Running — biking? — at the challenge of rural impact investment

Is investing in rural areas hard? Yep — and that’s exactly why I’m so interested in making it a reality.

By Seth Brown, Senior Associate at Quantified Ventures

I just returned from Athens, Ohio, where I served on a panel at “Investing in Rural America: Social Impact Investment,” a one-day Symposium at Ohio University. This event was primarily for individual and institutional impact investors interested in supporting growth and change in Ohio, Kentucky, and West Virginia — a part of the country hit hard by the decline of coal and manufacturing.

The event tackled some tough questions associated with rural impact investing, such as:

  1. Can we expect market rate returns on local opportunities that then keep wealth in the area?
  2. How can community partners plan for and successfully execute transitions to investment that support sustainable impact?
  3. What does impact investment mean in economically depressed areas? Is job creation impact enough?

Rural impact investing is hard. To put this into perspective, nearly 80 percent of U.S. venture capital goes to San Francisco, New York, and Boston. Ohio’s 3C’s (Cleveland, Columbus, and Cincinnati) often struggle to get access to investment capital, and it’s even tougher for places like Athens county, Ohio’s poorest county labeled “economically distressed” by the Appalachian Regional Commission (ARC). I, for one, do not believe that 3 percent of the population has 80 percent of its good ideas.

Rural areas are often where infrastructure, jobs, and environmental protection is needed most. This isn’t a charity case or sympathy story. This is an opportunity. Earl Gohl, the Federal co-chair of the ARC, reminded us that Appalachia isn’t a story of rusted cars on front lawns. Rather it is a story of grit and community with individuals waking up every day bettering their community. So, the question posed by the ARC is: what ecosystem do we need to build to ensure that working communities are successful?

“Appalachia is the next great investment opportunity in America.” — Earl Gohl, ARC federal co-chair

At Quantified Ventures, we tend to run at challenges, listening hard and learning actively with our clients and partners. This wasn’t my first trip to Athens. I have been there several times recently, working with the U.S. Forest Service (through an effort supported by The National Forest Foundation) to determine whether “Pay for Success” could be used to fund recreational infrastructure. Through a competitive process, the Wayne National Forest — located in the hills of Southeast Ohio — was selected as a promising investment candidate. We are now assessing the feasibility of financing an 88-mile single track mountain biking trail designed for all level riders by tying investor repayment to economic development outcomes. These outcomes would include increased spending by visitors, resulting in increased earnings and job opportunities for the region.

This project pumps me up and I’m feeling bullish about outdoor recreation as an engine for economic growth for a couple of reasons:

  • For the first time ever, the Bureau of Economic Analysis created an Outdoor Recreation Satellite Account. This means that they are measuring outdoor recreation’s impact on GDP, showing that this is a growing and promising sector.
  • Similar investments are also underway. The Appalachian Regional Community granted nearly $1 million to West Virginia to build out mountain bike trails, believing that it will spur $3 million in new revenue, and the Iron Range Resources and Rehabilitation Board, a state development agency, recently approved about $5 million for new trails in NE Minnesota.

We call ourselves measured optimists at Quantified Ventures, believing that our work will pave the way for a marketplace that invests in outcomes-based transactions to tackle society’s toughest problems in health, the environment, and education. Our goal is to work with partners like USFS to discover workable, profitable structures that can be replicated. But we can’t do this work alone.

Our partners in the Baileys working group — which includes the Wayne National Forest, Ohio University, the city of Athens, and Athens county — have been amazing. They are open-minded, enthusiastic, and committed, and they have the support of a wonderful community in the Southeast Ohio region. We applaud Ohio University for putting this Symposium together. It’s an important start to both community and national dialogues about how to make rural investment more sustainable, and even mainstream.

For more information on this project, see the article by Angela Woodward on Ohio University’s website.

Seth Brown is Senior Associate at Quantified Ventures. His background — which includes serving as a platoon leader and convoy commander in Afghanistan, diving deep into economic policy for the federal government, and revitalizing neighborhoods for a Philadelphia-based nonprofit — gives him a perspective few can claim. Driven by a desire to solve complex problems afflicting society, he joined Quantified Ventures to explore and employ new financial models that can move the needle on health, the environment, and education.