Asking “Why Not?”: Nest’s Journey in Increasing Access to Capital for U.S. Maker Entrepreneurs

Photo Credit: Creative Hina

While the handcraft economy is a massive part of the global economy, estimated to surpass $1 trillion USD by 2024, it has also always suffered from the perception of being small, niche, “women’s work”, unscalable, and not investible. In other words, investors have seen maker enterprises as not real businesses.

This has led to a lack of investment interest from philanthropy, and most certainly from the business sector. At Nest, we work with artisan and maker businesses across 124 countries, ranging from small-scale owner-operator startups to massive producers that employ thousands of craftspeople. Among these enterprises, a common theme has developed: business owners’ uncertainty around accessing working capital, particularly in the wake of the pandemic.

This concern holds true among creative entrepreneurs and artisan business owners, especially BIPOC individuals, in the United States too. A recent report by the United States Federal Reserve System found that firms or businesses, owned by people of color were more likely than white-owned firms to report financial challenges in the wake of Covid-19. And that they were more likely to reduce or shutter their operations as a result of this.

While Nest’s Maker’s United program is building a more vibrant and inclusive makers movement by providing maker entrepreneurs who often face barriers to accessing the support they need with the resources and market access opportunities they need to thrive, makers in the program have historically faced significant challenges in receiving the capital they need to scale their financial viability and social impact. In our survey of about 800 makers, nearly 80% reported that their primary challenge to scalability and business resiliency is the ability to access funding. Many do not know where to start or have anxiety around taking on debt (especially for businesses that are currently a side hustle). Others have been told point-blank by loan officers that they do not see how their jewelry shop is an “actual business,” or are considered too small to be eligible for a loan opportunity. Talk about frustrating, not to mention disenfranchising.

Nest has never been one to reinvent the wheel. Instead, we have often found ourselves asking “why not?” when it comes to issues in the artisan sector: why not create a comprehensive compliance program for homeworkers? Why not disrupt the traditional agent model for product sourcing, leading to full transparency between producer and brand? And now, why not create a financing model that feels more accessible for the makers we serve? But this was certainly a new space for us, and we needed help.

This exploration has brought in trusted partners, the Cordes family – Marty, a board member of Nest, and Ron, an advisor and former chair of the Fairtrade USA board, both of whom are longtime advocates for social entrepreneurship and impact investing. And, thanks to their support and partnership, Nest was introduced to Jerry Hildebrand. A legend in microfinance and a man whose mantra throughout his life has been “life begins at the edge of your comfort zone.”

I cannot imagine a more appropriate sentiment, as Nest embarked on the pursuit of financing options for US makers. We are not a lending institution. We do not want to be, nor never will be, a bank. But what we do want is to find readily accessible capital for the hundreds of thousands (if not millions) of makers in the US who have long been denied the opportunity to grow due to the lack of understanding of this sector.

Quickly, together we acknowledged the hurdles. As a 501(c)(3), Nest is not set up to be a lending organization or to navigate the complications of US lending regulations. For the size of lending we were considering (a typical US Maker really just needs $2,500-$10,000 of catalytic capital), it would be close to impossible to make a business case work: investors would be looking for a market return, the amount of due diligence required for each of these loans would sink any lender in terms of the amount of time and capital required. And, most if not all makers that enrolled in such a program would need extensive hand-holding in order to work through their own business finances and establish systems in order to repay any financing granted.

So, with Jerry’s encouragement, what prevented us from thinking about this issue in a new way – why be stuck in the old way of doing things? Bring in thought partners such as Square – who has disrupted the online transaction industry – and willing partners at the Social Impact Lab of Lynn University (where Jerry was a key mentor), and all the pieces were in place.

Instead of sticking to traditional routes, Nest has instead launched a pilot recoverable grants program (where recipients are encouraged but not obligated to pay it forward so that other Makers can benefit), through the generous support of the Tory Burch Foundation.

These are no-interest, quick disbursement grants, ideally creating a revolving fund so that the capital can be reused again and again. Some may scoff that this is a naïve pipe dream, but this 18-month pilot hopes to show that when given a chance, women and women-identifying maker business leaders in the US can utilize working capital to grow their businesses, reach their business growth goals, and by doing so will be able to pay back the opportunity they have been given. All the while receiving business mentorship from a group of consultants through Lynn University. Is this an investable opportunity? Maybe, maybe not. But it is a way to leverage philanthropy in a new and exciting way, and put the power into the hands of a community that for so long has been turned away at the door.

Jerry was so very excited by the direction this partnership had taken but sadly passed away suddenly just before this project launched.

To date, we have distributed $200,000 in quick-release grants to 50 women and woman-identifying makers across four regions, and I can still hear Jerry’s enthusiastic voice in my ears as we engage with excited makers around the country and read their tearful notes of appreciation, and watch them actively connect with each other, all because they were given a chance in a way that made sense for their businesses and their situations. That saw them as the amazing and creative whole people that they are– the way that Jerry saw everyone he ever encountered.

Thank you to Square for pushing us to think beyond the current possibilities.
Thank you to the Tory Burch Foundation for your faith in us to deliver high-impact programming.

Thank you, Cordes family, for believing and investing in the foundation for this pilot at Nest, introducing us to Jerry Hildebrand, and guiding us on this journey.

And thank you, Jerry, for helping us move beyond our comfort zone. There are countless makers out there that thank you as well. We at Nest really cannot wait to see where these next 18 months take us, the lessons we learn together, and the stories we will tell.

Rest in peace, Jerry.

Written by Chris van Bergen, Chief Financial & Operating Officer at Nest.