tag:blogger.com,1999:blog-26961720437494508592024-03-12T20:38:38.190-04:00LocavestingUnknownnoreply@blogger.comBlogger45125tag:blogger.com,1999:blog-2696172043749450859.post-36792351544129441562014-12-14T12:15:00.000-05:002014-12-14T12:15:05.923-05:00Can Crowdfunding Revive Local Stocks Markets?<br />
<br />
<br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwuB_j5Nr9saZv4hFgYt1F3TQouuFEt2LeE8FOpHjbJhgAjyrwrDUuZRpI4rpOD9JOvx1hZwwwQpHFvMyTHBE96sY6v4-uI-R2eWiHTRvgsTOFeFvSDenmSRf8sejrFbHbc0to0c7oyN0/s1600/Detroit+Stock+Exchange+pic.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhwuB_j5Nr9saZv4hFgYt1F3TQouuFEt2LeE8FOpHjbJhgAjyrwrDUuZRpI4rpOD9JOvx1hZwwwQpHFvMyTHBE96sY6v4-uI-R2eWiHTRvgsTOFeFvSDenmSRf8sejrFbHbc0to0c7oyN0/s1600/Detroit+Stock+Exchange+pic.jpg" height="320" width="310" /></a></div>
<span style="font-family: Arial, Helvetica, sans-serif;">Back in October, I wrote <a href="http://www.nytimes.com/2014/10/25/opinion/a-way-for-local-businesses-to-grow.html?_r=0">an op-ed that appeared in the New York Times</a> about local stock markets. Specifically, it was about the passage of Michigan's Investment Markets bill, a novel new law that allows the creation of intrastate stock markets that would let Michigan-based residents buy and sell shares of Michigan-based securities. The idea of a Michigan-only stock market harkens back to the local stock markets that once thrived across the country, and helped their regional economies thrive as well. The <a href="http://www.detroitstockexchange.com/dse_hist.htm">Detroit Stock Exchange</a> (pictured left) raised money for fledgling automakers, for example, while the The Honolulu Stock Exchange capitalized Hawaii's banking, communications and power infrastructure in the early 1900s. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">In a strange coincidence, just days before my op-ed ran, a Pennsylvania paper <a href="http://lancasteronline.com/business/local_business/lancaster-stock-exchange-proposal-dies-from-lack-of-financial-backing/article_2efd415c-5aaf-11e4-801b-0017a43b2370.html">ran a story about LanX</a>, a proposed local stock market for an eight-country region in western Pennsylvania. I wrote about LanX and its creator, Trexler Proffitt, then an assistant professor of business at Franklin & Marshall College, in my book (as well as well as in <a href="http://www.nytimes.com/2008/12/14/magazine/14Ideas-Section2-C-t-006.html?_r=0">the New York Times Magazine</a> in the weeks after the financial meltdown of 2008).</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">At Franklin & Marshall, Proffitt had done some of the only real research examining the role of local exchanges in American economic development. He and a fellow researcher counted 28 regional exchanges created between 1830 and 1930, from Richmond to Milwaukee to Los Angeles. The number of exchanges rose in lockstep with U.S. industrial production. But their research showed that regions with newly established exchanges had a 175% increase in manufacturing jobs—the dominant employer category at the time and a proxy for economic growth, That compared to 76% growth for the nation as a whole. So the local markets clearly helped their local economies. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">Most of those markets have since merged or closed. Today, many promising regional growth companies can no longer access the public markets, which cater to very large corporations (the average IPO size is around $140 million, up from $10 million or so twenty years ago). </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">Proffitt believed that a Lancaster area stock market could help provide capital to small but growing companies in the Lancaster area and add as much as $10 annually to the local economy. It was also a way to forge connections. As he explained it: "The idea was to let investors see the social impact of the company they were supporting, a sort of “Buy Local” approach to investing."</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">The news out of Lancaster, however, was that Proffitt, now a professor at </span><span style="background-color: white; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 16px; line-height: 20px;">Emory University</span><b style="font-family: Arial, Helvetica, sans-serif;">,</b><span style="font-family: Arial, Helvetica, sans-serif;"> was throwing in the towel on LanX. The reason? Crowdfunding had made the idea moot.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">“Since the energy went in that direction, I thought this is too much of an uphill battle,” Proffitt told the paper. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">The purpose of a stock market is twofold: to help companies to raise money through initial public offerings, and then to provide liquidity to share owners by providing a place to trade those shares. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">As Proffitt notes, companies can now raise money through crowdfunding as well as other alternative capital-raising methods, such as direct public offerings. Today crowdfunding is limited to offering non-financial rewards to contributors, as Kickstarter does, or "equity" (including stock, debt or revenue-sharing) to wealthy individual investors. While we wait (and wait) for federal regulators to finalize the rules that will open up crowdfunding to the general public, more than a dozen states have adopted their own state crowdfunding rules. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">Michigan is one of those states. It's Michigan Invests Locally Exemption, or MILE, allows Michigan-based ventures to raise money by selling securities to residents of the state through crowdfunding. Michigan lawmakers see it as a way to rev up their state economy and encourage a new generation of homegrown companies. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">But for investors to really warm up to crowdfunding, they need to feel comfortable that they'll be able to sell their shares should they need to cash out. As Proffitt told me in an email recently, "All </span><span style="font-family: Arial, Helvetica, sans-serif;">those equity shares have to go someplace and if there is no way to do that, </span><span style="font-family: Arial, Helvetica, sans-serif;">investors are stuck. They may not care, because the limits keep their </span><span style="font-family: Arial, Helvetica, sans-serif;">amounts small, but sometimes we all need our money back."</span><br />
<div>
<span style="font-family: Arial, Helvetica, sans-serif;"> </span><br /><table cellpadding="0" cellspacing="0"><tbody>
</tbody>
</table>
<span style="font-family: Arial, Helvetica, sans-serif;">That's why Michigan followed up its crowfunding law with the Michigan Investment Markets law: to give Michigan investors the comfort of knowing they have liquidity. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">It will be interesting to see where this leads. Could crowdfunding platforms, in addition to raising money, also be a mechanism for secondary trading? If so, crowdfunding platforms could turn into a sort of stock market for local, small and mid-sized companies that don't have the wherewithal—or maybe the desire—to go public on the New York Stock Exchange or NASDAQ. The hope is that these new age stock markets, at least at the local level, might provide a platform for long term investment and a sense of place, rather than flipping shares to make a quick buck. </span><br />
<br />
<div>
<br />
<span style="background-color: white; color: #333333; font-family: georgia, 'times new roman', times, serif; font-size: 16px; line-height: 23px;"><br /></span>
</div>
</div>
Unknownnoreply@blogger.com17tag:blogger.com,1999:blog-2696172043749450859.post-60913730201015843302014-04-05T11:25:00.000-04:002014-04-05T14:06:33.630-04:00Move Over JOBS Act: States Are the Real Laboratories for Crowdfunding<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-wBxkWj08wk4ecFjSzQnwK4mjNxZUpvXas2g3VuRFhZwrlE8-_ZigUZMQSmUCx9gjQyaUxVdo3bAktHUBJx9RpkhaHId2yRdcR0RcdMUt4g6Ra_dyFA5Hdh3O22PmGddRB72RfGvaOyM/s1600/JOBS+Act+image2.jpeg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh-wBxkWj08wk4ecFjSzQnwK4mjNxZUpvXas2g3VuRFhZwrlE8-_ZigUZMQSmUCx9gjQyaUxVdo3bAktHUBJx9RpkhaHId2yRdcR0RcdMUt4g6Ra_dyFA5Hdh3O22PmGddRB72RfGvaOyM/s1600/JOBS+Act+image2.jpeg" /></a><br />
<span style="font-family: Arial, Helvetica, sans-serif;">Today marks two years since the passage of the JOBS Act—the landmark legislation that was supposed to open up gushers of capital
for the nation's small businesses and create jobs. But as the law inches closer to implementation, it's becoming clear to even (or especially)
the law's most ardent supporters that it will fall short of those lofty
goals. If the SEC's 600 pages of proposed crowdfunding rules are adopted as laid
out, the complexities and requirements they entail will likely make it too
expensive and onerous for most of the small businesses the law was originally
intended to help. </span><br />
<br />
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">For example, the SEC estimates that companies raising less than
$100,000 could pay up to 15% in legal and other fees. For companies raising $1
million (which requires audited financials), the costs could be as much as $250,000.</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">As that reality sets in, a number of states impatient to spur
job creation and entrepreneurship are crafting laws that allow investment
crowdfunding within their own borders. Kansas was the first, with its Invest
Kansas Exemption (IKE), followed by Georgia. In late 2013, Wisconsin and
Michigan joined in with laws of their own. </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">Already this year, Maine, Alabama, Washington, Indiana and Maryland have passed their own mini-JOBS Acts, and many more are likely to follow. Why? Because they see it as pragmatic economic development, a way to strengthen their local economies. </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">“I hope that IKE can serve as a model for all fifty states,” one Kansas
state regulator told me. (Fittingly, Kansas was the first state in the country to regulate securities, in 1911. The argument—to keep "Kansas money in Kansas" and help local farmers and businesses rather than enriching "New York Stock Exchange speculators and gamblers"—rings as true now as it did then. (See chapter 2 of my book for more on these genesis of the Blue Sky laws) </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">Although the state laws vary, generally they allow any
business based in the state to raise money from any resident of the state, without
all of the red tape and restrictions entailed that come with JOBS Act
crowdfunding. In Kansas and Georgia, for example, companies raising money submit a
simple one-page form to state regulators, and there are no audited financials
required. Unlike the JOBS </span><span style="font-family: Arial, Helvetica, sans-serif;">Act, transactions in those two states don't even need to take place on a portal (although I think portals can provide clear value). </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">Because companies are restricted to raising money from
residents of their state, intrastate crowdfunding may not appeal to high-flying firms
that can attract a national or global audience of investors. But then, those companies
typically do not have problems raising capital—unlike thousands of
smaller or less sexy businesses that the JOBS Act was expected to boost.</span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">So where does state crowdfunding stand? It's been slow to take off so far, mainly because it is so new and much education needs to be done. In Kansas
and Georgia, there have been just a handful of deals so far, and many residents still don't know the laws exist. I'm most impressed with Michigan, which is taking a more hands on approach to promote the Michigan Invest Local Exemption (MILE). The <a href="http://www.mml.org/home.html">Michigan Municipal League</a>, a well respected organization that represents counties and towns throughout the state, has taken the lead in educating businesses and investors, and has partnered with two crowdfunding platforms- <a href="https://localstake.com/">Localstake</a> and <a href="https://fundrise.com/">Fundrise</a> - to encourage MILE deals. The first Michigan state crowdfunding campaign - for the Tecumseh Brewery - is now live on Localstake. </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, Helvetica, sans-serif;">I still hold out hope for a workable JOBS Act someday. But, as with so many things these days, states are becoming the true
laboratories for crowdfunding. They have an opportunity to show how crowdfunding—or in this case, <i>communityfunding</i>—can be done.</span> </div>
<div class="MsoNormal">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYsH1z5zXdlFkskr6JWNk2BjYjP0LKS7202ZqumZXr98ovlmjGhES3jKAshiIHoArX1VVAvh0-VrVVUaBRn1rXq3_RtWiL1ztsRNWbh-AdIh_Ub2t_PToQWfACoWhYiSLwqwg7i4sG2oA/s1600/McHenry+&+Me.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYsH1z5zXdlFkskr6JWNk2BjYjP0LKS7202ZqumZXr98ovlmjGhES3jKAshiIHoArX1VVAvh0-VrVVUaBRn1rXq3_RtWiL1ztsRNWbh-AdIh_Ub2t_PToQWfACoWhYiSLwqwg7i4sG2oA/s1600/McHenry+&+Me.jpg" height="237" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Me & Patrick McHenry at the Rose Garden signing ceremony April 5, 2012</td></tr>
</tbody></table>
<div class="MsoNormal">
<br /></div>
Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-2696172043749450859.post-61306064437571015262013-10-24T10:56:00.000-04:002013-10-28T09:29:01.755-04:00Crowdfunding: Don't Start Your Engines Just Yet<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQY78uCTgzh3Rlzu2QuJhekzjt4EjqYvBw-ASl14ZJrD5J-Bl9g-guRc6iqcPS8QBgPehofPswc6zrHhmwgKBBids_5FbwrKJ_6a8XbXD0VYPQL-u6caVIOF8HvCGcJ5bFZbVyue1SVr4/s1600/JOBS+Act+pic.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><span style="font-family: Georgia, Times New Roman, serif;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQY78uCTgzh3Rlzu2QuJhekzjt4EjqYvBw-ASl14ZJrD5J-Bl9g-guRc6iqcPS8QBgPehofPswc6zrHhmwgKBBids_5FbwrKJ_6a8XbXD0VYPQL-u6caVIOF8HvCGcJ5bFZbVyue1SVr4/s1600/JOBS+Act+pic.jpg" /></span></a></div>
<span style="font-family: Georgia, Times New Roman, serif;">Crowdfunding has landed with a thud! On Wednesday, the SEC issued 568 pages of <a href="http://www.sec.gov/rules/proposed/2013/33-9470.pdf">proposed rules</a> for
Title III of the JOBS Act – aka crowdfunding. Embedded in it were 295 questions for interested
parties and the public at large to comment on, ranging from how to calculate the $1 million per year limit on how much issuers can raise (ie. should that be net of fees? should other non-crowdfunded fundraising be included or exempted?) to the economic impact of the proposed rules (question #295). </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br />
SEC commissioners weighed in on the historic moment, proclaiming it a step forward in a "bold experiment" that has "great potential" to unleash capital for the nation's small businesses, but one that will take some time to get right. Others interpreted the voluminous proposal as the SEC kicking the can further down the road while appearing to fulfill its duty to issue rules mandated in the JOBS Act (already more than ten months behind). </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br />
While the details are sorted out, the broad outlines of crowdfunding remain the same: </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br />
- Companies can raise a maximum of $1 million through crowdfunding in a 12-month period</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- Investors whose income and net worth are less than $100,000 are limited to $2,000 or 5% of their income, whichever is greater, in aggregate crowdfunding investments over a 12-month period</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- Investors whose annual income or net worth is greater than $100,000 may invest up to 10% of their income or net worth, not to exceed $100,000 in a 12-month period</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- All crowdfunding transactions must take place on an SEC-registered intermediary - either a broker-dealer or a crowdfunding portal</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- These intermediaries must take measures to educate investors and mitigate fraud</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- Companies raising money on these platforms must provide basic financial information (the proposed rules require audited financials for offerings greater than $500,000)</span><br />
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">So when can we expect mainstream investment crowdfunding to be ready for prime time? </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Not so fast. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Wednesday's proposed rules kick off a 90-day comment period. At the end of the comment period, SEC staffers will
study the comments and consider whether to recommend tweaks to the proposed
rules to their bosses. Sara Hanks, an attorney and the CEO of <a href="http://www.crowdcheck.com/">CrowdCheck</a>, notes that the end
of the comment period does not imply any action on the part of the SEC – in fact,
in practice, proposed rules often languish for many months. Given the controversy surrounding crowdfunding and the magnitude of the questions buried in the proposed Title III rules, this recommendation stage
is likely to stretch on for at least three months, if not many more.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, 'Times New Roman', serif;">The next step would be for the SEC commissioners to formally
adopt the rules (or reissue rules and start the process all over again, which
is considered unlikely). Bottom line: </span><span style="font-family: Georgia, 'Times New Roman', serif;">final crowdfunding rules are not likely to be released until six months out, at the earliest. </span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">Add in some time for FINRA, the industry regulatory
body, which must issue its own rules and guidance, and a registration period for crowdfunding portals, and mainstream crowdfunding will not be a reality
until mid-2014 at best.</span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;"><o:p>In the meantime, r</o:p>ead the proposed rules <a href="http://www.sec.gov/rules/proposed/2013/33-9470.pdf">here</a>, and offer your own (constructive)
comments <a href="http://www.sec.gov/cgi-bin/ruling-comments?ruling=s70913&rule_path=/comments/s7-09-13&file_num=S7-09-13&action=Show_Form&title=Crowdfunding">here</a>.</span></div>
<div class="MsoNormal">
<o:p></o:p></div>
Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-2696172043749450859.post-59523037068557448922013-08-21T15:30:00.000-04:002013-08-27T13:06:22.575-04:00When Buying Local Doesn't Build Community Wealth<div class="p1">
Buy local. Support local business. These are the rallying cries that community-boosters (including </div>
myself) use all the time. When you spend money at a local business, the theory goes, more of that money circulates in the community, supporting other local businesses as well as charities and boosting the local tax base.<br />
<br />
Except when it doesn't.<br />
<div class="p2">
<br /></div>
<div class="p1">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhzOfVkGXUSJrtM1dxrvpvhxWQ80-FlMxL9bqofI5evpqilx6mX5uu8oXB3K5hdako5j1Pj7eloELeMZL4TKbR9eMbVGDNZ-JvGiJFVQpFedRiAipT_tGothWybEDZ74MQ6ZAV978y24Os/s1600/Martin_Luther_King_Jr_NYWTS.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhzOfVkGXUSJrtM1dxrvpvhxWQ80-FlMxL9bqofI5evpqilx6mX5uu8oXB3K5hdako5j1Pj7eloELeMZL4TKbR9eMbVGDNZ-JvGiJFVQpFedRiAipT_tGothWybEDZ74MQ6ZAV978y24Os/s1600/Martin_Luther_King_Jr_NYWTS.jpg" width="263" /></a>Maggie Anderson, the author of <a href="http://eefortomorrow.com/EE_Book.html">Our Black Year</a>, opened my eyes to the fact that, in many neighborhoods—especially poorer Black ones—the 'local' businesses are not owned by people who live there, so the money spent at them flows right out of the community. African Americans account for 14% of the population, but they make up only 5% of business ownership in this country (and most of those businesses are <a href="http://blackdemographics.com/economics/black-owned-businesses/">sole proprietorships</a>). The reasons are complex, but the reality is that, while African American buying power has surged, little of that spending is actually helping build wealth in Black communities. </div>
<div class="p2">
<br /></div>
<div class="p1">
Anderson cites some startling statistics:</div>
<div class="p2">
<br /></div>
<div class="p1">
A dollar spent locally circulates nearly a month in an Asian American community before the money flows out.</div>
<div class="p1">
In Jewish communities, it sticks around for about 20 days. </div>
<div class="p1">
White Anglo-Saxon Protestant neighborhoods enjoy a locally spent dollar for roughly 17 days. </div>
<div class="p1">
African American communities? <i>Six hours</i>. </div>
<div class="p2">
</div>
<div class="p1">
All neighborhoods have "leakage" — money that flows out of the community and into the hands of nonlocal business owners, chain stores, bankers, landlords, etc. But it's particularly acute in some Black neighborhoods. For every $100 spent in an "underserved Black community," about $95 leaves, says Anderson, citing a 2004 report. </div>
<div class="p2">
<br /></div>
<div class="p1">
To call attention to the lack of Black-owned enterprises, she and her family spent a year trying to buy only from Black-owned businesses around their Chicago neighborhood. The results of this Empowerment Experiment, as they call it, are chronicled in her book. I won't be spoiling anything to say that it wasn't exactly a rousing success. </div>
<div class="p2">
<br /></div>
<div class="p1">
Anderson's book is a reminder that not all neighborhoods are created equal, and that the 'local' movement must become more diverse (to its credit, the <a href="http://bealocalist.org/">Business Alliance for Local Living Economies </a>featured Anderson as a keynote speaker at its <a href="http://bealocalist.org/conference-2012">2012 conference</a>, where I found out about her project and book). </div>
<div class="p2">
<br /></div>
<div class="p1">
So when I heard about the Kingonomics <a href="http://mlk50mow.com/">conference taking place this week</a> in Washington, DC, I was intrigued. Timed to commemorate the 50th anniversary of the March on Washington, where Martin Luther King gave his enduring "I Have a Dream" speech, it brings together entrepreneurs, innovators, civil rights leaders, businesses and investors inspired by the economic philosophies of Dr. King. Yes, economic philosophies. As Kingonomics <a href="http://kingonomics.wordpress.com/book/">author</a> and conference organizer Rodney Sampson explains, many people don't realize that Dr. King was very focused on economic issues, believing that without economic opportunity, people do not have the chance to pursue happiness. Before his death, King campaigned for an "economic bill of rights" and called upon the government to invest in rebuilding American cities.<br />
<br />
"The modern day civil rights movement has evolved into an economic rights movement for all to participate," writes Sampson. To that end, the conference entails two days of entrepreneur bootcamps, capital raising education, crowdfunding and pitch competitions for entrepreneurs, capped by an "Emancipation of Capital" gala. </div>
<div class="p2">
<br /></div>
<div class="p1">
This is where I get excited about the potential for crowdfunding to help minorities, women and other entrepreneurs too often cut off from traditional funding sources. At its best, crowdfunding is about democratizing access to capital, so that ideas get funded based on their merits, not on powerful connections or where you went to school. So here's to MLK's dream, and the dreams of entrepreneurs everywhere, to make a difference in the world. We just have to give them a chance. </div>
<br />
<div class="p2">
<br /></div>
Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-2696172043749450859.post-16003522511945149302013-05-20T10:09:00.000-04:002013-05-20T10:09:20.638-04:00Show your supply chain? No sweat.<br />
<div class="p1">
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhi2sRoFKB_8pW5U6yHIPeMB1Bui4tg_12x2jj3ZxisFT-Cz-CSH3iPL3SDgo-sA_7Ti-gGen-JwtecTWJHEzCggpXPkjY9_LScNreOm0cNAEvGkZ8m3KOT9diJgLS2uwIi2n3-u1IxD9s/s1600/sweatshop.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhi2sRoFKB_8pW5U6yHIPeMB1Bui4tg_12x2jj3ZxisFT-Cz-CSH3iPL3SDgo-sA_7Ti-gGen-JwtecTWJHEzCggpXPkjY9_LScNreOm0cNAEvGkZ8m3KOT9diJgLS2uwIi2n3-u1IxD9s/s320/sweatshop.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Photo courtesy of <a href="http://www.flickr.com/photos/28876688@N03/">The Sweatshop Project</a> </td></tr>
</tbody></table>
The recent collapse of a garment factory in Bangladesh, which killed or injured thousands of low-wage workers, shined a harsh light on how and where much of our clothing is made. And working conditions aren't the only problem: fashion often comes at a high cost to our health and the environment, with finishes, fabrics and dyes that involve a laundry list of toxic chemicals. In fact, consumer goods of all kinds—whether clothing or cosmetics or processed food—are the retail equivalents of the global financial system, characterized by long, complex and opaque supply chains that are hard for companies, much less consumers, to keep track of. That is, until some tragedy, scandal or recall brings the details to the surface (<a href="http://www.telegraph.co.uk/foodanddrink/foodanddrinknews/9874854/Tesco-pledges-to-open-up-supply-chain-after-horse-meat-scandal.html">horse meat</a>, anyone?). </div>
<div class="p2">
<br /></div>
<div class="p1">
In the wake of the Bangladesh incident, companies from Nordstrom to Walmart have indicated they would <a href="http://www.nytimes.com/2013/05/09/business/global/fair-trade-movement-extends-to-clothing.html?pagewanted=all&_r=0">take steps to make their supply chains more transparent</a>. We've heard that before. But corporations have been slow to back up their promises. In the meantime, a new generation of socially-minded companies is showing the way. </div>
<div class="p2">
<br /></div>
<div class="p1">
In North Carolina, <a href="http://tsdesigns.com/">T.S. Designs</a> makes organic cotton t-shirts "from dirt to shirt" in the state. The organic cotton is grown, spun, knit, finished, sewn and printed all within 700 miles—compared to the 16,000 miles that a typical globally-sourced t-shirt travels. The t-shirts are also printed with water-based ink and no harsh chemicals. When T.S. Designs president Eric Henry set out on this mission, there was no organic cotton being grown in the Carolinas. But with the help of a $30,000 loan from <a href="http://slowmoneync.org/">Slow Money NC</a>, Henry was able to persuade (and pay up front) a handful of cotton farmers to make the switch to organic. In late 2011, the state's first organic cotton crop was harvested and ginned. Henry also helped found <a href="http://www.cottonofthecarolinas.com/">Cotton of the Carolinas</a>, a <span class="s1">collaboration of farmers and manufacturers dedicated to growing, making, and selling its t-shirts in the Carolinas. </span>E<span class="s1">ach t-shirt from the Coalition comes with a tag that lets you track the entire supply chain, from farm to finish. </span> </div>
<div class="p2">
<br /></div>
<div class="p1">
I was recently introduced to another supply chain pioneer, <a href="http://swbasicsofbk.com/">S.W. Basics</a>, a small but ambitious Brooklyn startup that makes a line of wonderfully simple skin care products, each with just five or fewer ingredients. No scary, unpronounceable names, chemical fragrances or fillers made in a lab. Just pure, ethically-sourced ingredients like shea butter, avocado oil, rosewater, coconut butter, and sea salt. S.W.'s founder, Adina Grigore, says all of the ingredients are either certified organic, Fair Trade, or sourced from small, family farms. And she wants you to know! Grigore and her team have <a href="http://www.kickstarter.com/projects/172176779/sw-basics-small-biz-film-project-a-make-umentary">launched a Kickstarter campaign</a> to help the company film and document its suppliers, from the family that sustainably harvests its witch hazel in the Ozarks to the small Iowa firm that makes its lip balms and the <a href="http://www.globalmamas.org/Producer/280-GlobalMamasPureShea.aspx">women's cooperative in Ghana</a> that suppliers its shea butter. </div>
<div class="p2">
<br /></div>
<div class="p1">
The idea, says Grigore, is to celebrate S.W.'s suppliers and help them perhaps attract more business so that they can thrive. But it's also about creating new standards for doing business and encouraging people to be curious about how their products are made.<br />
<br />
<div class="p1">
"For me, it's about being truthful to what we're doing, and not in a way that's token, like putting our ingredients on the front label, but in a way that is completely transparent," she says. In other words, "Proof, not just words." </div>
<div class="p1">
<br /></div>
<div class="p1">
Grigore believes that if supply chains were more transparent, people might make different purchasing decisions. After all, would you knowingly buy <a href="http://www.ewg.org/skindeep/">cosmetics that have lead or endocrine disruptors in them</a>? Or a t-shirt made in a sweat shop? No wonder the big conglomerates are so slow in responding to pressure.</div>
<br />
As consumers, we have power. In addition to buying local and ethical, we can demand information from the retailers and manufacturers whose products we choose to buy. Or not buy, as the case may be. </div>
Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-2696172043749450859.post-6551133350491151592013-04-05T12:39:00.000-04:002013-04-05T14:20:56.527-04:00Happy Anniversary, JOBS Act!In case you missed it, today marks the one-year anniversary of the JOBS Act. For those assembled in the Rose Garden for that momentous signing and for millions of entrepreneurs who would benefit from the law, hopes were high. A year later, we're still waiting for key provisions of the Act, notably crowdfunding and (Title III) and the lifting of the general solicitation ban (Title II).<br />
<br />
There's been plenty written about that in the days leading up to the one-year anniversary (see links below) and several events today to commemorate the one-year mark (I participated in <a href="http://crowdfundx.eventbrite.com/?utm_source=SMW+Newsletter&utm_campaign=5acfee8a99-NYC_Class_email_4_2_2013&utm_medium=email&ct=t(NYC_Class_email_4_2_2013_2)">one in NYC</a> yesterday). But I am reminded of the words of Bill Gates, who sagely observed that when it comes to disruptive technologies, we tend to overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. The revolution, apparently, will wait. <br />
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8W7KzyO7dY1s7lXIdeg7IIG7i4CYwVWjUK3uJSIi3KK_XNbcJWzQKfiO75o4QAhmmxtDaMVIf1ZuP3AX0xE8gjOm0MD6vtzCnFqX4YV8L3PZIFrktihZx1IFCP64OK8YbbvojZuzkzy8/s1600/ObamaJOBS.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="238" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj8W7KzyO7dY1s7lXIdeg7IIG7i4CYwVWjUK3uJSIi3KK_XNbcJWzQKfiO75o4QAhmmxtDaMVIf1ZuP3AX0xE8gjOm0MD6vtzCnFqX4YV8L3PZIFrktihZx1IFCP64OK8YbbvojZuzkzy8/s320/ObamaJOBS.jpg" width="320" /></a></div>
Happy anniversary JOBS!<br />
<br />
<a href="http://www.forbes.com/sites/ryancaldbeck/2013/03/16/happy-first-birthday-jobs-act/">http://www.forbes.com/sites/ryancaldbeck/2013/03/16/happy-first-birthday-jobs-act/ </a><br />
<br />
<a href="http://www.washingtonpost.com/business/on-small-business/for-brokerdealers-crowdfunding-presents-new-opportunity/2013/03/28/bb835942-8075-11e2-8074-b26a871b165a_story.html">http://www.washingtonpost.com/business/on-small-business/for-brokerdealers-crowdfunding-presents-new-opportunity/2013/03/28/bb835942-8075-11e2-8074-b26a871b165a_story.html </a><br />
<br />
<a href="http://www.inc.com/candace-klein/the-regulations-that-ate-crowdfunding.html">http://www.inc.com/candace-klein/the-regulations-that-ate-crowdfunding.html</a> <br />
<br />
<a href="http://www.forbes.com/sites/devinthorpe/2013/04/03/anniversary-of-jobs-act-finds-investment-crowdfunders-champing-at-the-bit/">http://www.forbes.com/sites/devinthorpe/2013/04/03/anniversary-of-jobs-act-finds-investment-crowdfunders-champing-at-the-bit/</a><br />
<br />
<a href="http://www.crowdsourcing.org/editorial/conference-to-bring-crowdfunding-leaders-to-silicon-valley/24856">http://www.crowdsourcing.org/editorial/conference-to-bring-crowdfunding-leaders-to-silicon-valley/24856</a><br />
<br />
<br />Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-2696172043749450859.post-7259880638123545082013-02-19T12:31:00.001-05:002013-02-19T12:50:28.353-05:00Crowdfunders to SEC: Bring it OnI was in the Rose Garden that exhilarating, giddy day last April, when President Obama signed the JOBS Act into law. And I can tell you with relative certainty that everyone present, including the President, thought that it would be implemented by now. Instead, as we approach the one-year anniversary, key pieces of the JOBS Act —namely Title II and III, which eliminate the restrictions on advertising private securities and allow for investment-based crowdfunding, respectively— are still just a rosy dream. That's because the SEC, the agency charged with writing the rules that will govern these new provisions, has been moving at the speed of molasses.<br />
<br />
Here's a not-very-well-guarded secret: the proposed rules for crowdfunding have been written by the SEC staff and finished for some time. What's holding it up? Well, apparently the commissioners have been sitting on the rules for reasons spanning wariness of leaving themselves open to criticism from opponents of crowdfunding, to turmoil at the agency: former SEC chairwoman Mary Schapiro resigned late last year. Elisse Walter — one of four remaining commissioners, was named interim chairwoman. Then President Obama nominated Mary Jo White to head the agency, although she has yet to take over the role. In the meantime, it's a power vacuum. For crowdfunding advocates and startups, it's like waiting for Godot.<br />
<br />
And that's a shame, because the delay is holding back regulatory progress that could deliver much needed relief to small businesses seeking capital and begin to bring the transformational power of the Internet and social networks to a broken financial system.<br />
<br />
It's against this backdrop that some of the leaders of the nascent crowdfunding industry decided to take a stand. This morning, the <a href="http://www.cfpa.org/">Crowdfunding Professional Association</a> staged a press conference at the National Press Club in Washington, before heading off to meet with various officials in the Office of Science & Technology Research, Treasury and, yes, SEC. Their aim, it seems, was to dispel some of the misperceptions about crowdfunding and put pressure on the SEC to act.<br />
<br />
One of those misperceptions is that crowdfunding is about get-rich-quick schemes. Instead, speaker after speaker talked of helping Main Street businesses. Woody Neiss of <a href="http://crowdfundcapitaladvisors.com/">Crowdfund Capital Advisors</a> summed it up when he said that crowdfunding is not about "finding the next Facebook" — Silicon Valley does a robust job of that already. It's about finding and funding "the next 1 or 10 or 100,000 Main Street startups" that will create jobs and help build strong and prosperous communities. "It's social media meets community finance," he said.<br />
<br />
Readers of this blog and <a href="http://www.locavesting.com/">my book</a> will know that this is long what I have been preaching. To me, crowdfunding makes the most sense when there are social bonds and relationships that connect investors and entrepreneurs. As Warren Buffet has long advised: it makes sense to invest in what you know!<br />
<br />
Crowdfunding is also an opportunity to take a broken financial system and make it better. To wit: Sarah Hanks, a former securities and corporate lawyer who is now the CEO of <a href="http://www.crowdcheck.com/">CrowdCheck</a>, is offering a private market solution that addresses regulators' fraud and risk concerns. Her disclosure and due diligence system walks investors through the investment process, presenting them relevant information in plain understandable English. Compare that with the typical phone book-sized prospectus filled with legalese that no one in their right mind reads. "We've thrown that out the window," says Hanks. "The best disclosure is the kind that someone is actually reads and understands."<br />
<br />
Crowdfunding is in its infancy and will continue to evolve to address market needs. As Chance Barnett, founder of <a href="http://crowdfunder.com/">Crowdfunder.com</a> pointed out, Crowdfunding 1.0 was about transactions, often undertaken on impulse. But with the JOBS Act, we're on the cusp of Crowdfunding 2.0, which will be based on building long term relationships and community ecosystems.<br />
<br />
In a world of speculation and short term trading, that is something to celebrate. That is, if the SEC ever makes a move. <br />
<br />
<br />
<br />
<br />Unknownnoreply@blogger.com36tag:blogger.com,1999:blog-2696172043749450859.post-20567745567708430852013-01-07T14:32:00.001-05:002013-01-07T14:49:48.111-05:00The Real Risk With Crowdfunding <span style="font-family: Verdana, sans-serif;"><span style="font-size: large;">W</span><span style="font-size: 12pt;">hen the JOBS Act was signed into law last April, entrepreneurs were elated, even giddy, at the prospects. They and other supporters saw it as a democratizing</span></span><span style="font-family: Verdana, sans-serif; font-size: 12pt;"> force that could unlock new sources of capital for job-creating entrepreneurs, boost the economy and give Wall Street-wary investors a profitable alternative. It </span><span style="font-family: Verdana, sans-serif; font-size: 12pt;">was one of those disruptive innovations that comes along once a generation and radically transforms the competitive landscape. It was so potentially revolutionary that pundits and financial pros alike predicted it would put many venture capitalists and banks out of business—in other words, exactly the sort of game-changing opportunity that makes entrepreneurs dream big. </span><span style="font-family: Verdana, sans-serif; font-size: 12pt;"> </span><br />
<span style="font-size: 12pt;"><span style="font-family: Verdana, sans-serif;"><br />
</span></span> <span style="font-size: 12pt;"><span style="font-family: Verdana, sans-serif;">Well, ten months later, the enthusiasm has cooled. Not for the potential of crowdfunding, but for the realistic chances that it will be enacted anytime soon and in a form that honors the original intent of legislators to ease the bottlenecks that prevent so many entrepreneurs and small business owners from obtaining the capital they need to grow, hire and thrive. The SEC, which was charged with writing the rules that will govern the nascent crowdfunding industry by year-end, has missed that deadline (not surprisingly–the agency is concerned about the potential for fraud and has a lot on its plate already). Most people now believe true investment crowdfunding will not get underway until 2014. At the same time, it appears likely that the rules will require the new crowdfunding portals to be regulated much like conventional broker-dealers—in other words, more Merrill Lynch than eBay, as one observer put it. For better or for worse, crowdfunding may turn out to be a game not for idealistic entrepreneurs but for well-capitalized investment pros. </span></span><br />
<span style="font-size: 12pt;"><span style="font-family: Verdana, sans-serif;"><br />
</span></span> <span style="font-family: Verdana, sans-serif;"><span style="font-size: 12pt;">As I wrote in <a href="http://www.nytimes.com/2013/01/06/business/crowdfunding-for-small-business-is-still-an-unclear-path.html?pagewanted=1&_r=0&adxnnl=1&ref=business&adxnnlx=1357585403-7mnRjeD1B9FTcl9FnDbleg">my recent feature for the New York Times</a>, d</span><span style="font-size: 15.555556297302246px;">espite the uncertainty, </span><span style="font-size: 12pt;">the outlines of a new industry are beginning to take shape, and with it a glimpse of what a crowdfunding future might look like: promising young companies able to get funding from people who believe in them, regardless of those investors' net worth; new jobs being created by the availability of growth capital; and more broadly shared prosperity and economic opportunity. Sure, there is a risk of fraud and loss with crowdfunding. But then, that takes place every day on Wall Street. As Thom Ruhe, </span><span style="background-color: white; font-size: 15px; line-height: 22px;">vice president for entrepreneurship at the </span><a href="http://www.kauffman.org/">Kauffman Foundation</a><span style="background-color: white; font-size: 15px; line-height: 22px;">, told me, with the economy stuck in limbo, the bigger risk to the economy is to do nothing at all. </span></span><br />
<!--EndFragment-->Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-2696172043749450859.post-12481700725670725802012-11-28T11:01:00.001-05:002013-01-07T14:57:59.388-05:00Kickstarting the Indie Food Scene<span style="font-family: Verdana, sans-serif;">I've been a bad blogger, I know. I will not even tally up how many weeks have passed since my last post! So thank you for hanging in there. I intend to revive this blog - and indeed build it into something much bigger - in the coming months. In the meantime, let me ease back in by sharing a story I recently wrote for Edible Manhattan about Kickstarter and its role in funding a new crop of indie food entrepreneurs:</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
<b>THE EDIBLE ECONOMY: RAISING DOUGH</b></span><br />
<i><span style="font-family: Verdana, sans-serif;">First published in the November-December 2012 edition of Edible Manhattan</span></i><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><span style="background-color: white; color: #323232; font-family: Verdana, sans-serif; font-size: 14px; line-height: 21px;">When Dan Maniaci and Piergiorgio Maselli were Boston College students with an appetite for more than knowledge, burgers were a shared obsession. Sliders, Big Macs, Shackburgers, animal-style In-N-Outs—they devoured them all (Maniaci earned the nickname “Tapeworms” after scarfing 11 cheeseburgers in one sitting).</span><br />
<div style="background-color: white; margin: 0px; padding: 0px;">
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;">Still, for all the great burgers they could order while out, the two undergrads lamented the pathetic state of patties made at home: overcooked and drowned in ketchup. So they began making their own burger sauce in an effort to resuscitate the home burger experience.</span></div>
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;">From their tiny dorm kitchen, the pair experimented with recipes and tried them out at tailgate parties until they hit on their Top Secret Burger Sauce— Maselli likens it to “a zesty mayonnaise with some spice.” After graduating in 2010, they moved to New York (“burger nirvana,” says Maniaci) with big plans to launch Gotham Sauce Co.</span></div>
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;">But, like many would-be food entrepreneurs with little credit history and no collateral, they found the up-front costs—renting a commercial kitchen space, contracting with a manufacturer, securing the right permits—were out of reach. “We didn’t even bother going to a bank,” says Maselli.</span></div>
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;">In years past, their story would have ended there. Instead, this September, Maniaci and Maselli turned to Kickstarter, a three-year-old company on the Lower East Side whose Web site lets ambitious but underfunded entrepreneurs appeal directly to friends, fans and future customers who believe in their idea. They put together a video pitch explaining their quest “to give the homemade burger a better life” through their secret sauce. And they promised perks to anyone who made a donation—from “a warm and fuzzy feeling” for a $1 contribution, to a bottle of Top Secret Burger Sauce for a $10 pledge, all the way up to a gourmet tailgate party cooked by the two 24-year-old entrepreneurs for a $2,500 pledge.</span></div>
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;">On September 15, just four days into a monthlong funding campaign, they hit their $5,000 goal—modest seed money that would allow them to start commercial production and shop the product around. But contributions continued to pour in, from friends, family, classmates and random burger lovers. With more than a week to go, 950 people had chipped in a whopping $18,500.</span></div>
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;">Maselli, a New York native now in law school at St. John’s, called the tremendous response “a vindication” of the venture. He and Maniaci are finalizing arrangements with a co-packer and plan to ship their first products in December. Armed with bottles, they can also begin calling on specialty stores and supermarkets, he adds.</span></div>
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;">Welcome to the Kickstarter economy.</span></div>
<div style="margin-bottom: 20px; padding: 0px;">
<span style="font-family: Verdana, sans-serif;"><i style="color: #323232; font-size: 14px; line-height: 21px;">Read more <a href="http://www.ediblemanhattan.com/featured-article/raising-dough/">here</a> or go to </i><span style="color: #323232;"><span style="font-size: 14.44444465637207px; line-height: 21px;"><i>http://www.ediblemanhattan.com/featured-article/raising-dough/</i></span></span><span style="color: #323232; font-size: 14px; line-height: 21px;"> </span></span></div>
<div style="color: #323232; font-size: 14px; line-height: 21px; margin-bottom: 20px; padding: 0px;">
<br /></div>
</div>
<br />
<br />Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-74587548991775031422012-03-16T13:28:00.001-04:002013-01-07T14:53:24.299-05:00In Defense of Crowdfunding<span style="font-family: Verdana, sans-serif;">Crowdfunding legislation is tantalizingly close to becoming reality—the Senate is expected to pass a version of a bipartisan House bill within days. But a rash of negative publicity threatens to derail this important update to antiquated securities laws that hamper small business capital raising.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The problems stem from the <a href="http://republicans.financialservices.house.gov/News/DocumentSingle.aspx?DocumentID=282267">Jump-Start Our Business Start-Ups</a> act—JOBS, for short—a House package that rolled together a number of largely uncontroversial bills aimed at spurring small business capital raising, and added some new ones. JOBS has provoked a fierce outcry from consumer protection groups, regulators and pundits, who evoke alarming images of <a href="http://dealbook.nytimes.com/2012/03/14/a-jobs-bill-that-will-provide-help-but-for-all-the-wrong-people/?scp=1&sq=boiler%20room&st=cse">coke-snorting boiler room operators</a>, Nigerian scammers and pump-and-dump research analysts. It seems this bill will make "<a href="http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=1&scp=4&sq=muppets&st=cse">Muppets</a>" of all of us.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Let's all take a deep breathe and consider this.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The elements of JOBS sparking the most backlash are provisions that loosen regulations on public and pre-IPO companies, including exempting publicly traded "emerging growth companies" from certain reporting requirements, and letting issuers and financial firms peddle securities to accredited (aka wealthy) investors. Fair criticism. I don't see anyone taking issue with other elements of the bill, like raising the ceiling for Reg A offerings and increasing the number of shareholders (from 500 to 1,000) a private company can have before it is considered public.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The other key element of the package is a crowdfunding bill that had previously passed the House with near unanimous support. Crowdfunding has its share of detractors, for sure. But much of the recent criticism seems to be unfairly tarring crowdfunding and other good elements of JOBS with the same broad brush. In the <i>Times</i>, Floyd Norris declared crowdfunding <a href="http://www.nytimes.com/2012/03/16/business/the-return-of-the-rip-off-factor-on-wall-street.html?pagewanted=2&ref=business">"a major victory for Wall Street."</a> </span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">That couldn't be farther from the truth.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Crowdfunding, as most people by now know, is a fundraising model where lots of small sums are aggregated from lots of people. Think Kickstarter.com, Kiva.org, and President Obama's initial presidential campaign. Crowdfunding legislation would move that model into the investment sphere, so entrepreneurs could tap into their social networks to raise capital, and allow those investors to share in the profits. It's Kickstarter with a financial return. </span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Under existing rules—rules that were crafted in the 1930s, in the age of ticker tape and telegraphs—that is illegal. Private companies may only raise money from accredited investors. If they want to reach out to their customers, their friends and family, their neighbors or social networks—a perfectly natural impulse—they must hire lawyers and accountants to guide them through a registration process and produce a bulky prospectus that hardly anyone reads. This process can easily cost $1 million or more—making it a non-starter for small firms that only need $10,000 or $100,000 or even a million.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">These small firms are shut off from a huge pool of potential capital, at a time when bank lending and seed funding is down dramatically. And ordinary Americans are unable to invest in companies that they know and love and support.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Having spent the past two years talking to small businesses and investors, I can tell you that people <i>want</i> to invest this way. They would like to put their money in companies that they know, that are part of their community, or doing things they believe in. Just look at the success of Kickstarter, which has raised tens of millions of dollars in contributions for creative ventures. The site logged <a href="http://www.kickstarter.com/blog/double-fine-day">$1.6 million in pledges</a> in a single day this week.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Before it shut down last month under pressure from regulators, <a href="http://profounder.com/">ProFounder.com</a>—a crowdfunding platform cofounded by a founder of Kiva—helped dozens of small businesses raise money from friends and family. This kind of capital is supportive, nurturing capital. It's the antithesis of vulture capital or "ripping the eyeballs out" of Muppets. </span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">In fact, crowdfunding presents a badly needed alternative to Wall Street-style investing. Just as Kickstarter allows independent artists to bypass the traditional gatekeepers like record studios and publishers to get their works produced, crowdfunding can help entrepreneurs with good ideas or promising growth potential get funding that is not forthcoming from banks or VCs. Millions of Americans have <a href="http://moveyourmoneyproject.org/">moved their money</a> out of big banks to credit unions and community banks; many may want to do the same with some of their investment dollars. </span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Yes, there is risk. Investors could lose money or be victims of fraud—just as they can in the stock market. Most of the proposed crowdfunding bills limit the amount that individuals can invest in a crowdfunded venture—the highest allowable amount among the bills is (the lesser of) $10,000 or 10% of their annual income—so the amount any one investor could lose would be limited. (In comparison, there is no limit to what they can lose in the stock market or at the casino, for that matter). The amount a company can raise is also limited, to $1 million (or $2 million with additional disclosure).</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">It is the risk of fraud that has most critics' knickers in a knot. Without a doubt, hucksters will ooze out of the ether. But there are commonsense measures included in the crowdfunding bills that can address the risk. For example, the Senate bills require companies to go through a crowdfunding intermediary to raise funds. The intermediaries (the equivalent of a Kickstarter or eBay) must register with the SEC. And they must hold funds in escrow until the money is released to the company raising it. In addition, state regulators can prosecute any offenders if someone manages to pull off a fraud. </span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The crowdfunding intermediaries will also perform a basic level of vetting of the companies they list on their sites, such as background checks of principals and the like. And let's not underestimate the power of hundreds or thousands of people dissecting a business plan and crowd-vetting an idea or a company. The Internet brings a new level of transparency to investing, in ways that the framers of the 1930s securities laws could never have imagined. In fact, crowdfunding has the potential to be more transparent than many other investments we can routinely make. Do you know what's in your emerging market mutual fund, or what the hidden fees are, for example? Do you really know what is going on inside that blue-chip bank whose stock you own? (Here's a <a href="http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?pagewanted=all&src=ISMR_AP_LO_MST_FB">hint</a>)</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Crowdfunding has been taking place for nearly two years in the UK without a hitch, funding hundreds of local businesses. Luke Lang, a cofounder of <a href="http://www.crowdcube.com/">Crowdcube</a>.com, which has raised more than <span style="background-color: #f8f8f8; color: #454748; font-size: 12px; line-height: 15px;">£2.5 </span>million in equity capital for more than a dozen companies since it launched a little over a year ago, fully expects some companies to fail; that comes with the territory. But so far there has not been a whiff of fraud. Likewise, on Funding Circle.com, British investors have lent more than <span style="background-color: #f8f8f8; color: #454748; font-size: 12px; line-height: 14px;">£</span>23 million to about 600 local businesses in the less than two years, with nary a Nigerian scammer or boiler room creep. </span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The bottom line is, the financial system is broken. Small businesses—which create the majority of jobs, contribute half of private GDP and provide the biggest economic boost for their communities—are going begging for capital. Investor protections are predicated on the public markets, yet those markets are closed to 80% of the companies that need them, according to a report by Grant Thornton (pdf <a href="http://www.gt.com/staticfiles//GTCom/Public%20companies%20and%20capital%20markets/Files/IPO%20crisis%20-%20June%202010%20-%20FINAL.pdf">here</a>). Small firms are simply priced out. The median IPO size has risen from $10 million 20 years ago to roughly $140 million today. </span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">We need alternatives. Done sensibly, with the right precautions built in, crowdfunding could unleash a new wave of innovation and job growth. The potential rewards vastly outweigh the risks. I hope Congress and the pundits will separate this issue from some of the more problematic proposals in the JOBS package. </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span>Unknownnoreply@blogger.com54tag:blogger.com,1999:blog-2696172043749450859.post-64779210677983007072012-03-02T14:06:00.005-05:002012-04-13T12:32:36.994-04:00Starbucks Revisited<span style="font-family: Verdana, sans-serif;">Remember Starbucks' <a href="http://www.createjobsforusa.org/on/demandware.store/Sites-Createjobsusa-Site/default/Default-Start?gclid=CPCWqKPmyK4CFeQQNAodWiLzAw">Create Jobs for USA</a> program?</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The java giant <a href="http://locavesting.blogspot.com/2011/10/grande-idea.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Locavesting+%28Locavesting%29">launched the program last fall</a> in an innovative effort to help stimulate the economy by getting money into the hands of micro-entrepreneurs and small businesses that could create jobs—if only they had access to funding. The program is sort of a "counter-to-community" model: Starbucks customers are encouraged to donate a few bucks after buying their Caramel Macchiatos. The aggregated funds are then funneled to community development loans funds, which make loans to entrepreneurs in low-to-moderate income areas that conventional lenders deem too risky. These loan funds have an impressive record of success and job creation. (See <a href="http://locavesting.blogspot.com/2011/10/cdfis-under-radar-no-more.html">my previous post</a> on this)</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The program is off to a promising start. Since November 1, customers have donated <a href="http://www.americanbanker.com/issues/177_33/starbucks-loan-fund-donations-job-creation-growth-1046760-1.html">more than $2 million</a>. Assuming an average donation of $5, that's about 400,000 customers. Add in the $5 million that Starbucks kicked in, and we're looking at $7 million being injected into underserved communities. The money is leveraged by the community loan funds for maximum impact: every $5 from the Create Jobs for USA program translates into $35 worth of loans.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">Those are the numbers, but here's what it looks like in action.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">In Elkins Park, a tree-lined Philadelphia suburb, Starbucks customers are helping to fund a new food cooperative called CreekSide Co-op. <a href="http://www.trfund.com/">The Reinvestment Fund</a>, a Philly-based community loan fund that is one of the 63 such organizations to receive funds from Create Jobs for USA, is making a $2.2 million bridge loan to the coop. That will allow it to complete construction, after which it will qualify for a USDA loan guarantee program. In addition, <a href="http://creekside.coop/">CreekSide Co-op</a> has raised $280,000 from its members, who earn up to 6% on their money, in an ongoing <a href="http://creekside.coop/member-loan/">member loan campaign</a>.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">The CreekSide Co-op is expected to create 47 fulltime positions and 28 construction jobs. And locals hope it will help revive the area's flagging retail district, which has suffered since a popular, locally-owned grocery store sold out several years ago and foot traffic trailed off. Jon McGoran, a Creekside Co-op board member and Elkins Park resident, notes the experience of Mount Airy, another Philadelphia neighborhood. When the <a href="http://weaversway.coop/index.php">Weavers Way food coop</a> opened a few decades ago in a quiet spot there, other businesses soon followed, including a bookstore, a yoga studio, a creperie and an architectural salvage shop, creating a vibrant retail center and what is today one of the area's most coveted neighborhoods. McGoran, who works at Weavers Way, said Mt. Airy coop is also lending money and expertise to CreekSide.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">In Buffalo, New York, a community health center is another recipient of a Starbucks-supported community loan. After several hospitals and primary care facilities in the area were shuttered, patients visits at the <a href="http://www.chcb.net/">Community Health Center of Buffalo</a> swelled. The center was able to expand to 50,000 square feet thanks to a $450,000 loan from Primary Care Development Corp., a New York-based community development financial institution (CDFI). The expansion enables the center to provide primary and preventative medical care, dental and behavioral health services more than 12,000 low-income residents, and has created jobs across a spectrum of skill levels, ranging from entry-level clerical to licensed professionals, in an area that badly needs them.</span><br />
<span style="font-family: Verdana, sans-serif;"><br />
</span><br />
<span style="font-family: Verdana, sans-serif;">These are just a couple of examples of how the spare change donations of ordinary citizens can have a real impact on neighborhoods in need. Better yet, many community development loan funds allow individuals to invest directly in their own communities, in return for CD-like returns in the low-to-mid digits. To find a loan fund in your own area, check out the <a href="http://www.opportunityfinance.net/industry/industry_locator.asp">Opportunity Finance Network's CDFI locator</a>.</span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-86638299299898608872012-02-23T11:30:00.004-05:002012-02-23T18:54:20.888-05:00The Future of CrowdfundingThis past weekend, crowdfunding pioneer <a href="https://www.profounder.com/">ProFounder.com</a> shut down. Hopes has been high for ProFounder, which set out to help entrepreneurs and small businesses raise money from their friends, family, customers and community. One of its founders, Jessica Jackley, was a cofounder of <a href="http://www.kiva.org/">Kiva.org</a>, the wildly popular microfinance site that has raised hundreds of millions of dollars for micro-entrepreneurs throughout the world since it launched in 2004. Could ProFounder do the same for the many entrepreneurs and small businesses held back by a lack of capital in the U.S.? <br />
<br />
In its first six months, <a href="http://www.wired.co.uk/magazine/archive/2011/09/start/investors-wheels-in-motion">ProFounder raised</a> more than half a million dollars from 302 investors for 18 companies, including a Hawaiian "shave ice" shop and an electric motorcycle maker. Sadly, Jackley and cofounder Dana Mauriello, who met at Stanford Business School, found that U.S. securities laws made it difficult for them to proceed. Despite their best efforts to comply with state and federal regulations, they drew the ire of the California regulators, who issued a cease & desist order in August. A <a href="http://blog.profounder.com/2012/02/17/profounder-shutting-down/">message</a> on their web site explains:<br />
<br />
<blockquote>Despite our progress, the current regulatory environment prevents us from pursuing the innovations we feel would be most valuable to our customers, and we’ve made the decision to shut down the company.</blockquote><br />
Observers pointed out the irony that, just a week before ProFounder's demise, <a href="http://fundinglaunchpad.com/2012/02/investment-crowdfunding-analysis/">the crowdfunding world hit a major milestone</a>: two separate deals raised more than $1 million each. In a Kickstarter campaign ended on Feb. 11th, Elevation Lab raised just under $1.5 million for a new docking device for the iPhone, while Double Fine Adventure, an adventure game, is poised to blow past $2 million with more than two weeks to go. <br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTwCCX7MnYQhpfpkgSkTxyeXtwCgHD04gr7yFT6I7Uke31txWfXsXNgLdxQiPJpB4b3oAFGjZMnLzzl0sS3waWyJxPb4bCg7Y5yURLgrNYbLrU00Kwi2f-4N5Hqx3alsUytkz_BffANRc/s1600/hawaiiann-superman8_shave-ice+%25281%2529.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="145" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTwCCX7MnYQhpfpkgSkTxyeXtwCgHD04gr7yFT6I7Uke31txWfXsXNgLdxQiPJpB4b3oAFGjZMnLzzl0sS3waWyJxPb4bCg7Y5yURLgrNYbLrU00Kwi2f-4N5Hqx3alsUytkz_BffANRc/s320/hawaiiann-superman8_shave-ice+%25281%2529.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="http://www.houseofpurealoha.com/">Uncle Clay's House of Pure Aloha</a> raised money on ProFounder </td></tr>
</tbody></table><br />
Crowdfunding is clearly striking a chord. On Kickstarter, people are pledging more than $2 million a week to projects they support—a figure approaching the entire annual operating budget for the National Endowment for the Arts! <br />
<br />
But ProFounder was different. Site such as Kickstarter and Indiegogo raise money mainly for artsy projects like documentary films, music CDs, and computer games. Small businesses have been turning to these sites more and more with some success—<a href="http://www.lacasaazulbookstore.com/">La Casa Azul</a>, a bookstore in East Harlem, raised nearly $40,000 on Indiegogo to open a bookstore that would cater to the Latino community there. But it's not always a good fit.<br />
<br />
ProFounder, in contrast, was designed for small business entrepreneurs. <br />
<br />
The other main difference is that Kickstarter, Indiegogo and their ilk raise money from supporters with no expectation of a financial return. In other words, people donate money to projects they want to support in return for an in-kind reward, like a CD, a t-shirt or a credit in a film. It's arts patronage in the digital age. <br />
<br />
Meanwhile, on Kiva.org, the microfinance site Jackley co-founded, loans are paid back (the site has a 99% repayment rate), but without interest. <br />
<br />
There's more than altruism going on. If a financial return were introduced, these transactions would become securities subject to federal and state securities regulations. And those regulations make it illegal for privately-owned businesses to seek money from ordinary investors without first spending a massive amount of time and money to hire lawyers and accountants to register the offering with the SEC and relevant state agencies. The cost of registration typically swamps the small sums being sought, so it is not a viable option for most small businesses. <br />
<br />
Yet that is the realm that Jackley and Mauriello bravely entered with ProFounder (this kind of fundraising is often called <a href="http://www.startupexemption.com/">Crowdfund Investing</a> to differentiate it from donation-style crowdfunding). Their vision was to help entrepreneurs reach out to their social networks—friends, family, neighbors, fellow students or loyal customers—to raise money in return for a small share of the revenue. <br />
<br />
They called their brand of crowdfunding "community-funding," since it is a much more intimate form of investing than tapping an anonymous crowd. Although regulators are rightly concerned about protecting small investors, this kind of community-funding is much less vulnerable to the charlatans that troll the Internet, precisely because of the social bonds and accountability that exist in these networks. <br />
<br />
Like many crowdfunding advocates, Jackley and Mauriello were hoping that legislation working its way through Congress that would make it legal for ordinary Americans to invest in small, private businesses would pass, opening up new opportunities. Yet, despite strong bipartisan support, the legislation is currently hung up in the Senate and is facing strong resistance from state regulators. <br />
<br />
(To learn more about these bills and voice your support for crowdfunding, see <a href="http://legalizecrowdfunding.org/">legalizecrowdfunding.org</a> and <a href="http://wefunder.com/petition">WeFunder</a>) <br />
<br />
The result is that innovation in a vital area—the intersection of social media and finance—that could create jobs and rebuild local economies and Main Streets is being stifled. <br />
<br />
While we dither, Crowdfund Investing is taking off in other areas. In England, for example, securities laws are more accommodating and crowdfunding sites have been operating for more than two years now with no fraud, scams or wiped-out investors. <a href="http://www.fundingcircle.com/">Funding Circle</a>, a two-year old London-based website, has rased more than £25 million in loans for British small businesses, earning investors <a href="https://www.fundingcircle.com/lend/stats/">average gross yields of 8%</a>. Crowdcube, an equity-based crowdfunding site also based in London, just marked its one-year anniversary with £2.7 million raised in equity for 11 companies, including <a href="http://www.kammandsons.com/">Kammerling's</a>, the maker of a ginseng-based artisanal spirit, and The <a href="http://www.startups.co.uk/rushmore-group-secures-1m-in-record-breaking-crowdfunding-deal.html">Rushmore Group</a>, which owns three clubs in London. It even crowdfunded itself to the tune of £300,000. <br />
<br />
And herein may lie the ultimate irony. As Americans, we pride ourselves on being innovators, the home of companies like Apple, Google and Facebook that are admired around the world. Yet when a Facebook for Finance emerges, it is not likely to be in California or New York or any other U.S. city. As one British crowdfunding entrepreneur told me: "It used to be that you came up with a good idea over here and the first thing you did was hop on a plane to the U.S. to get it funded." In fact, when developing <a href="http://www.seedrs.com/">Seedrs.com</a>, a soon-to-be launched equity crowdfunding site, he considered the U.S. but concluded that securities laws made it impossible to operate there. Now London and other European cities, he says, are becoming new centers of innovation.<br />
<br />
I hope our leaders are listening.Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-2696172043749450859.post-12193919083537617812012-02-15T17:31:00.005-05:002012-02-16T16:03:56.471-05:00Paradise at a Crossroads<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPJoTkp2tX-J_I3QEi2tr0TTWloy8ifJdSWRwBUb8NsT_jZgEGfhG32sDq5bNbR0Aeu_7M3etzXErktbz2Cy6l-EekClYcFNJzuzgQE_wbF6cS5-xIEaLqCoy8d4rPR0mqKHkBnsklGvs/s1600/Maui+view+slim.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="149" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjPJoTkp2tX-J_I3QEi2tr0TTWloy8ifJdSWRwBUb8NsT_jZgEGfhG32sDq5bNbR0Aeu_7M3etzXErktbz2Cy6l-EekClYcFNJzuzgQE_wbF6cS5-xIEaLqCoy8d4rPR0mqKHkBnsklGvs/s200/Maui+view+slim.jpg" width="200" /></a></div><div class="p1">I didn't have to think very long when I was asked to be a presenter at <a href="http://tedxmaui.com/">TEDx Maui</a>. Hawaii in January? Are you kidding me? Beyond escaping New York in the depths of winter, I was truly excited about this event, Maui's first TEDx. And in doing some research for my talk, I began to appreciate just how fragile these majestic islands are.</div><div class="p2"><br />
</div><div class="p2">Despite being blessed with an abundance of natural resources—volcanic soils, a year-round growing season, plenty of sunshine and cooling breezes—Hawaii imports roughly 90 percent of its food and energy. The lush land that conjures up visions of pineapples, coconuts and mangoes even imports 65 percent of its fruit! And Hawaiians pay the highest prices for <a href="http://www.hawaiinewsnow.com/story/16902392/hawaii-gas-prices-top-4-a-gallon">gasoline</a> and <a href="http://www.staradvertiser.com/news/breaking/138411179.html?id=138411179">electricity</a> in the country.</div><div class="p1"><br />
</div><div class="p1">This dependency on imports is, in many ways, a legacy of Hawaii's colorful, controversial history, starting with the missionaries who came to the islands in the early 1800s. Their mission was to convert Hawaiians to Christianity, but they eventually became wealthy businessmen controlling huge tracts of land on which laborers toiled to produce sugarcane and pineapples for export. Today many of those plantations are idle, since sugarcane and pineapples can be produced more cheaply in Central America and elsewhere. The question—like the one faced by George Clooney's character in the movie <i><a href="http://www.youtube.com/watch?v=CWHNXJ1K4yA">The Descendants</a></i>—is what to do with that land. The all-too-easy option is to turn it over to deep-pocketed developers eager to build more houses, resorts and shopping malls, which create more demand for food, energy and water.</div><div class="p2"><br />
</div><div class="p1">A smarter approach would be to preserve the land for small farms, renewable energy projects and other ventures that can help make Hawaii more self sufficient and sustainable. I met many smart, committed and passionate people in Maui who are working towards those goals, from fellow TEDx speakers including <a href="http://tedxmaui.com/speakers/vincent-mina/">Vincent Mina</a>, an organic farmer and organizer, and <a href="http://tedxmaui.com/speakers/art-medeiros/">Arthur Medeiros</a>, a biologist working to restore Hawaiian ecosystems. Others, such as <a href="http://tedxmaui.com/speakers/pualani-kanahele/">Dr. Pualani Kanaka'ole Kanahele</a> and musician <a href="http://paulafugamusic.com/">Paula Fuga</a>, are at the forefront of a renewal of native Hawaiian culture and wisdom.</div><div class="p2"><br />
</div><div class="p1">One challenge in creating a more robust local economy is capital: where does the funding come from? Here again, Hawaii is blessed with abundance: there is a lot of wealth on the islands. Yet much of it is invested on the mainland. That's why one of the most exciting initiatives underway is an effort to create a local stock exchange that would bring together Hawaiian investors and entrepreneurs. A local exchange would allow Hawaiians to keep more capital local, where it could be put to use funding homegrown companies that can lessen their dependence on imports—companies such as <a href="http://www.biodiesel.com/">Pacific BioDiesel</a>, which makes biofuel from local restaurant refuse (and powered the Jetta I rented from Maui's;<a href="http://www.bio-beetle.com/">Bio-Beetle</a>), and the <a href="http://www.haliimaile.com/">HaliiMaille Pineapple Co.</a>, a newly formed, locally owned venture that grows pineapples for the local market. </div><div class="p1"><br />
</div><div class="p1">A legislative working group recently concluded a several-month study on the viability of a Hawaii stock exchange. The working group has given a green light to <a href="http://hilocalexchange.org/">the Friends of Hawaii Local Stock Exchange</a> to create an "alternative trading system" for accredited investors (people with a net worth of $1 million or more, not including primary residence, or over $250,000 in annual income for each of the prior three years). Of course, the real value in a local exchange is when everyone, rich or poor, is able to have a stake in the local economy and be part of its growth. And that's the ultimate goal for the Friends of Hawaii Stock Exchange. But many regulators are wary of local exchanges and other new funding platforms and want to see them tested in a low risk environment first.</div><div class="p1"><br />
</div><table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhC46NbXRj8xg3t5ag5ZD9DxMBNCMu64-Gor5w7D2fo2zah7VodnOMyRgDhymnct7ke8DUHE28qniSF96s2JsWOujd8RHiGqltI2ftXcpntZj-zvGqqLv3s_3I6ALTqf8_l6v4Moo5ct8c/s1600/1898+Honolulu+Stock+Exchange+des+by+Oliver+Traphagen.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhC46NbXRj8xg3t5ag5ZD9DxMBNCMu64-Gor5w7D2fo2zah7VodnOMyRgDhymnct7ke8DUHE28qniSF96s2JsWOujd8RHiGqltI2ftXcpntZj-zvGqqLv3s_3I6ALTqf8_l6v4Moo5ct8c/s200/1898+Honolulu+Stock+Exchange+des+by+Oliver+Traphagen.jpg" width="200" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="http://www.hawaiianfinancialart.blogspot.com/">The old Honolulu Stock Exchange</a></td></tr>
</tbody></table><div class="p1">Ironically, the concept is not new: Hawaii, like dozens of regions across the country, had its own stock exchange for decades. The Honolulu Stock Exchange was instrumental in establishing the local economy and infrastructure, financing companies including Maui Telephone, the Bank of Hawaii, and Honolulu Rapid Transit Co. before it closed its doors in 1977 amid financial market consolidation.</div><div class="p2"><br />
</div><div class="p1">As one of the most geographically isolated places on earth, Hawaii may be an extreme example. But in this age of globalization, climate change and scarcity, many communities across the country, and indeed the world, can relate to the need to become more self sufficient, to keep more capital local, and to rebuild their local economies. If Hawaii can do it, we all can. And I'm rooting for Hawaii.</div><div class="p2"><br />
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-90024255199627532552011-12-18T15:29:00.000-05:002013-01-07T14:51:27.927-05:00This Holiday Season, Think Outside the Big BoxHere's a post that I wrote for American Public Media's Marketplace on shopping local, with an intro by Marketplace's economics editor <a href="http://www.marketplace.org/people/chris-farrell">Chris Farrell</a>:<br />
<br />
<div style="background-color: white; color: #222222; font-family: Georgia, 'Times New Roman', Times, 'DejaVu Serif', serif; font-size: 15px; line-height: 21px; margin-bottom: 1.5em; padding-left: 10px;">
It matters where we spend our money. For instance, I like supporting local entrepreneurs whenever possible -- especially small business owners active in the community. Engaged entrepreneurs can make a big difference to the health of a neighborhood.</div>
<div style="background-color: white; color: #222222; font-family: Georgia, 'Times New Roman', Times, 'DejaVu Serif', serif; font-size: 15px; line-height: 21px; margin-bottom: 1.5em; padding-left: 10px;">
I learned a lot about the benefits of local from reading <em>Locavesting: The Revolution in Local Investing and How to Profit From It</em> by Amy Cortese. "Just as 'locavaores' eat mostly foods that have been raised or grown in a radius of 100 miles or so, some people are investing the same way," she writes. "I call them locavestors." </div>
<div style="background-color: white; color: #222222; font-family: Georgia, 'Times New Roman', Times, 'DejaVu Serif', serif; font-size: 15px; line-height: 21px; margin-bottom: 1.5em; padding-left: 10px;">
As we head into the last weekend for holiday shopping, I thought I'd ask Amy for insight about buying local.<span style="background-color: transparent;"> </span></div>
<div style="background-color: white; color: #222222; font-family: Georgia, 'Times New Roman', Times, 'DejaVu Serif', serif; font-size: 15px; line-height: 21px; margin-bottom: 1.5em; padding-left: 10px;">
<span style="background-color: transparent;">Read the full post <a href="http://www.marketplace.org/topics/your-money/makin-money/holiday-season-think-outside-big-box">here</a>.</span></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-80320379605039009712011-12-08T12:54:00.005-05:002012-02-16T16:11:13.940-05:00Cheeseheads, UniteThe Green Bay Packers are the envy of the NFL, but for more than their undefeated record. They are also self-funded. When the Packers need money for stadium improvements or to get them through a rough patch, they simply turn to their fans—who also happen to be owners.<br />
<br />
Green Bay is the only team in the league that is owned by its fans, dating back to 1923. It has sold shares four times in its history and today is owned by 112,205 fans. On Dec. 6th, <a href="http://www.nytimes.com/2011/11/16/sports/football/in-green-bay-shares-of-stock-are-more-than-a-financial-investment.html?pagewanted=1&sq=green%20bay%20packers&st=cse&scp=2">the team launched its fifth stock sale</a>—its first in 14 years—to help pay for improvements at Lambeau Field, the stadium named for the team's legendary manager (not a promotion-hungry corporation). <br />
<br />
Shares are being offered for $250 a piece, with a $25 handling fee. The shares do not earn dividends. Nor can they be traded, and they will not appreciate (or depreciate) in value, other than on the collectibles market. Nonetheless, the official Packers web site, <a href="http://packersowner.com/">packersowner.com</a>, was deluged with fans buying—and crowing about—their new shares.<br />
<br />
"I'm an OWNER!!!!!!! One of the BEST days of my life......" <a href="http://www.packers.com/news-and-events/article-1/Packers-stock-sale-underway-250-shares-to-support-Lambeau-Field-expansion/17178be6-6fdc-49a2-bffe-d650bda38ef5?vv=discuss">wrote a fan </a>who goes by the name CHEESEHOUND on the site.<br />
<br />
For some investors, that may seem like a raw deal with little pay-off. And perhaps the Packers should be offering some sort of upside or profit participation (although technically the team is a nonprofit). But fans—and all of Green Bay—benefit in very real ways.<br />
<br />
For one, there is the revenue that a popular team brings to the area. In 2009, the Packers and Lambeau Field contributed approximately $141 million in economic benefits to Brown County, where Green Bay is located, as well as 760 jobs and $80.6 million in wages, according to an economic impact study. That's in addition to $5.7 million in taxes to local and state coffers (see a pdf of the study <a href="http://www.packers.com/assets/docs/2010economic_impact_report.pdf">here</a>).<br />
<br />
And the community-ownership structure has ensured that the team has stayed put in a small town, rather than follow the money to a glitzy new home like so many sports franchises have done. A big reason is a clause in the team's articles of incorporation that stipulate that, if the team were to be sold, any profits would go to the Green Bay Packers Foundation, which makes donations to charities and institutions throughout Wisconsin. That has effectively stymied any attempts to cash in.<br />
<br />
Ownership by fans may also account for the extreme loyalty inspired by Green Bay, where the open-air stadium is regularly packed with "cheeseheads" despite freezing temperatures. (The new funding will help pay for seating for an additional 7,000 people).<br />
<br />
Finally, while the fans may be largely funding their team's capital expenses (the Packers also have a bank loan and government incentives that help pay for the current round of stadium improvements), at least it is voluntary. Most major sports franchises end up wrangling millions of taxpayer dollars to build or refurbish stadiums. In fact, taxpayers frequently foot the bill for these boondoggles whether or not they ever step foot inside the new stadiums or can afford their luxury-priced seats. And often the debts drag on for years. <a href="http://www.nytimes.com/2010/09/08/sports/08stadium.html?pagewanted=all">A New York Times article last year</a> examined how New Jersey residents are still paying for the old Giants stadium, which carries $110 million in debt even after it was demolished to make way for the new Meadowlands stadium.<br />
<br />
Often, the publicly-funded stadiums are used to steal a team away from their home. As the Times article explains: "politicians and business leaders pushed for taxpayer-financed stadiums to lure teams. To name a few, New York built <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/s/shea_stadium/index.html?inline=nyt-org"><span class="s1">Shea Stadium</span></a> for the expansion <a href="http://topics.nytimes.com/top/news/sports/baseball/majorleague/newyorkmets/index.html?inline=nyt-org"><span class="s1">Mets</span></a>, Atlanta put up Fulton County Stadium to lure the <a href="http://topics.nytimes.com/top/news/sports/baseball/majorleague/atlantabraves/index.html?inline=nyt-org"><span class="s1">Braves</span></a> from Milwaukee, and Oakland built a stadium to entice the <a href="http://topics.nytimes.com/top/news/sports/baseball/majorleague/oaklandathletics/index.html?inline=nyt-org"><span class="s1">Athletics</span></a> to move from Kansas City, Mo."<br />
<br />
So, Packers fans may not get rich on their shares, but this little town of 100,00 still has a team to call its own. As <a href="http://en.wikipedia.org/wiki/Green_Bay_Packers">Wikipedia reminds us</a>, "Today 'Green Bay Packers' is the oldest team-name still in use in the NFL, both by its nickname and by virtue of remaining in its original city."<br />
<br />
By the way, you don't have to be a cheesehead or even a sports fanatic to benefit from community ownership. Today the model is being applied to everything from <a href="http://www.nytimes.com/2011/11/13/business/a-town-in-new-york-creates-its-own-department-store.html?pagewanted=all">department stores</a> to <a href="http://aire-nc.org/">renewable energy</a> projects—with <a href="http://locavesting.blogspot.com/2011/11/un-walmart.html">winning results</a>. Now that's something to root for.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-2696172043749450859.post-77596214860730842752011-11-23T17:06:00.001-05:002011-12-05T11:07:27.002-05:00The Un-WalmartA few weeks ago, I boarded Amtrak's Adirondack train and headed to Saranac Lake—or at least as close as I could get to the isolated village in the Tri-Lakes region of upstate New York. I went to cover the opening of the <a href="http://www.community-store.org/">Saranac Lake Community Store</a>, a department store that was organized and financed by residents who raised more than $500,000 from the community by selling shares in the store. The village badly need a general store: its lone Ames department store had closed, and while there was a vibrant mix of merchants on Main Street, certain items such as bed linens and underwear required a 50 mile drive to the nearest big box store. Yet the only retailer interested in locating in Saranac Lake was Walmart, which wanted to build a supercenter there. Many locals rightly feared that a store that huge would swamp their village, with its year round population of 5,000. So they took matters into their own hands and decided to open their own.<br />
<br />
As I wrote in <a href="http://www.nytimes.com/2011/11/13/business/a-town-in-new-york-creates-its-own-department-store.html?pagewanted=all">my story for the New York <i>Times</i></a>, it's the retail equivalent of the Green Bay Packers: a department store that won't pick up and leave when a better opportunity comes along or its parent company takes on too much debt (as the bankrupt Ames chain did).<br />
<br />
The story was the #2 most-emailed story in the <i>Times</i> for much of the day, which I think reflects how the idea of community ownership and initiative resonates in these days of protest and unrest. Last week, I heard from Melinda Little, one of the organizers of the store and the current president of its board, who said that her phone has been ringing off the hook since the story ran with calls from "folks all over the country who want to invest and/or want to emulate the model." One local small business owner made a $6,000 investment. (The share offering closes in December).<br />
<br />
Community-owned stores are not unfamiliar in the American West, where towns with dwindling populations have a hard time attracting and retaining businesses. They are also thriving in the rural UK, where villagers have banded together to create their own general stores, pubs and post offices when faced with shutdowns. There are now over 260 community owned shops in England, Scotland and Wales, according to the <a href="http://www.plunkett.co.uk/">Plunkett Foundation</a>, a UK organization that helps rural communities combat decline in their areas by setting up community enterprises. Each year, some 400 village shops are shuttered, with community owned ones replacing about 5% of them, according to Plunkett. These enterprises are often more than just a shop, they are the beating heart of village life.<br />
<br />
They have also proven to be quite resilient. Community shops have a 97% success rate, compared with a national UK business survival rate of 46.8%, according to a report produced by the Plunkett Foundation last year (a pdf of which can be found <a href="http://www.plunkett.uk.net/sites/default/files/23/Better%20Business%20Report%202010(2).pdf">here</a>). The shops operate with an average gross margin of 21%, in part due to the a large reliance on volunteers, and 22% of net profits are reallocated to community projects.<br />
<br />
Retailing is a notoriously tough business, especially in an age of mega-retailers who wield their clout to demand price concessions from suppliers. Yet that model may be running its course: Walmart's same-store sales in the U.S. have been down <a href="http://www.reuters.com/article/2011/10/10/walmart-idUSN1E7961M620111010">for 9 consecutive quarters</a>, and behemoths like Borders and Blockbuster have gone bust. And as the success of 'buy local' campaigns has shown, people may be tiring of the soulless, cookie cutter big box shopping experience.<br />
<br />
A community-owned enterprise, in contrast, is about more than commerce, it is about relationships and a sense of place. And that engenders loyalty and trust that a big box will never have, even if profits are modest. The Saranac Lake Community Store shows that alternatives are possible. And for that we should be thankful.<br />
<br />
Update: Port Townsend, Washington—a town north of Seattle with a strong local investment ethos—plans to open a community-owned store to replace a general store that recently closed. Read the Seattle Times article <a href="http://seattletimes.nwsource.com/html/localnews/2016928060_quimper04m.html">here</a>.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-2696172043749450859.post-17925084574900850012011-10-24T14:18:00.000-04:002011-10-24T14:18:02.453-04:00CDFIs: Under the Radar No MoreThere are so many interesting issues brought up by the Starbucks "Create Jobs for USA" program, the subject of <a href="http://locavesting.blogspot.com/2011/10/grande-idea.html">my last blog post</a>. As noted, Starbucks will take donations from customers and pass them along to the <a href="http://www.opportunityfinance.net/">Opportunity Finance Network</a> (OFN), a network of community development financial institutions, or CDFIs. OFN will then make grants to individual CDFIs that apply for the funds. Joe Nocera of the NY <i>Times</i> points out that CDFIs, which lend to underserved communities and entrepreneurs, operate "<a href="http://www.nytimes.com/2011/10/18/opinion/nocera-we-can-all-become-job-creators.html?ref=howarddschultz">mostly under the radar</a>." Starbucks CEO Howard Schultz had never heard of them before an employee proposed the partnership. Nor have most people.<br />
<br />
That is a shame, because these organizations do an enormous amount of good. In particular, community development loan funds, a type of CDFI, engage in the sort of relationship-based lending long abandoned by big banks and even many smaller ones. Rather than simply rely on credit scores and cookie cutter lending models, CDFI officers meet face to face with entrepreneurs and assess whether they have the knowledge, character and business savvy to succeed. The 180 CDFIs that are part of OFN have lent more than $23 billion to entrepreneurs and individuals through 2009. In 2008 alone, they made $2.3 billion in loans, including to more than 51,400 micro-businesses that created or maintained 223,738 jobs.<br />
<br />
All the more amazing, they did that with a minuscule charge-off rate—1.3%—that would make Bank of America green with envy.<br />
<br />
How are they so successful? For one, because CDFIs focus on a particular region, they are intimately familiar with the neighborhoods they are lending into. And, when a borrower runs into trouble, they work with her to avoid a default. (Imagine your megabank lender doing that!) They also seem to be pretty good judges of character.<br />
<br />
Community development loan funds get their capital from big banks, which give them low-interest loans as a way of fulfilling their Community Reinvestment Act mandates to lend locally (something the big banks are no longer equipped to do well themselves). They also receive grants from foundations, to help pay for operating expenses or create reserve funds for losses. Although they haven't marketed themselves, many community loan funds also take investments from individuals. <br />
<br />
Typically, individuals can make an investment—usually a minimum of $1000, but sometimes lower—for a period of one to several years. In return, they receive a modest fixed return, typically 1% to 3% for a short term loan and up to 5% or more for a 10-year loan (based on current rates), with principal returned at the end of the loan period. It's like a locally-focused CD, except that the funds are not FDIC insured. But then, it is rare, if not unheard of, that a loan fund does not return capital and keep to its promised rate of return—even throughout the financial crisis. Best of all, as an investor, you know that your money is going to work in your community and helping budding entrepreneurs get a foothold—not generating trading profits or lining some fat cat banker's pockets.<br />
<br />
The Starbucks campaign is shining a light on these under-appreciated financial institutions. But if you'd like to do more than donate a five-spot, consider investing in a CDFI in your region—there are more than 800 certified CDFIs across the country, so most regions have one. The <a href="http://cdfi.org/index.php">Coalition of Community Development Financial Institutions</a> offers a search tool on its site at CDFI Coalition www.cdfi.org. The Opportunity Finance Network offers one as well at <a href="http://opportunityfinance.net/">opportunityfinance.net</a>.<br />
<br />
Another easy option is to invest in Calvert Foundation Community Notes, which invests the money in CDFIs across the country (you can choose which region you prefer). An advantage of the Calvert Notes is that they are available through most major brokers (I bought mine through Charles Schwab—and it's about the one thing in my portfolio that hasn't lost money this year!) For more information, go to <a href="http://www.calvertfoundation.org/invest/how-to-invest/community-investment-note">www.calvertfoundation.org/invest/how-to-invest/community-investment-note</a>. You can also invest in community development loans funds, including Calvert Notes, on <a href="https://www.microplace.com/">www.microplace.com/</a>.<br />
<br />
And, if I may close with a shameless plug, if you are interested in learning more, I devote a chapter in my book to CDFIs. I call it "The Biggest-Impact Financial Sector You've Never Heard Of."Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-2696172043749450859.post-40053118167409828312011-10-24T10:50:00.002-04:002011-10-24T14:19:34.812-04:00A "Grande" Idea - Let People Profit From Crowdfunding<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Starbucks' recent announcement that it will start taking donations from its tens of millions of customers to help fund small businesses was a grande - no, make that <i>venti</i>-sized - idea. As the NY Times' Joe Nocera explained in his recent op-ed, <a href="http://www.nytimes.com/2011/10/18/opinion/nocera-we-can-all-become-job-creators.html?ref=howarddschultz">"We Can All Become Job Creators,"</a> Starbucks will act as the middleman, passing along the donations to the Opportunity Finance Network, a group that represents 180 community development financial institutions (CDFIs), which lend to communities underserved by traditional banks. </span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">With tight credit still holding back many small businesses that might otherwise expand and hire, Starbucks and its CEO Howard Schultz have been rightly praised for this innovative program. It will be interesting to see how many caffeinated customers step up to become small business donors, or "Americans helping Americans," as the wristband they will receive for donations of $5 or more reads.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">If the experience of sites like <a href="http://www.kiva.org/">Kiva</a>, <a href="http://www.kickstarter.com/">Kickstarter</a> and <a href="http://www.indiegogo.com/">IndieGoGo</a> is any indication, there is a lot of pent up desire among Americans to help out entrepreneurial ventures that they care about. Kiva allows people to make small loans to micro-entrepreneurs around the world and in cities like Detroit, while the other two sites are a conduit for donations to artists and entrepreneurs, such as musicians and filmmakers. Kiva has facilitated nearly $250 million in loans from more than 600,000 individuals, and Kickstarter users are pledging funds at a rate of $2 million a week.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">That's impressive. But to really crack the small business capital market open, we need to make it part of the mainstream financial landscape. In other words, <b>let people earn a profit on their money</b>. Donations and no-interest loans are great and have helped a lot of people, but they cannot serve the vast demand for small business capital in this country. That's why I advocated in <a href="http://www.nytimes.com/2011/09/26/opinion/a-proposal-to-allow-small-private-companies-to-get-investors-online.html">my own recent NY Times op-ed</a> for changes to our securities regulations that would allow businesses to raise funds from many small investors—a practice known as <i>crowdfunding</i>.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">As I wrote in that op-ed:</span><br />
<blockquote><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><span class="Apple-style-span" style="background-color: white; font-size: 15px; line-height: 22px;">[Crowdfunding is] the sort of person-to-person (or P2P, in industry jargon) funding that characterized financial transactions for millennia, before our mediated, securitized financial system took hold</span><span class="Apple-style-span" style="background-color: white; font-size: 15px; line-height: 22px;">. </span>Crowdfunding has the sort of populist, common-sense appeal that resonates with free-market libertarians and champions of the working class alike. By marrying online social networks with finance, crowdfunding offers a more democratic model of finance, in which individuals can directly fund other individuals or businesses that they deem worthy, without going through a bank or Wall Street middleman. </span></blockquote><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Unfortunately, in this country, it's illegal to raise funds this way in return for a profit. Once a financial return is promised or implied, the offering becomes a security in the eyes of the Securities & Exchange Commission (SEC) and the legal hurdles go way up—putting public capital out of reach for most small businesses.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">The laws, put into place after the 1929 stock market crash, were intended to protect investors from unnecessary risk. But the effective result is this: wealthy investors can invest in pretty much anything they like: private equity, hedge funds, venture capital. But ordinary investors (the 99%, you might say) must stick to publicly traded securities.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">The problem is, most small business can generally not afford to go public—consider that the median IPO size was $140 million in 2009, up from $10 million twenty years ago! Nor do many want to, given the market volatility and Wall Street's fixation with short term results. (There is also a certain irony to this. In order to protect "unsophisticated" investors, the SEC confines them to the public markets. How safe do you feel about your stock market investments these days?)</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">So, no surprise, the financial landscape today is dominated by big business investment options. Think about your 401K (if you are fortunate enough to have one of those employer-sponsored plans). These plans offer a menu of funds that invest in the stocks and bonds of large companies (even a "small cap" firm falls between $50 and $300 million—<a href="http://www.investopedia.com/articles/analyst/010502.asp#axzz1bdOq77Ak">the size of a large cap in the 1980s!</a>). There may be some government bond or emerging market funds thrown in as well. But what you will not find is a small or local business fund. Those things do not exist.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Eight decades after the legal framework of securities law was put into place, the Internet and social networks have transformed the way we do everything, and the regulations look wildly anachronistic. And the vast majority of Americans are prohibited from investing in small and local businesses they want to support, and these firms in turn are cut off from a huge pool of badly needed capital.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">That's why there is so much excitement about the growing bipartisan support for a crowdfunding exemption. President Obama has championed crowdfunding through his <a href="http://www.startupamericapartnership.org/">Startup America initiative</a>, and House Republican Patrick McHenry has drafted a bill that is winding its way through the House. There are also grassroots petitions calling for a crowdfunding exemption before the SEC. The proposals vary in their details, such as the caps on the amount individuals could invest in each deal, but all would allow ordinary investors to put small sums of money in small businesses without requiring the business to go through a long and costly registration process with the SEC.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Yes, small businesses can be risky, but the small sums involved would ensure that no single investor could lose the farm on an investment. And here at Locavesting Central, we believe that community-based crowdfunding—where businesses are reaching out to their customers, neighbors and supporters— would further mitigate the risk. That's because local business owners have a reputation in the community, and potential investors have a greater knowledge of the company and the market it operates in—a key concern of the SEC. (<a href="https://www.profounder.com/">ProFounder</a>, an interesting crowdfunding startup in Los Angeles, is promoting such a "community-funding" model). What's more, I believe that this kind of investing—where individuals have a literal stake in their local businesses and therefore their communities—can help in the renewal of democracy and civic engagement. </span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Of course, there is no guarantee that anything will come of these crowdfunding proposals, that's why it is so important to speak up. So sign the petitions (links below), call your elected representatives, and drop a few coins in the donation can at Starbucks.</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<blockquote><ul><li><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">The Sustainable Economies Law Center has filed a petition with the SEC that would allow individuals to invest up to $100 in small companies. Details, including how to post a comment with the SEC can be found <a href="http://crowdfundinglaw.posterous.com/petition-posted-by-sec-as-file-no-4-605">here</a>. </span></li>
</ul></blockquote><blockquote><ul><li><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Startup Exemption is another campaign to change the law—add your signature <a href="http://www.startupexemption.com/#axzz1bcemYE7h">here</a>. </span></li>
</ul></blockquote><div class="p3"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span></div><div class="p3"><br />
</div>Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-2696172043749450859.post-7355211875476173642011-10-01T11:28:00.000-04:002013-01-07T14:52:20.552-05:00Community Capital<span class="Apple-style-span" style="background-color: white; font-family: Georgia, Times, serif; font-size: 10px;"></span><br />
<div style="font-size: 15px; line-height: 1.5; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Verdana, sans-serif;">It’s not fun being an investor these days. The options are pretty stark: parking your savings in an inflation-lagging money market fund or T-bill (or under the mattress), or rolling the dice in a stock market that has careened wildly amid global uncertainty.</span></div>
<div style="font-size: 15px; line-height: 1.5; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Verdana, sans-serif;">But a growing number of investors are discovering alternatives in the small businesses in their own backyards. Just as locavores eat a diet sourced close to home, these investors—call them locavestors—are investing that way. The idea is to earn profits while supporting your community.</span></div>
<div style="font-size: 15px; line-height: 1.5; margin-bottom: 15px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">
<span style="font-family: Verdana, sans-serif;">Read the rest of my guest blog post for American Public Media's Marketplace, with an introduction by Chris Farrell, <a href="http://www.publicradio.org/columns/marketplace/money-blog/2011/09/investing_has_become_synonymou.html">here</a>.</span></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-42429736715894564272011-09-26T09:31:00.000-04:002011-09-26T09:31:58.244-04:00Pennies From Many<span class="Apple-style-span" style="background-color: white; font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;">AS Congress considers President Obama’s job package, one measure seems to have rare bipartisan support: a proposal to loosen some of the outdated securities regulations that hamper small businesses in raising capital.</span><br />
<span class="Apple-style-span" style="background-color: white; font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;"><br />
</span><br />
<span class="Apple-style-span" style="background-color: white; font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;">The Obama administration, not surprisingly considering its own success in gathering small donations during his campaign for the presidency, is supporting crowdfunding, a financing model that relies on collecting small sums of money from many people over the Internet.</span><br />
<span class="Apple-style-span" style="background-color: white; font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;"><br />
</span><br />
<span class="Apple-style-span" style="background-color: white; font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;">Read the rest of my op-ed in today's New York Times <a href="http://www.nytimes.com/2011/09/26/opinion/a-proposal-to-allow-small-private-companies-to-get-investors-online.html?_r=1&ref=opinion">here</a>. </span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-46472665576669950802011-09-24T15:25:00.001-04:002011-09-24T15:26:39.298-04:00A Grassroots Stimulus Program<span class="Apple-style-span" style="background-color: white; font-family: Arial; font-size: 16px;"></span><br />
<div class="textBodyBlack" style="color: black; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;">In a deeply divided nation, the one thing we can agree upon is the need for jobs. The economy cannot recover until millions of people are put back to work and consumer spending once again flows. But it’s doubtful that any meaningful job-spurring policy will surmount the political gridlock in Washington.</div><div class="textBodyBlack" style="color: black; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;"><br />
</div><div class="textBodyBlack" style="color: black; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;"><span id="byLine"></span>Don’t look to Corporate America for salvation either: our biggest and most profitable corporations are sitting on piles of cash pile while focusing their investments overseas. And Wall Street is too busy chasing trading profits to engage in the kind of productive capital-raising that was once its mainstay.</div><div class="textBodyBlack" style="color: black; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;"><br />
</div><span class="Apple-style-span" style="background-color: white; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;">So how are we going to begin rebuilding the broken economy and creating jobs? Where is the investment going to come from? </span><span class="Apple-style-span" style="background-color: white; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;">One answer is taking shape in dozens of towns and neighborhoods across the country, as citizens from Brooklyn, NY to Port Townsend, WA are figuring out ways to invest in the local businesses that create jobs and help build strong local economies.</span><br />
<span class="Apple-style-span" style="background-color: white; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;"><br />
</span><br />
<span class="Apple-style-span" style="background-color: white; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;">Read the rest of <a href="http://www.cnbc.com/id/44611085">my guest blog post</a> on CNBC's Bullish on Books. </span><br />
<br />
<span class="Apple-style-span" style="background-color: white; font-family: Arial; font-size: 16px;"></span><br />
<div class="textBodyBlack" style="color: black; font-family: Verdana, Arial, Helvetica, sans-serif; font-size: 13px; line-height: 22px;"><br />
</div>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-47427875656216669402011-09-12T12:09:00.000-04:002011-09-12T12:09:44.427-04:00Extreme Financial Markets are the New Climate Change<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">The front page NY <i>Times</i> story today, <a href="http://www.nytimes.com/2011/09/12/business/economy/stock-markets-sharp-swings-grow-more-frequent.html?_r=1&hp">Market Swings are Becoming the New Standard</a>, wasn't exactly a revelation—anyone who has watched their life savings whipsawed by global macro trends and speculation over the past few years knows that the markets have become unnervingly volatile. But what struck me about this article was the similarity to global climate change. </span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Listen to <span class="Apple-style-span" style="background-color: white; line-height: 22px;">Andrew Lo, professor of finance at the M.I.T. Sloan School of Management: </span></span><br />
<blockquote><span class="Apple-style-span" style="background-color: white; line-height: 22px;"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">“The last few years have been the most volatile for all of recorded history,” noted Lo. For evidence, he says that 10 of the biggest 20 daily upswings and 11 of the largest 20 daily drops since the beginning of 1980 to the end of last month have occurred in just the last three years.</span></span></blockquote><span class="Apple-style-span" style="background-color: white; line-height: 22px;"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Similarly, the past decade has included <a href="http://www.theatlantic.com/daily-dish/archive/2011/01/the-hottest-year/177287/">9 out of the 10 hottest years on record</a>, going back to 1880 when global temperatures were first tracked. As wild fires rage in Texas and the northeast recovers from epic flooding, extreme weather has become the norm. Now, it seems, we can add extreme markets to the new normal. </span></span><br />
<span class="Apple-style-span" style="background-color: white; line-height: 22px;"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><span class="Apple-style-span" style="line-height: 22px;">Certainly some traders are profiting richly off the volatility, but for most individual investors, it is stomach churning to watch their investments swing so wildly (and mostly downward). </span>As the <i>Times</i> points out, volatility is a problem because it scares investors and companies alike from the markets and undermines confidence, which can reinforce negativity. <span class="Apple-style-span" style="line-height: 22px;">Global events—from Europe's debt crisis to U.S. political dysfunction—have contributed to the volatility. So have high frequency trades fired off by computer algorithms and exchange-traded funds that can be flipped like pancakes. </span><span class="Apple-style-span" style="line-height: 22px;">In other words, global financial change has manmade causes, just like climate change. And the perpetrators, whether polluters or high frequency traders, foist their external costs onto society at large. </span></span><br />
<span class="Apple-style-span" style="line-height: 22px;"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span></span><br />
<span class="Apple-style-span" style="line-height: 22px;"><span class="Apple-style-span" style="font-family: Georgia, 'Times New Roman', serif;">Against this backdrop are increasing calls for market reforms. Some observers are even suggesting the creation of a safe market for long term investors that would be walled off from high frequency traders and market manipulators. As I detail in my book, Locavesting, one way to do that is through the reintroduction of local stock markets like the ones that used to flourish across the country until technology and globalization made them obsolete. There are efforts to launch local exchanges in <a href="http://lancasterstockexchange.org/">Lancaster, PA</a>, <a href="http://hilocalexchange.org/">Hawaii</a>, and <a href="http://thesvx.org/">Toronto</a>, among other places. They all seek to bring together a region's long term investors with its small businesses and entrepreneurs to create strong local economies. Think of them as little bastions of productive calm amid a raging global storm. </span></span><br />
<span class="Apple-style-span" style="font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;"><br />
</span><br />
<br />
<span class="Apple-style-span" style="background-color: white; font-family: georgia, 'times new roman', times, serif; font-size: 15px; line-height: 22px;"><br />
</span>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-2696172043749450859.post-6824111578134115712011-08-04T10:35:00.000-04:002011-08-04T10:35:00.340-04:00What's wrong with this picture?Luxury goods are flying off the shelves as revenues at Tiffany, BMW and LVMH soar, the NY Times tells us in <a href="http://www.nytimes.com/2011/08/04/business/sales-of-luxury-goods-are-recovering-strongly.html?ref=business">a Page 1 story today</a>. Turn to the business section, and we learn that <a href="http://www.nytimes.com/2011/08/04/business/global/russia-becomes-a-magnet-for-american-fast-food-chains.html?ref=todayspaper">American fast food companies are investing in Russia</a>, where—as in China and India—the middle class is growing. At home, however, the diminishing middle class is hunkering down for a potential repeat of 2008. Meanwhile, despite the hit the S&P has taken over the past week,<a href="http://professional.wsj.com/article/SB10001424053111904772304576466003840674770.html?mod=ITP_marketplace_0&mg=reno-wsj"> corporate earnings are the highest</a> they've been in four years, fueled by growth in overseas markets.<br />
<br />
Is there a better argument for supporting our tax-paying, job-creating locally-owned businesses? Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-2696172043749450859.post-61368789831660990102011-08-01T14:34:00.001-04:002011-10-20T17:19:05.477-04:00Community-owned Post OfficesThe financially strapped U.S. Postal Service is planning to close thousands of low-traffic post offices across the country. Some are in big cities like New York and Chicago, but many are in sparsely populated rural areas such as Waverly, Washington and Mountain City, Nevada. In all, 12% of the nation's post offices could be closed. The U.S. Postal Service is looking to <a href="http://www.msnbc.msn.com/id/43887908/">partner with small businesses</a> to fill the void, reports MSNBC. <br />
<br />
There's another model that communities about to lose their snail may want to consider. In the U.K., where hundreds of rural shops, pubs and post offices (or combination of the three, as is common) have closed in recent years, communities are banding together to own and operate their own shops and post offices, which are at the center of village life.<br />
<br />
The village of Berrynarbor in Devon (population: roughly 750) is one example. In 2004, it was faced with the closing of its only shop and post office when the postmaster was to retire. Today, the post office—which also sells groceries and operates a cafe—is owned by the community and staffed by nearly 30 volunteers. There are around 250 such community-owned shops in the U.K., including 40 that opened in 2010 alone, according to the Plunkett Foundation. <br />
<br />
In these cost-slashing days, it's a model to keep in mind.Unknownnoreply@blogger.com6tag:blogger.com,1999:blog-2696172043749450859.post-92072099629959174952011-08-01T11:53:00.000-04:002011-08-01T11:53:10.528-04:00"Systemic Risk" in the Supply ChainThere's been a lot of talk about systemic risk since 2008, when we abruptly learned that the concentrated power of a handful of financial institutions could blow up the global economy. But systemic risk is not confined to the financial system. It has also become embedded in our global industrial system, as <a href="http://www.thenation.com/article/162317/how-america-could-collapse">a smart story by Matt Stoller</a> in The Nation points out. We witnessed this recently when the double-punch of an earthquake and tsunami in Japan knocked out a major supplier of auto parts, causing shortages that torpedoed sales at major auto makers.<br />
<br />
The disaster also affected other, less publicized areas, such as the market for video tape, when a Sony plant was taken offline. Next time it could be life-saving medicine or the ubiquitous consumer electronics we take for granted. (China, for example, controls production of 97% of the world's rare earth metals, which are critical to many manufactured goods, from cell phones to hybrid cars). <br />
<br />
There's a reason why a "smart" energy grid is distributed, and the most resilient computer networks (like the Internet) spread processing across many computers. When we become reliant on one "node" in a system - whether it is an electric grid, a computer network, or an economy - the system is vulnerable to disruption. <br />
<br />
The article, "How America Could Collapse," explains how our industrial supply system is full of systemic risk that could disrupt the flow of everything from food to smart phones. The problem: American corporations have outsourced so much manufacturing and production to other countries that we are dangerously dependent on foreign suppliers and imports. We have hollowed out the economy (just ask one of the 25 million un- or under-employed). <br />
<br />
Stoller says we need to re-engineer our global supply chain, re-orient the economy towards manufacturing and rededicate our corporations to productive uses. Good luck with that last one. <br />
<br />
In the meantime, the localization movement taking place across the country is beginning to rebuild local economies from the ground up. By nurturing and investing in homegrown enterprises, organizations like the <a href="http://www.livingeconomies.org/">Business Alliance for Local Living Economies</a> (BALLE), the <a href="http://www.transitionnetwork.org/">Transition Network</a> and <a href="http://www.slowmoney.org/">Slow Money</a> are helping communities become more productive, prosperous and self sufficient—and perhaps less likely to be broadsided by the next global disaster <i>du jour</i>.<br />
<br />
Local production will never completely displace our global economic system. But it can reduce our vulnerability to systemic shock. And in these volatile times, wouldn't it be nice to have a back up plan?Unknownnoreply@blogger.com1