Curious about how the online space for crowdfunding will be regulated based on the passing of the JOBS Act? Jenny Kassan posted a set of answers here on her Cutting Edge Capital blog. Bottom line, get used to filling out SEC forms and getting serious about your knowledge of investing regulations. Also, until the SEC has completed its rulemaking process, you cannot act as a crowdfunding intermediary, (even if you are already a registered broker). So, while I am sure we will see a host of new faces in this space eventually, the best process right now, legally, to gather small investments from your unaccredited neighbors (and the accredited ones too, of course!) is the Direct Public Offering.
Really. Join us on June 15 and 16 to learn more. A rare opportunity to hear from the national experts on the use of this tool to leverage community capital.
It’s about filling a gap, one that we have been harping on for years, namely, startup. As an April Slate article described the likely beneficiaries of the Jumpstarting Our Business Startups (JOBS) Act: “They’ll be startups and young businesses that have growth potential, but not on a large enough scale to attract venture capital.” It will take effect in 2013, and the SEC will have an additional 200+ days to work out the regulatory piece. “Crowdfunding,” the opportunity to have many small contributors or investors buy into an entity, has largely been hamstrung by the securities laws, put there to protect us (us being the little guys who don’t have a lot of experience investing and can’t afford to lose a lot of money. The law will still have a say, but the rewards (as well as the potential losses) could be widespread.
“Along with individual companies, small-time startup scenes outside of Silicon Valley are likely to reap rewards as well. Austin, Boston, and New York have had some success in building startup cultures, but they’ve been held back by the Bay Area’s grip on venture-capital money. Crowdfunding will allow companies without access to Sand Hill cash to find the capital they need online, perhaps spurring a wave of innovation among mom-and-pop startups whose ambitions are local rather than global. If that happens, the JOBS Act might end up creating some jobs after all.” (quotes from the April 6 Slate article)
If you need the JOBS Act basics, the MSNBC post is helpful. Or, better still, read Jenny Kassan’s article on HuffingtonPost.
“The vast majority of the American public, the 99 percent of us who are “unaccredited” investors, will soon have the opportunity to keep their money local. The half of our economy made up of small, independent businesses will now have access to capital that previously could only go to giant public companies. Americans have $30 trillion dollars invested in securities — imagine if even 10 percent of that went from Wall Street to Main Street. What could $3 trillion dollars do in our communities?”
She is admittedly, still “cautiously optimistic.” If you want the flip side of the act by those who are seriously upset about what the law ALSO allows, look here: Rolling Stone and Bloomberg.
I’m most interested in the ecosystem growth this Act will offer up to us. This Act is really an invitation. It invites those of us advocating for local and sustainable businesses to make this work broadly, sharing knowledge and taking advantage of the opportunities wisely. Michael Shuman sums it up nicely,” I believe that local economy advocates now must start educating the public about the importance of favoring local investment. Our argument should be that knowing the business in which one invests – knowing the products, the entrepreneur, the workforce, etc. – is the best way to prevent fraud.”
Hatch: A Community Innovation Lab, and other ecosystem cultivators, should look closely at their new role in getting the word out, and acting as sources of information and direction.
The topics at the Sustainable Business Oregon Panel May 8th event were impact investing and alternative finance. This post should help those who want to dig deeper into the measurement of impact, a critical piece for impact investors (or should be). A recent CSRWire article helps decode the alphabet soup of tools, namely the GIIN, PULSE, and IRIS. Check it out here. Beth Busenhart, the author, is the PULSE product manager, and her experience mirrors mine. People are truly interested, but are simply baffled by the acronyms and new practices.
Here is a quote from the article, “Before exploring their differences, it’s helpful to recognize that PULSE, GIIRS and IRIS have a shared goal: To increase the flow of capital to investments that solve social and environmental problems while generating a financial return. Each solution, however, plays a unique role.”
One question I often raise is what do you mean by impact? This states it pretty well–”…investments (to enterprises of all kinds) that solve social and environmental problems…” It is about mission-driven entities. Opportunities to promote their efforts and therefore their impact, through investing in them via loans or equity, is what impact investing is all about. (For more about social finance listen to RSF’s new podcast.)
Impact investing seems simple, and an obvious win-win. Why is it so difficult?
One issue that continues to surface, especially through nonprofit consultants in marketing, is the “sell” to likely donors. (And, as we merge the worlds of donating and investing into this new impact investing world, this will matter.)There are two reasons, they tell you, that people contribute: They either gain personally or they are moved–the more tears the better. You must tug (yank) on their heartstrings. You need a good story!
I know I know. It’s true. People need stories to make situations real. But, as long as we want our hearts tugged and the feeling of a tear or two trickling out, we will never ask the meaningful questions that would transform the field of nonprofits and social enterprise alike. (And I don’t mean overhead. That debate should be over, thanks to Dan Pallotta and his book Uncharitable.) I mean “What are your impact metrics and how well do you reach them?
First, we could use some common language. Standardization is the promary objective of the Impact Reporting and Investment Standards (IRIS). This is a critical first step towards comparing impact results and entities, as well as their strategies, which in turn inform and improve practice. Next, you want to track these data across your portfolio. PULSE is a data management tool for fund managers and organizations to do just that. Read through these sites, and the article cited above, and get familiar with these resources. This is the small stone in a pool pushing out ripples far and wide.
The problem is, (if I can call it a problem), is that these tools are primarily for “the impact investing industry” not really for joe and josephine local investor or donor. I’m glad big institutional investors have these new tools to improve their impact, but they’re big guns with big targets. As we move into the realm of becoming local investors, with some of the same questions and needs, we are going to be searching for ways to validate our due diligence assumptions, get advice and feedback, and better grow the local impact investing industry.
This is where it gets exciting. This arena is wide open. There are no local investment advisors for nonaccredited investors. The JOBS act will transform and grow these opportunities and tools.
There is more to come on this topic. Join me at the SBO Forum tonight, and let’s talk.
How do I put my money towards building a resilient local economy? Who else is doing this? How are they doing it? What are the basics that I have to know? Entrepreneurs and citizens are growing their communities by leveraging models that allow direct investing by the other 96%. Hear about the tools and strategies that enable the flow of local dollars into our communities, and the multiple benefits they provide.
With Slow Money NW, a newly organized LION:PDX, and Supportland we are taking the most urgent issue rising to the top at our ReVisioning Values National Conferences and our monthly Social Innovation Forums to create the 2012 Re:forums on Local Investing.
For those of you who helped us pack the room at the October Social Innovation Forum on Growing Community Capital, we want to explore the next step with you. For the first of four Re:Forums, we start off with an evening on the who, how, and why of local investing. Then we expand the topic of the Direct Public Offering – a tool to connect local enterprises to local investors – into a workshop that will help you do focused, smart work on your business plan and open up possibilities for local community members to invest in your enterprise.
Jumpstarting Local Investing Re:Forum
Keynote Speaker: Amy Cortese
Panel: Slow Money NW, Quimper Mercantile, LION Port Townsend
June 15th, 5:30p – 8:00pEcotrust
Billy Frank Jr. Conference Room, 2nd Fl
Re:Forum Workshops
Workshop #1: The Direct Public Offering
Workshop #2: Becoming Community Investors
June 16th
PREM Meeting Space
NW 12th and Flanders
For more information, check out the event page. Come explore how we can align our think-local values with our investment dollars.
Congratulations to the residents around Quimper Peninsula and the Quimper Mercantile on an incredible Direct Public Offering, successfully raising $425,000 with 520 citizen investors over a 2-3 month period. Why did they do this? From the Quimper Merc website:
We are a diverse group of business-oriented Quimper Peninsula residents concerned about the loss of Port Townsend’s Swain’s Outdoor & More store and the gap that it leaves in our community’s ability to provide for basic mercantile needs. We are also concerned about the negative impact this gap can have on the practice of shopping locally; a practice that is important in fostering the economic viability of our Quimper community.
It is incredibly encouraging to hear about the success of an entirely citizen-led effort to come together as a group to solve a community problem. Congratulations again and stay tuned on members of the Quimper Merc group joining us in Portland for the Jumpstarting Local Investing event in June!
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