--- title: both has to survive the transaction canonical_url: https://ensurance.app/guide/both-has-to-survive-the-transaction markdown_url: https://ensurance.app/guide/both-has-to-survive-the-transaction.md subtitle: "seven questions to run on any nature-finance proposal, and one bad year that shows why" category: nature-finance --- # both has to survive the transaction *seven questions to run on any nature-finance proposal, and one bad year that shows why* Picture year three at an invented watershed company. The water utility that pays for all of the meadow work renews its contract at 20% less. The same week, the lead investor asks when distributions resume. Someone is about to take the cut: the meadow, the crew or the investor. Which one was settled two years earlier, in documents nobody read with a bad year in mind. A **regenerative finance business model** is the set of agreements that carries a customer's payment to a living place, to the people who care for it and to the capital that financed it. The seven questions below test those agreements before you sign. Then we go back to year three and see who took the cut. :::johnson **both has to survive the transaction.** A proposal that pays investors and protects a watershed in a good year has shown you very little. Ask what it does in a bad one, and get the answer in writing. ::: ## the example: one invented company Alder Fork is hypothetical. No customer, contract, wage or return here is real, and every number is an illustrative assumption. It cares for a headwater meadow and stream corridor above a town's water intake. A utility pays $1,000,000 a year for that care. Investors financed the upfront costs: a conservation easement, equipment and the first months of payroll. A foundation grant paid for the baseline surveys. | a normal year | amount | |---|---| | Utility contract | $1,000,000 | | Crew pay and benefits | $550,000 | | Monitoring and independent review | $100,000 | | Equipment, insurance and administration | $150,000 | | Care reserve contribution | $50,000 | | Left for investors | $150,000 | ## 1. who pays, and what did they sign? Name the customer, the budget it comes from, the term and the renewal date. The utility pays Alder Fork because sediment from a degraded meadow lands at its intake. A study valuing the meadow's water benefits at many times the fee is a reason to negotiate. Only the signed contract is revenue. An income line built on a valuation, an avoided cost or "expected demand" has no payer yet. ## 2. where does the investor's return come from? One answer holds up: cash left after care is paid in full, Alder Fork's $150,000. Distrust returns that depend on the next fundraise, a grant nobody has awarded or a rising ecological valuation. None of those is cash from a customer. ## 3. which money arrives once, and which keeps arriving? Investor capital and grants arrive once; care recurs, so care needs revenue that recurs. Alder Fork's capital bought the easement and the truck, the grant bought the baseline, and the utility's fee pays for each year's care. A model that pays year-four wages out of year-one capital is counting down. ## 4. when does money reach the work and the people? Ask for the route and the dates. The utility pays Alder Fork quarterly in advance into an account restricted to the meadow, and payroll runs monthly before any distribution. Then read the payroll line. The people doing this work should be paid exceptionally well, and that only happens if their pay is inside the contract price. A proposal that reports profit and can't show what the crew earns has skipped the question. ## 5. what holds the protection in place, and who can undo it? Alder Fork's easement is recorded and held by an independent land trust, so it outlasts the company. Investors own shares in the company and have no vote that could drain the meadow. Ask first whose rights were already there, including Indigenous and customary rights, and whether those people agreed. Protection that lives only in a company's mission statement can be amended by the company's owners. ## 6. what is the evidence, apart from the invoice? An invoice proves spending. Ask for the baseline, the measures and who checks. Alder Fork tracks streambank erosion, vegetation cover and late-summer water levels against the grant-funded baseline. An outside reviewer signs the findings, including the bad ones. "We planted," "the plants survived" and "the stream is healthier" are three claims, and each needs its own proof. ## 7. what gets cut first when revenue falls? Ask for the order in the binding documents: what is paid first, what is suspended first and who decides. The first six answers are only as good as this one. ## year three, twice The utility renews at $800,000. Full care, before the reserve contribution, costs $800,000. **Where both breaks.** Nothing ranks care ahead of distributions, and investors control the board. They keep their $150,000, which leaves $650,000 for $800,000 of care. The reserve gets nothing. Monitoring goes first, saving $100,000. The last $50,000 comes out of crew pay. The company is still profitable, and profit says nothing about the meadow. It gets less care, and nobody is measuring what happens to it. **Where both holds.** The documents rank care first. Distributions stop and the reserve contribution pauses. The $800,000 pays crew, monitoring and operations in full. Investors receive nothing that year, as the term sheet told them in plain words they might. If the fee fell further, the reserve would cover a defined gap while Alder Fork finds a second payer. The easement stands even if the company fails. Same meadow, same shortfall. The second version still hurts. It is the one where the investor's bad year does not become the meadow's. ## frequently asked questions ### what is a regenerative finance business model? A business model in which a paying customer funds the care of a living system, and capital is paid from what remains once that care and its people are paid in full. If the return only works when care is cut, the model is extractive, whatever it is called. ### what should investors ask before funding a nature-based project? Who pays and what they signed. Where the return comes from. Which money recurs. When it reaches the work and the workers. What holds protection in place. What the evidence is beyond the invoice. What gets cut first when revenue falls. ### is buying a certificate or coin the same as investing in a company like this? No. Alder Fork is an invented equity example. Holding an [*ensurance*](/?from=guide) certificate or coin is not land ownership or a guaranteed return. Read each instrument's own terms, and put them to the same seven questions. ## run it on a real proposal Take one pitch deck, grant request or term sheet. Answer the seven questions from its documents, not its summary. Then cut its revenue by a fifth and write down who absorbs the loss. Every blank is a diligence item. Stewards: answer them first. Question 7 decides your crew's pay. [See where ensurance proceeds are routed](/proceeds?from=guide&topic=both), and hold that page to question 4. ## the series Both: making money by keeping nature alive. A seven-part reading sequence, bringing new essays together with existing Guide posts. 1. [both](/guide/both?from=guide) — the case for holding both ambitions 2. [the private ten percent](/guide/the-private-ten-percent?from=guide) — the private share of nature finance 3. [the 30:1 gap: why nature finance is failing (and how to fix it)](/guide/the-30-to-1-gap-why-nature-finance-is-failing?from=guide) — the direction of finance 4. [capital doesn't invest for nature. it invests.](/guide/capital-doesnt-invest-for-nature?from=guide) — the financial reason to participate 5. [the people keeping nature alive should make a lot of money](/guide/the-people-keeping-nature-alive-should-make-a-lot-of-money?from=guide) — prosperity for the people doing the work 6. [how to make money with ensurance](/guide/how-to-make-money-with-ensurance?from=guide) — the ways the work can pay 7. **both has to survive the transaction** — a practical test for the business model *(you are here)*