Coralus grants interest-free loans to social entrepreneurs through a democratic process
About seven years ago, serial social entrepreneur Vicki Saunders observed the economy around her and perceived it to be broken – a system that benefited a small number of investors while endangering the climate – and our very lives – and creating serious inequalities. It would help to build a better route, not by tinkering around the edges. “If we don’t do things differently, there won’t be any more markets to invest in,” she says.
So Saunders launched a Toronto-based platform she first called SheEO that aimed for what she calls “an alternative economy” allowing women and non-binary people to provide interest-free loans of five years in women-led social enterprises. Group members vote on which companies to fund. “We help fund women entrepreneurs whose businesses are impacting change and tackling major global challenges,” says Saunders. About 45% of the more than 120 businesses funded so far are Black, Indigenous and women of color businesses, with a total of about $7 million in loans made to more than 7,000 people. Expectations are to fund about 60 companies this year.
Recently, in the midst of a rebranding, Saunders changed the name to Coralus to emphasize the collective nature of the model. And she is redoubling her efforts to introduce it to other communities.
Build new systems
Saunders’ approach is based on the idea that there is an urgent need for a fundamental overhaul of the way we invest in and build businesses. “In my experience, I don’t think you can get away with it gradually,” she says. “You have to build new systems.”
But the revamped model had to not only deploy capital, but also support ideas that Saunders says “have solutions we need to survive, as opposed to more extractive ventures.” Marginalized groups receive a tiny fraction of the capital for a reason, she argues, because the system was designed by a certain group of people with a certain set of values, thus perpetuating and increasing global inequalities, as well as the conditions creating climate change. This had to change. “The question was how to disrupt the power,” Saunders says.
The community decides
What she created was a system whereby members, called activators, pay a subscription fee of $92 per month. This capital is pooled and members vote online once a year for which companies will receive funding. “The community decides where the capital goes,” she says. Once the zero rate loans are paid off – according to Saunders there is a 95% repayment rate – the money goes back into the pool, so it keeps rolling.
Entrepreneurs apply by completing a 10-question online application. After members select companies to invest in, a subsection that has financial expertise works with startups to understand the amount of capital they need and can afford. The average loan is $100,000. Funded companies are averaging “triple digit” revenue growth, according to Saunders.
Saunders cites Better Packaging, which was funded in 2018, as a good example of the type of business they seek. The circular economy business makes compostable courier packaging from plastic waste collected from polluted rivers and streams by women in poor communities. So, as the company grows, its ability to clean up pollution also increases.
While money is of course important, so is the advice, networking and support that entrepreneurs receive. Saunders designates Twenty One Toys. The Winnipeg company makes an “empathy toy”, which anyone from school children to co-workers, working in teams of two, uses to build connections and communication skills. Recently, through a member of Coralus, the founder was introduced to a senior bank executive. This led to a six-figure contract to train employees in the use of the toy.
Saunders started with 500 women in Canada. Now Coralus has a presence in four additional countries – the US, New Zealand, Australia and the UK – and a total of 7,000 female and non-binary contributors.
Sharing with other communities
About a year ago, Saunders was approached by Dark Matter, an alternative business consultancy, who suggested they work together to introduce the model to other areas. At the same time, she began working with a New Zealand organization specializing in the design of decentralized decision-making systems within communities. Now she is embarking on an effort to share her experience with other groups and investors.
Still, Saunders isn’t suggesting that everyone take Coralus’ approach. “We are a small example of another way of doing things,” she says. “We will share what we have developed to help people on the margins.”
Applications are open for the next cohort from Canada, the United States and the United Kingdom until October 16.