The first comprehensive snapshot of community investing in the U.S. points to increased diversity for start-up funding
When seeking investors, business owners are increasingly looking to their communities for shareholders and lenders. With new legal models in effect, crowdfunding is growing into a serious funding alternative. Aggregation site Investibule has featured and tracked community investment campaigns over the past year. The COMMUNITY CAPITAL 500 summarizes key trends from the first 500 campaigns.
A great experiment in democratized finance is underway. Recent changes in federal and state laws have given all Americans the ability to invest in local businesses and ventures that they believe in. Until now, that natural impulse has been very hard for all but the wealthiest people to act on.
What happens when the financial gatekeepers are no longer a barrier? When communities can invest in themselves, rather than waiting for a white knight to come along? Will community capital live up to its promise to level the playing field?
We’re just at the beginning of this transformational shift. But the early results are encouraging.
Introducing the Community Capital 500
As an aggregator, Investibule has a unique view of this grassroots financial revolution. The CC 500—comprised of the first 500 offerings featured on the site—is a vibrant mix of businesses. It’s a snapshot of American ingenuity: everything from grass-fed beef to the newly legalized kind of grass, and from Main Street businesses to jetpacks (really!) There are family-run businesses, women-run start-ups, minority-led ventures, co-ops and B Corps, in rural and metro areas.
Investibule takes a broad view of community capital that spans regulations, funding types and platforms—that includes offerings conducted under the federal JOBS Act, intrastate laws (where possible) and direct public offerings, as well as non-securities.
Investors can find equity, loans, revenue-share, rewards and pre-pay opportunities spanning more than 30 funding platforms that are open to all investors.
Small Checks, Big Impact
Businesses are getting funded. 68 percent of the sample successfully raised at least their minimum funding goal as of mid-August, and another 12% still had time to go—a far better success rate than most businesses see when seeking angel or venture funding, or even a bank loan.
All told, the Community Capital 500 raised over $52 million from more than 72,000 investors—an average of $161,000 and 234 investors per funding campaign. Offerings ranged from small Kiva loans to $1 million+ crowdfunding offerings.
The overall picture is clear: community capital is financing smaller businesses and ventures that otherwise might fall through the cracks, via small checks, money from the many.
While underrepresented as a group, women and minority-owned businesses outperformed the average: 76% of women-owned and 73% of minority-owned ventures were successfully funded.
Community capital is helping entrepreneurs like Lynn Johnson and Allison Kenny of Spotlight Girls expand their empowerment programs for girls. It’s helping Native American Natural Foods restore buffalo to the Great Plains and a livelihood to the Lakota people. And it’s helping Century Partners extend the Detroit revival to overlooked neighborhoods.
Community capital is bending towards social justice, towards building a financial system that serves all people, not just those with the right connections and collateral.
When community members share in their success (or failure, as may be the case), this new form of funding can help build community wealth and keep profits local.
If we want to change who gets funded, we need to change who does the funding.
Building the Movement
The early data is encouraging, but many challenges remain. How do we raise awareness and educate investors and entrepreneurs about these new funding tools? How soon can we go from 500 offerings a year to 5,000? How can community capital better benefit underserved communities? What role can foundations, local governments and anchor institutions play?
Interested in hearing more? Investibule has more insights and data to share with impact investors, foundations, and community change agents.
Investibule is a Public Benefit Corporation created to increase the flow of capital to diverse entrepreneurs and help build community wealth. It was founded by two pioneers in the community capital field: Amy Cortese (journalist, Locavesting) and Arno Hesse (Credibles and Slow Money). [contact]