Investment Readiness Case Study SKETCH Working Arts

Author Rudy Ruttimann, Founding Director of SKETCH Institute

This case study is part of a social finance case studies series on investment readiness. Through a partnership with Investment Readiness Program (IRP), SI Canada is working with ten entities (SPOs non-profits, co-operatives, for-profit social enterprises) that have achieved investment readiness and provide them with an opportunity to share their journey and profile this work through a case study and a virtual event.

 

Background

SKETCH is a community arts enterprise engaging diverse young people, ages 16-29, from across Canada, who live homeless or on the margins and navigate poverty to: experience the transformative power of the arts, build leadership and self-sufficiency in the arts, and cultivate social and environmental change through the arts.

How the initiative came about

SKETCH Working Arts was able to purchase a 9,000-square-foot arts studio in Toronto’s downtown core through a capital campaign that paired traditional fundraising with Community Bonds. This campaign was called “Project Home”.

SKETCH calculated that with Toronto’s high rents, they would no longer be able to afford to stay in the Queen West neighbourhood by 2025.

Their landlords at Artscape Youngplace offered to sell SKETCH their space in the fall of 2018. Executive Director Rudy Ruttimann formed an Advisory Committee, made up of experts from real estate, investment, and charitable sectors, to help SKETCH explore its options.

Rudy Ruttimann then had to get members of the organization on board for the ambitious project, which “was about more than ownership, it was about sustaining SKETCH’s programming so that future generations of young leaders have access to a safe space to explore their creativity.”

 

The social finance campaign timeline

The offer was presented October 2018 and fundraising goal met June 2021.

Types of financial support sought out

In the beginning, Rudy leveraged SKETCH’s existing relationships to raise the capital. They engaged a corporate wealth firm (TD Wealth) that connected SKETCH with one of their private investors. The private investor anonymously donated $100,000.

Community Bonds came into the campaign picture to engage individuals who supported SKETCH but did not have the means to donate a large amount of money, and to market itself to an investment- knowledgeable audience that was new to the organization.

A series of bonds that could acquire investment from a diverse group of stakeholders such as young artists, donors, corporations, and foundations was selected. To help them structure and administer their bonds, SKETCH partnered with Tapestry Community Capital, so that there would be full transparency and investors could be conflict-free.

In the beginning, Tapestry Community Capital was engaged to do a feasibility study so that Rudy could present the possibility of this project to the Board and they could see what level of risk would be involved. Now Tapestry primarily provides the backend infrastructure to process the purchasing and management of the community bonds. For example, Tapestry provides the tax forms for all the investors annually. Tapestry also provides mentoring and coaching throughout the campaign.

For the “Project Home” campaign, four bonds with varying investment minimums and terms were offered. Bond B was aimed at foundations and corporations, while Bond D had a more accessible $500 minimum.

SKETCH developed the first Charity Bond in Canada. “The Giving Bond”, Bond A, allowed SKETCH to effectively access an interest-free loan, where investors have the option to donate their interest back to SKETCH for a charitable tax receipt. It was another incentive to those who maybe had some access to lending capital and could make the interest a donation. This strategic, zero-cost financing strategy offered donors an innovative way to champion SKETCH in a whole new way.

Project Home’s bond campaign opened SKETCH up to a completely new audience of investors who would not have engaged with the organization otherwise. In the end, 55% of bond holders were first time supporters of SKETCH.

By January 2020, SKETCH had four distinct bonds, a fixed mortgage and secured line of credit, and was ready to launch their capital campaign that would engage and acquire both donors and investors.

Challenges

Barriers to accessing social finance/impact investing, and how these were overcome

The initiative was a learning curve for Rudy, the Board, and the organization as a whole. The Board agreed to allow her to commit 75% of her time to the project. Rudy needed to delegate a number of operational tasks to free up time. The SKETCH team had to adapt between the bond campaign and the fundraising campaign, which they were doing at the same time.

Rudy also depended on the regular support of several individuals. Rudy’s co-directors Phyllis Novak, Artistic Director, and Rose Gutierrez, Program Director, met regularly with her in support of the demands of the project. Every week they met to review the project with a team that included fundraising staff, communications, Tapestry, Board reps, and volunteers. Staff involved in the project had to be trained to know everything about Community Bonds.

Roles were redefined and mentorship was provided so that everyone felt supported throughout the process. SKETCH also engaged Youth Ambassadors who became a very important part of the project. The Youth Ambassadors spoke to investors and presented to groups of people.

 

Some other challenges included

A condition from the Board was that donors would have to be new to the organization or able to donate to the project in addition to their regular support.

A provision by Artscape Youngplace was that SKETCH had to close the sale by the end of 2019, which meant raising $407,000 +HST. Faced with a timeline of only three months, SKETCH was unable to consider any grants, so Rudy leveraged SKETCH’s existing relationships to raise the capital.

With the emergence of COVID-19, SKETCH’s funding was directed immediately to programming for young people navigating the pandemic, and the capital campaign was put on pause for several months. Since the campaign had launched before Covid hit, those who had already invested in SKETCH such as foundations helped to inspire confidence in other investors.

 

The government’s involvement in SKETCH’s impact investing journey

Rudy, along with Project Advisors Mitchell Cohen and Celia Smith, reached out to their City Councillor at the time, Joe Cressy. Rudy had an initial meeting with Joe and his staff where more information was provided. Rudy also met with Mike Layton and Cheryl DiNovo. Mike used to be their Councillor and is an advocate of SKETCH.

Rudy was informed by Joe that they would be bringing a motion to a Council Meeting where there would be a vote. It was passed and they were able to meet the March 31st deadline to close the deal with Artscape! In March of 2021, the City of Toronto donated $540,000 to the campaign to complete its fundraising target.

 

Measuring Impact

How impact was measured and demonstrated to investors

The SKETCH team set the milestones from the beginning. They had to manage two campaigns – Community Bonds and Capital Fundraising – and both had critical targets to meet. Additionally, they had to also raise funds for operations and programming.

With the Community Bonds, SKETCH tracked engagement and sales on a weekly basis, which became even more critical when COVID impacted the timing of the campaign. They prepared and continue to provide quarterly impact reports to share with all the investors. They also present at an Annual Meeting of the Investors where interest payments are disseminated.

SKETCH provided a breakdown of the investors, including geography and how many individuals, foundations, and corporate investors are involved. All the investors were invited to the Annual General Meeting in May 2022. SKETCH also invited participants to the meetings in order to talk about the impact of this project and what it has meant to the community.

“While demonstrating impact was still important, we also had to present a solid financial model,” explained Dale Roy, SKETCH’s Marketing Associate and head of the bond campaign. “Especially for those new to the organization, it was important to build a sense of trust.” To inspire confidence among new groups of investors, SKETCH engaged reputable experts, or investment influencers, to help spread the word across their own audiences.

 

Incorporating diversity and inclusion into the venture

SKETCH works on a principle and belief that everyone has a right to access – but barriers of all kinds get in the way of opportunities. Investing can feel way beyond reach.

SKETCH settled on a series of bonds that could acquire investment from a diverse group of stakeholders, including: young artists, donors, corporations, and foundations.

Rudy considered the Ambassadors who were working so hard on the project and thought how it would be great if they could receive a bond. They had been learning all about impact investing and what it meant for people to be giving SKETCH the resources needed to buy and secure their space.

 

 

Lessons learned from your “investment readiness” journey

Keys to success with this campaign included involving the community in the campaign every step of the way, and having the advocacy by supporters serve as inspiration for others.

Bringing subject matter experts into the process was a critical step in building stakeholder confidence. “The time we took to engage foundations, major donors, and industry experts during the campaign’s consultation phase paid off later on,” recalled Rudy. “By the time we were ready to launch we had several soft commitments already lined-up.”

Advice that Dale has for other charities thinking of community bonds is to make sure you have the time to walk investors through the process. “The decision to invest isn’t a quick one, there’s quite a bit of paperwork and a lot to consider. It was important to follow-up with potential investors personally, to keep the momentum going”

Home Bonds ended up being a great acquisition tool, connecting SKETCH to 100 investors – most of whom were completely new to the organization. Unlike one-time donors, this distinct group can be uniquely stewarded throughout the length of their investment term.

 

Hopes for the future with regard to social finance

The charitable structure is set up on an old colonial system as a response to poverty but has created barriers for people to advance. It is time to revise the purpose of the charitable sector towards a new way of bringing together ‘investors’/philanthropic individuals and people with lived experience.

SKETCH Institute is a new initiative that drives sector and social change by using education and resource sharing to address the systemic barriers that new generation QTBIPOC leaders face, which preclude their accumulation of social capital and stymie their advancement and/or succession in senior positions of leadership in the arts sector. SKETCH Institute helps shift the focus to increasing resiliency within the systems that produce the myriad barriers that SKETCH’s community faces, while also establishing alternative conditions to eradicate those same barriers.

The Institute could be an opportunity to invest directly in young people and explore the intersection of people with resources and power and those who do not experience the same levels of impact.

 


 

Watch the recording of the SI Canada Investment Readiness Case Study Webinar on SKETCH Working Arts.

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