonstrate thorough planning
- Clear return structures: Create clear investment offerings that explain how returns will be structured—IRR, equity multiple, percentage returns, or cash flow distributions
- Pre-sales strategy: Fund most development through pre-sales to reduce equity needs and preserve community ownership
- Cash flow planning: Plan cash flow carefully—understand when you'll use cash, which determines how much money you need to raise and when
- Professional presentation: Create professional investment decks and materials that clearly explain the investment opportunity and return structures
Implementation Guide
To implement investment strategies in your regenerative village project:
1. Conduct comprehensive planning: Create detailed business plans, investment strategies, websites, land feasibility studies, and real estate negotiations to demonstrate thorough planning
2. Develop investment analysis: Create detailed investment analysis with equity waterfalls, cash flow distributions, and partnership structures (limited partners, general partners)
3. Clarify investment offering: Create a clear investment offering that explains how returns will be structured—IRR, equity multiple, percentage returns, or cash flow distributions
4. Design pre-sales strategy: Develop pre-sales strategy for lots, houses, or units to fund most development costs and reduce equity needs
5. Plan cash flow: Plan cash flow carefully—understand when you'll use cash, which determines how much money you need to raise and when
6. Prepare due diligence: Prepare comprehensive due diligence including land title verification, zoning compliance, environmental site assessments, water rights documentation, soil quality surveys, and infrastructure feasibility studies
7. Define impact metrics: For impact investors, define theory of change with measurable outcomes, IRIS+ metrics selection, SDG alignment mapping, and community governance structure documentation
8. Address risk concerns: Address investor concerns about community stability—member turnover rates, governance conflict frequency, leadership succession planning, and financial transparency practices
9. Choose legal structure: Choose legal structure carefully—consider cooperatives for mission-aligned investors or Benefit Corporations for mission-driven decisions with traditional investors
10. Create professional materials: Create professional investment decks and materials that clearly explain the investment opportunity and return structures
11. Prefer cash flow over equity: Structure returns through cash flow when possible, reserving equity for true partners who will be actively involved
12. Build investor relationships: Build relationships with aligned investors, starting with ethical banks and impact investors who understand regenerative values
Challenges and Considerations
Equity complexity: The general problem with equity is that what you give, you carry it back. Equity creates ongoing ownership relationships that require management and can complicate decision-making.
Due diligence requirements: Investors require comprehensive due diligence including land title verification, zoning compliance, environmental site assessments (Phase I/II), water rights documentation, soil quality surveys, and infrastructure feasibility studies.
Impact metrics for impact investors: For impact investors, add theory of change with measurable outcomes, IRIS+ metrics selection, SDG alignment mapping, and community governance structure documentation.
Risk mitigation: Address investor concerns about community stability—member turnover rates, governance conflict frequency, leadership succession planning, and financial transparency practices.
Legal structure implications: Cooperatives attract mission-aligned investors but deter those seeking proportional control. Benefit Corporations provide legal protection for mission-driven decisions while accommodating traditional investors.
Return expectations: Balance realistic return expectations with impact goals. Impact-first investors typically target 4-8% annual returns, while regenerative real asset funds benchmark against higher returns (11.4% average annual returns over 25 years for NCREIF Farmland Index).
External Resources
For deeper exploration of this topic, see:
- 1000-Year Investment Horizon - Long-term investment approach for regenerative projects
- Bonding Curve Financing - Innovative financing model for regenerative projects
- Real-World Assets Tokenization - Tokenizing physical assets for investment
- Nature Token - Tokenized nature assets
Real-World Examples
These partners are actively implementing investment strategies in their projects:
Wild Community
Wild Community operates as a blockchain-powered Smart Enterprise Ecovillage (SEV) global investment fund and foundation focused on regenerating people, land, culture, and econom...
Better World
Better World Cameroon (BWC) was registered in Yaounde in 1996 as an umbrella organization for youth/women development.