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
Tags: crowdfunding, driver, evolutionary strategy, financial assets, local investments
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.”
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!
Tags: close to home strategy, community groups, crowdfunding, local investments
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
Tags: close to home strategy, community investing, crowdfunding, financial assets
Two recent posts on the excellent Locavesting website zeroed in on the challenges and opportunities facing women entrepreneurs. The first looks at numbers suggesting that traditional channels of investment capital may be harder for women-led companies to access, due to a mis-match in goals and too much focus on fairy-tale Silicon Valley style venture capital channels. Author Jenny Kassen sees that women-led companies are more apt to be mission-driven, and suggests that they will benefit from pursuing sources of capital that are not so focused on making quick or exponential returns. This dovetails well with the second article, which summarizes a recent report, Stand out in the Crowd: How Women (and Men) Benefit from Equity Crowdfunding: “Women are achieving a higher success rate raising investment capital online than they are through traditional offline channels: 24% for online compared to 19% for offline.” Still, far fewer women-led companies even seek outside funding—and this represents a huge opportunity for those that pursue these channels. We highly recommend both articles for anyone who’s gearing up to raise funds for their business; keep reading for a few key quotes to whet your appetite.
Tags: crowdfunding, financial assets, investing, local investments
Three years ago, excitement ran high after congress authorized new rules to greatly expand the ability of small companies to raise investment capital via crowdfunding. While the SEC drags its feet on issuing the federal framework, state governments have seized the initiative; half the states have completed crowdfunding laws, and 11 more are working on it. “It’s exploded this year,” said crowdfunding advocate Anthony Zeoli in a recent NYT story. “People are clamoring for it, and those who see the power of it are pushing these agendas forward. I mean, who can say no to legislation designed to help open up capital for small and growing businesses?”
Success stories are coming in, though it’s also clear that businesses looking for capital are embracing the new funding platforms more rapidly than are investors. Click through for more details, and then consider looking for opportunities to support local businesses in your state.
Tags: crowdfunding, evolutionary strategy, financial assets, local investments
As crowdfunding continues to mature into a platform for raising investment capital, investors may feel that that they need more information to be sure they’re making prudent decisions. Crowdcheck works with companies seeking funding to compile due diligence and disclosure reports that may put your mind at ease. Their blog is a great place for entrepreneurs to stay current on the latest regulatory rulings and interpretations, and their list of crowdfunding platform partners is a valuable starting point for both investors and entrepreneurs.
Tags: crowdfunding, directories, financial assets, impact investing
The SEC has just updated a long-standing investment regulation in ways that will make it somewhat easier for small companies to raise investment capital from all investors (i.e. not just “accredited” investors). The Locavesting website offers a good overview of the changes; for more detail, see this overview from Crowdcheck, a company that offers disclosure and transparency tools for investors and entrepreneurs and tracks the emergence of investment-oriented crowdfunding. While the changes will reduce some of the compliance burden for small companies and opens up the possibility of using social media to spread the word, it does involve some significant federal and state oversight.
This is not the long-awaited SEC Crowdfunding rule, which continues to languish somewhere deep inside the SEC’s rule-making labyrinth.
Tags: crowdfunding, financial assets, local investments
Amy Cortese just launched www.locavesting.com 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.
Tags: close to home strategy, community investing, crowdfunding, local, local investments
Several new crowdfunding lending platforms have made it possible for non-accredited investors to help fund clean energy projects; the loans can often be relatively small, and are repaid with interest. This article profiles several of the early entrants into this exciting new field; be sure to do a fresh web search to find new options as well. Some raise most of their money from accredited investors, or do crowdfunding only in some states, though most are eager for the new SEC rules that will open up crowdfunding opportunities more widely. Read article.
Tags: crowdfunding, evolutionary strategy, financial assets, renewable energy, solar
This article describes how peer to peer lending (or micro-lending) works, and compares several of the leading lending sites: Lending Club, Prosper, and Kiva. All these platforms allow investors to lend money to groups or individuals. Kiva loans are interest-free; principle only is returned. The other two require credit checks from investors and return interest as well as principle. Read the article.
Tags: community investing, crowdfunding, evolutionary strategy, financial assets, global, impact investing
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.
Tags: close to home strategy, community investing, crowdfunding, evolutionary strategy, financial assets
The Savory institute promotes holistic land management and grazing techniques, rotating herds of domestic livestock in a way that mimics the movement of wild herds. In addition to increasing soil fertility and water storages, these techniques can sequester thousands of tons of carbon in the soil. Learn more at their website.
Tags: carbon sequestration, climate, crowdfunding, evolutionary strategy, regenerative, tangible assets