Zone 7

Financial Assets, Close to Home

In a world where $3 trillion circulates through global currency markets every day, it is easy to forget that, until recently, keeping your money close to home was the most ordinary of choices. Banks were locally owned, and entrepreneurs depended on their own connections if they wanted to finance a business. But local communities, and small businesses in particular, find it difficult to tap into today’s swirling ocean of cash. In recent years, a hardy cohort of community activists has pioneered new models that reconnect with these historic roots and address these challenges. . As a result, there are now many ways to invest in communities, some of which can be done right from a standard brokerage account.

Key areas of Zone 7 focus

  • Local banks and credit unions
  • Community loan funds
  • Local investment clubs

New programs link cities with science experts to tackle resiliency challenges

Two new programs aim to get subject-matter experts linked up with local and regional governments to take on their most pressing resiliency challenges.  Andy Revkin offers up his typically link-infused overview of these efforts, centered on Thriving Earth Exchange, which is networking to bring in experts to help cities with specific issues such as flood risks to food distribution systems, adapting to extreme heat, responding to drought, and many others.  Meanwhile, the Obama White House rolled out a similar program dubbed The Resilience Dialogues, an “online consultative service will help communities find, use, and understand information, tools, and programs to support their climate-resilience needs.”

Both of these programs are actively soliciting requests from cities for expert guidance, and subject-matter experts willing to share their insights.  If you’re active in your local community’s transition, resiliency, or climate response programs, check them out!  Start with Revkin’s introduction, then dig in.

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Equity crowdfunding off to promising start

In May, the SEC finalized its long-anticipated new rule that opens the door for more investors to take part in the most exciting—and risky—realm in the investing universe: innovative startups.  Previously, only “accredited” investors ($200K/yr income or $1 million in assets) were allowed to take these risks, and thus to reap the outsized rewards that can accrue to early investors in companies that are not yet available in the public stock markets.

Indiegogo announced this week that it will begin allowing small companies to offer equity investments on its platform, rather than just the rewards-based pre-sales that have been the core of crowdfunding up til now.  Many small companies have used crowdfunding platforms to get rolling and prove that there’s a ready market for their new products, only to turn to the super-rich when the time came to scale up for mass marketing their innovations.  Oculus, for example, raised millions from early adopters, but it was equity funders who reaped the windfall when the company was sold to Facebook for $2 billion.

In these early months, the potential is just beginning to be realized.  According to WeFunder, the largest equity crowdfunding portal so far, about 55 companies have successfully raised a combined total of $12 million from small investors.  WeFunder is currently hosting several dozen offerings, which range from

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Small towns: lure your kids home to launch a start-up

Not long ago, I stumbled across The Daily Yonder, an excellent website that focuses on rural economic and social issues (try their Weekly Yonder email to get a taste). This week, they featured an inspiring interview with Maury Forman, Senior Manager for Rural Strategies and Entrepreneurship for the Washington State Department of Commerce, who urges small towns and cities to cultivate an entrepreneurial culture that can entice young and middle-aged kids who left town to return to start small businesses. In contrast to the concern about “brain drain” in small towns, he says, “Let kids get out and explore. People keep saying we want to keep our kids after high school. I think we should let them go out and explore new ideas, new things, and then come back educated and experienced, so that they can start a business, and create new jobs, and live in healthier communities.”

Forman enthuses:

I actually think it’s easier to do economic development in rural areas than it is in big cities. …. When you have small successes in rural, they’re big successes; the thrill is so much bigger there than it is if Seattle hires 10 employees. It’s going to make the newspaper in a rural community. I find rural communities to be easier to work with, more fun to work with, they take life a little less seriously.

Forman has also collaborated with a colleague to put together one of the best concise primers on raising capital that we’ve seen, and they’re giving it away free online. Startup Wisdom: 27 Strategies for Raising Business Capital offers succinct 2 or 3 page overviews of everything from crowdfunding to local investing clubs to grants (while also making nods to the lottery and even lemonade stands!). It won’t get you all the way to being funded, but it’s a perfect first read to help you narrow down the avenues you want to investigate further. They put this booklet together after finding that many potential rural entrepreneurs were struggling with Step 1, since “banks were not loaning to people in order to get businesses started. They didn’t like the idea. It was a risk. The whole bank idea of making bank loans just wasn’t in the banks’ interest, especially in micro-loans. That’s really what many small communities are looking for, probably under $50,000.”

Forman is offering just the kind of practical, localized guidance that can invigorate the regional vitality that is essential to the flourishing resilient economies and social networks that we envision in The Resilient Investor.  Here’s to both local communities and early- to mid-career rural expatriates taking this advice to heart!

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US is a nation of regions, not states

Readers of The Resilient Investor will remember that our picture of more vibrant local economies is rooted in a shift from national and international trade networks toward increasingly vibrant regional economic systems.  A recent article in the NYTimes speaks to the emerging regional character of the US economy and society, suggesting that national policy should be redirected from state-specific funding, and instead nourish the already-emerging regional networks, which can then breathe new life into their surrounding rural areas and depressed smaller cities:

America is increasingly divided not between red states and blue states, but between connected hubs and disconnected backwaters. Bruce Katz of the Brookings Institution has pointed out that of America’s 350 major metro areas, the cities with more than three million people have rebounded far better from the financial crisis. Meanwhile, smaller cities like Dayton, Ohio, already floundering, have been falling further behind, as have countless disconnected small towns across the country.

Here’s the map of the US that the authors suggest we begin to plan around (click for larger version):

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Put your modest savings to work making a better world

Did you know that Calvert Foundation’s new Vested portal has lowered the entry point for its social investment opportunities to $20?  Social impact investing is one of the best ways to get real bang for your buck, but until recently there were few options for people with modest savings to participate. Most impact investments are risky enough that they’re only available to accredited investors, though local and regional loan funds and Calvert’s Community Investment Notes made it safer by bundling many social-impact projects into a mutual-fund-like packages.  Still, depending on the outfit, minimum investments were generally $1000 or more.

Vested opens these doors much wider, and offers beginning investors a wealth of choices: you pick the amount of your investment, and the term, as well as the type of social impact you’d like to have.  Investments for 3 years or longer pay interest rates comparable to or higher than most savings accounts.  Most exciting, you can choose from an array of targeted purposes, and with the low entry point, it’s easy to spread your money around a bit into several areas of interest.  Familiar themes like women’s empowerment, microfinance, and small businesses are augmented by other intriguing areas of focus, including aging and education in the U.S. or fair trade overseas.  For those who want their money to make a real difference in the world, this kind of direct investment in on-the-ground initiatives has far more impact than buying shares of even a do-gooder company. Your social returns are significant, while your money makes roughly what it would just sitting in your bank.

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Community-sourced capital: No-interest loans for local businesses

Two recent MBA graduates in Seattle are pioneering an exciting new approach to funding local businesses. They call it Community Sourced Capital, and they’ve already funneled about $1.5 million to dozens of small companies around the country.  Their innovation is that the investments are zero-interest loans; lenders expect to get their money back, but the “returns” are explicitly in the form of social benefits, ie, enhancing their local economy by helping to grow small businesses.  These are mostly modest projects (funding targets range from $5000-50,000), and 98% of the loans they’ve made so far are being repaid on time.  In the words of CSC Co-Founder Rachel Maxwell: “Money does not have to be about creating more money—it is a tool we can use to create the world we want.” You can learn more in an interview with the two co-founders published on

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Local business “pollinators” are revolutionizing economic development

For years, economic development has focused on attracting existing businesses to build or move to your state or city.  A new book from Michael Shuman challenges the track record of multi-million-dollar tax incentives and points instead at the rapid spread of “business pollinators” that spark local business ecosystems to life, creating far more jobs without relying on public funds to do so.  In fact, the fight among several “suitors” for a new factory or a movie production generally doesn’t create any new jobs for the national economy; indeed, existing companies have shown a net loss of jobs in recent years, while new small businesses have been the primary source of new job creation.  We’ve long appreciated Shuman’s efforts to spotlight the powerful effects of what we call the Close to Home investment strategy, and this new book shows the way forward in exciting detail.  Click through for some key excerpts and more info.

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Locavesting website launched

new_logoAmy Cortese just launched and it looks like a great site and a valuable resource. We featured Amy in The Resilient Investor as one of the key champions of local investing and we’re thrilled she’s continuing to document and engage the movement. The website’s tagline is “Local Investing News, Education & Resources,” and that’s indeed what you’ll find—engaging tales of local investing successes, introductions to the many avenues now available to put your money to work in your local community, and topical coverage of key themes, including crowdfunding and growing the local investing ecosystem.

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Local Investing Resource Center

A nationwide, non-profit resource center that has created in-depth training programs to educate local investors and business owners in the nuts and bolts of creating local investing networks in their regions. In addition to the free training guides, LIRC hosts forums for local investors and entrepreneurs, and a nationwide directory of local investing groups (already featuring over 30 groups from coast to coast). Visit their website.

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Institute for Local Self-Reliance

For decades, the Institute for Local Self-Reliance has championed just that. It focuses on local control and reliance particularly in the areas of broadband, energy, independent businesses, banking, waste (to wealth), and the public good. Each of these areas contains a deep database of articles, relevant rules and resources. Its website has numerous audio, video and written resources. Noteworthy is a searchable database of local, state and federal laws in areas of interest to local self reliance, such as composting, anti-privitization, beverage containers, etc. Visit website.

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Your loans do a world of good at Calvert Foundation

Calvert Foundation’s Community Investment Notes were a pioneer in advancing community investing in both the US and the developing world. And now, their Vested platform accepts crowdfunded investments of as little as $25 as well. Either approach lets you pick your interest (small businesses in US, women’s empowerment, microfinance, fair trade, education, housing). Learn more.

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