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
Did you hear the joke about why the farmer crossed the road? The punchline is that she wanted to go to the bank to ask about getting a loan. Not very funny, except that by the logic of bankers and Wall Street, the idea that a farmer would qualify for financing might elicit a guffaw or two. Small-scale farming is considered a high-risk, low-return activity that any prudent investor should steer clear of.
And yet, wending their way across the highway to the farm, who’s that? Why, it’s a gaggle of Slow Money investors, taking action on their desire to build local food systems. Are they just being charitable, driven by idealism to donate a bit towards keeping a neighborhood farm alive? Not at all—they actually are investors, doing exactly what a traditional investor does. They are considering their own financial situation and how it fits into their overall portfolio. They are asking lots of questions, getting to know the business, assessing the risks, and looking for ways that not only their money, but their expertise, could help assure the success of their investment. And they are negotiating a deal that works for both parties.
Wall Street “professionals” can’t relate to this new breed of more creative and engaged investors because
Tags: close to home strategy, community investing, financial assets, food, future, local, local investments, regenerative, tangible 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
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.
Tags: close to home strategy, collaboration, local, local investments, workplace
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
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
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.
Tags: close to home strategy, directories, financial assets, local investments
Cutting Edge Capital is a collaboration among several leading evolutionary economy visionaries providing pioneering financing strategies for socially oriented businesses. that create possibilities of raising funds from both wealthy and retail investors. They also develop strategies to help businesses and organizations create and use capital market tools such as investment funds, secondary markets and market-based regulatory strategies. Visit their website.
Tags: evolutionary strategy, financial assets, local investments
Gar Alperovitz has had a distinguished career as a historian, political economist, activist, writer, and government official. He is president of the National Center for Economic and Security Alternatives, and a founding principal of the Democracy Collaborative. His widely-praised book, What Then Must We Do?, looks at how our economic system got to where it is, and why the time is ripe for a new-economy movement to coalesce; it’s already becoming visible, and Alperovitz outlines how we can move it forward.
Gar Alperovitz website. Features current blog and articles, as well as information on his books.
Article: What Then, Can I Do? This article is a precursor to his book of a similar name, and features ten types of activism you can engage in to help the new economy to grow.
Democracy Collaborative. A research and consulting firm developing practical, policy-focused, and systematic paths towards ecologically sustainable, community-oriented change and the democratization of wealth.
Book: What Then Must We Do?: Straight Talk About the Next American Revolution. Alperovitz calls for an evolution, not a revolution, out of the old system and into the new. That new system would democratize the ownership of wealth, strengthen communities in diverse ways, and be governed by policies and institutions sophisticated enough to manage a large-scale, powerful economy. This next system is not corporate capitalism, not state socialism, but something else entirely—and something entirely American.
Video: What Then Must We Do? A forty-minute talk that introduces the key themes of Alperovitz’s book of the same name.
Tags: close to home strategy, community groups, dreamer, evolutionary strategy, local investments, personal assets
This article provides an overview of green bonds as a new investment option. These bonds are generally offered by governments agencies or banks, and support a wide range of sustainable development, renewable energy, and restoration projects. See article.
Tags: close to home strategy, evolutionary strategy, financial assets, local investments, regenerative, renewable energy