Here’s a short note on a new and promising development called community financing. It’s going to be very important to our efforts to build resilient communities.
Here’s a simple question: Outside of your home, what have you invested in?
For most of us, the answer is: Mutual funds. Bonds. Gold. Basically, ways to speculate on the fate of the global economic system. In contrast, we DON’T own many investments in what matters. Business that are tangible, productive and local.
Why? The way most businesses are financed is literally medieval. Really, nothing much has changed since the Renaissance. Fortunately, Community Financing is on the way.
In short, Community Financing is a set of legal and technological frameworks that makes early stage financing a market based activity. How? It allows customers (in aggregate, acting as a community) a way to finance a business they want to BUY a product or service from.
If you want to get a feel for how quickly the shift to how this works, give “24 hours” from Kickstarter blog a read. As you can see, on financing platforms like Kickstarter, companies can now raise millions of dollars in financing from future customers. Wow.
Why does this work so well? This type of direct financing, via lots of small contributions, cuts out all of the extremely expensive overhead (banks, law firms, venture capitalists) that makes small scale finance impossible. It also radically reduces venture risk by allowing customers to VOTE with their wallets on the companies they want to see built.
Community financing provides the legal and technological framework to make it possible for you to invest in:
- The establishment of a local farm or greenhouse that can deliver fresh seasonal produce (from veggies to beef) to you every week.
- A local energy business that leases solar heating systems to homeowners in your community.
- A company that has designed and plans to make a product for a new and emerging market (or a very small but passionate market you are part of).