If the subject of local funding is important to you, I suggest that you also read about Community Supported Business on the Startup Owl website.
Get more than money
How much more effective would it be to fund your startup in the place where you operate? Chances are high that you would have opportunities for finding backers, mentors, advocates and evangelists for your business if you could.
Soon it will be much easier. Whereas in the past, investors other than family and friends had to be accredited investors, or people of high net worth or very high incomes. Michael Schuman, author of Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity, says , “Local businesses comprise more than half the US economy by output and jobs.”
The growing field of crowdfunding can be of enormous value to you. There are more and more platforms with a local orientation. For a good background to the whole field of putting your money where your mouth is, you should read Inquiries Into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered by Woody Tasch.
Direct Public Offerings
The means of financing varies from direct methods within the community, to more arms-length schemes, akin to crowdfunding. Other funding agencies support CSBs through grants and loans. Another funding approach uses Direct Public Offering (DPO)1, raising equity capital through advertising directly to customers, employees, suppliers, distributors and friends in the community. A DPO requires a legal strategy to make sure everything complies with state and federal securities laws. DPOs involve fees, though significantly less than an IPO, but are not suitable for small or micro finance, especially since trading the stock is severely limited. As examples, Real Pickles raised $500,000 from investors living in Vermont and Massachusetts; Quimper Mercantile raised $750,000 to open a community-owned store in Port Townshend, Washington State.
Invest in local startups yourself
You may want to invest in other local businesses. The scene is changing rapidly, but you can get excellent advice and a wealth of good pointers and links by reading Locavesting: The Revolution in Local Investing and How to Profit From It by Any Cortese. Forget credit default swaps and derivatives. This is the kind of financial innovation we desperately need. A source of inspiration and ideas with practical how-to advice, Locavesting is must-reading for small business owners, entrepreneurs, and investors looking for solid, socially productive alternatives to the Wall Street casino—and anyone who cares about the future of democracy in America. If you find the idea of kickstarter and crowdfunding appealing, then do a search to find what the opportunities are locally.
Local Investing Networks are beginning to proliferate across the US. They are not like investment clubs that do invest directly on behalf of members, but they provide opportunities and introductions so that individuals can make their own direct investments individually, as they will have so-called ‘preexisting relationships’ with the owners of the businesses they invest in. Americans’ long-term savings in stocks, bonds, mutual funds, pension funds, and life insurance funds total about $30 trillion. But not even 1% of these savings touch local small business—even though they generate about half the jobs and output in the private economy.
Involve yourself in local accelerators or incubators
Why would you do that? Because you would learn a great deal and find opportunities to associate yourself with, partner with or invest in startups in your locality. The energy of accelerators and incubators is infectious and exciting. Chances are high that you have skills and attributes that will be attractive to others.
If you believe that entrepreneurship can contribute to economic and social development, then this is a way to give an expression to your belief. A former MBA student of mine worked on her startup at The Technology Farm of the Cornell University that aims to provide a campus for research and development in the areas of food and agriculture. Their flexible policies regarding the development and ownership of intellectual property make The Technology Farm exceptionally business-friendly, and gives businesses a unique competitive advantage. You’ll easily find your own local opportunity.