Sangudo Opportunity Development Co-op – The Model for Co-operative Investment in Rural Enterprise

A lot has already been written about the Sangudo Opportunity Development Co-op, the first Community Investment or “Opportunity Development Co-op”, to be incorporated Canada in 2009. And it remains the preeminent example of what this model can achieve in a small community. Having spent some time in Sangudo with Dan Ohler, one of the founders of the co-op, I am even more convinced that there is something important in this model. First, some explanation with respect to just what an Opportunity Development Co-op is:

Opportunity Development Co-ops are designed primarily as a mechanism to allow community members to invest in local business ventures in need of capital. In essence, these are legally incorporated co-ops that sell memberships to individuals and are collectively governed by a board of directors like any traditional co-op. However, members also will also generally make a monetary investment in the co-op, and the board then invests the capital accumulated through membership investments in any local venture they deem “investment worthy,” with the intent of both supporting the growth of the local business(es) and providing a modest return on investment to the membership. Ultimately, such co-ops are intended to act as a community economic development mechanism. 

The underlying logic of such co-ops are built atop two points:

a) it is becoming more difficult for entrepreneurs, especially in small and rural communities, to access investment capital from traditional banks, and

b) the annual contributions Canadians make to their Registered Retirement Savings Plans (RRSPs) often represent a large stream of capital regularly leaving their communities and ending up in the coffers of publicly-traded companies thousands of miles away.

What if, advocates of Opportunity Development Co-ops frequently ask, there was a way to direct a fraction of that investment capital from the individual portfolios of rural and small-town citizens back into their communities by opening avenues for them to invest directly in the very local businesses that are finding it increasingly difficult to acquire necessary capital from banks?

This notion seems especially intriguing given the oft-cited statistics related to the number of small and medium sized businesses in Canada expected to transition ownership over the next decade. For rural communities in particular, this coming wave of transitions poses a significant problem given the difficulty owners of existing businesses can have in finding individuals that have access to the capital required to purchase the business – a result that may lead to the closure of a significant portion of existing businesses in small-town Canada. Opportunity Development Co-ops, supporters argue, are tailor-made for this situation. By providing access to capital to local entrepreneurs willing to buy an existing business, the Opportunity Development Co-op is playing a direct role in retaining jobs and wealth in their community while simultaneously avoiding yet another underused commercial space.

The Sangudo Opportunity Development Co-op grew out of a broader organization of local people who were initially pulled together when the local school’s future was in doubt, but eventually there emerged a shared consensus to work together to support the local economy – “we wanted to figure out how we could be an incubator” for local businesses, noted co-founder Dan Ohler. Over the next several years, the group was able to raise capital locally to allowing the co-op to:

• Purchase the building of a local butcher shop that was on the verge of being shuttered for good, before working out a business plan and lease agreement with the local entrepreneurs that allowed them to take control of the business while simultaneously generating a return on investment to members of the Sangudo Opportunity Development Co-op. Sangudo Custom Meats is still in business and the co-op has helped finance additional upgrades to the operation.
• Purchase the Legion Hall on Main Street, before signing a lease with local entrepreneurs who opened a coffee shop, restaurant and community gathering place. 
• Break into local real estate development with the purchase of three vacant lots in Sangudo, and the eventually building of one house which has now been sold, generating a healthy return for local Sangudo Opportunity Development Co-op investors.

This was but a quick summary of the impressive work the Sangudo Opportunity Development Co-op has completed in its rural community, a summary that glosses over a number of small hurdles the group had to clear, and the enormous amount of volunteer work a dedicated group had to put into the co-op to ensure its successes. But, overall, the co-op has made three major investments which contributed positively to the economic development of their community and simultaneously generated returns in the 5-7% range for their investors – results that are not to be dismissed lightly.  As Ohler told us:

"What makes these [investment co-ops] magical is that it's a combination of local people working together, pooling their resources, their money, their knowledge, and tapping into and working with entrepreneurs, to be able to help them to start the business. And to set it up for success right from the get go, in their local community. And one of the real benefits that I see is that it sparks or invokes a deeper sense of pride in the community. So people come together, they work together, they're not investing their entire fortunes. We know that in most of these communities, these shares are $5,000 or sometimes even $1,000. So it can include anybody, most anybody, in that community where people can buy in and be part of this."

Overall, our 'Co-ops and Rural Economic Development' project team sees substantial but, as of yet, largely unrealized, potential in the Opportunity Development Co-op concept for rural Alberta more generally. Although a fit for a wide variety of ventures requiring capital, looking forward, we assert that the areas of existing business succession, housing co-ops and private real estate development, new small-footprint agricultural operations, and renewable energy co-operatives all seem especially well-positioned to be supported through co-operative community investment in rural communities going forward. So how can these results be replicated in other rural communities? Read the Alberta Centre for Sustainable Rural Communities Policy Brief on Opportunity Development Co-ops and our Final Report on Co-operatives and Rural Economic Development.