A HISTORY OF COMMUNITY SOURCED CAPITAL
Community Sourced Capital was dreamed up by Brent Cochran, Casey Dilloway, Rachel Maxwell, and Meryl Hunter– a team of MBA Students taking an Entrepreneurship course at the Bainbridge Graduate Institute (now Presidio Graduate School). It was brought to life in the summer of 2012 (just after the video above was made) when Casey Dilloway and Rachel Maxwell joined Fledge, the conscious company accelerator. CSC launched and ran for three years led by Casey and Rachel with the help of a spectacular team, including core team members Alex Mondau, Hilary Wilson, Emily Triggs, Lindsey Shelley, and Stephanie Robinett. They were helped along the way by Ryan Ceurvorst, Emily Kanter, Michael B. Maine, Danny Lampton, Ben Chesler, Peter Rengstorf , Awen Wen and many others. The tech platform was designed by Casey Dilloway with the help of Marcy Tobin, and developed by Marc Cantwell and Mark Hurwitz of Launch Brick Labs. With loads of strong advisors including Carol Sanford, Todd MacDonald, Teri Bellamy and Luni Libes alongside the financial support of a group of committed angel investors, CSC grew into a much loved platform for local lending!
The power of CSC’s work attracted important partners such as Craft3 and the Washington State Department of Commerce. And our story excited people all across the globe. CSC won an investment prize from SVP Fast Pitch, became a finalist and the Ethical Finance Innovation Challenge in the United Arab Emirates, and garnered loads of earned media in national outlets such as Fast Company, Entrepreneur and on NPR. We even made the TV news!
After three years and 96 loans, the reality of scaling crowd sourced zero-interest lending for local businesses as a for-profit business came home to roost in the form of the end of the the runway of our working capital. We simply didn’t show enough progress and acceleration of adoption to be viable for a second round of funding. CSC, the Social Purpose Corporation closed its doors.
Rachel Maxwell and Hilary Wilson, with the help of Lindsey Shelley, thought the CSC platform could be viable as a not for profit organization. To this end, the directors and investors of the Social Purpose Corporation gifted the tech platform to a newly formed non-profit under the same name. Over 500 people made donations to help build the new non-profit.
And while we never relaunched the lending platform, here’s what we did do during our year as a non-profit:
- We brought the concept of our innovative lending platform to thousands of people in Hong Kong, speaking at their Social Enterprise Summit.
- We represented a real live example of community investment at an intimate gathering of innovators and investors from all over the US and Europe in Taos, NM exploring Money in Place.
- CEO Rachel was a keynote speaker at the Economics of Happiness conference in Port Townsend, WA focusing on the importance of real community value as a measure of the health of our economy.
- CSC brought together groups of people to discuss their relationship with money and the holidays in three cities.
- We were active on the steering committee of the People’s Economy Lab in Seattle developing a set of initiatives to foster a local economy that works for ALL people.
Jed Emerson is a leading thinker and an innovator in the Impact Investing community. He made this remarkable, beautiful and life-affirming set of statements on the purpose of capital at SOCAP17:
“The purpose of capital is to advance a more progressively free and just experience of life for all
The purpose of capital is to negate, resist, and challenge the present economic social and environmental and political realities in which we find ourselves
The purpose of capital is to serve as a fuel for freedom and the attainment of the greatest potential for each person in every community”
SEATTLE – Like many cities across the country, Seattle is finding great wealth often brings great wealth disparity.
The Emerald City has the fifth highest median income among large U.S. cities, is home to two tech giants in Amazon and Microsoft and is the nation’s fastest growing big city.
But some Seattleites see the downside of this growth as lower-income residents, particularly people of color, are being left behind.
Beto Yarce, executive director of the small business support group Ventures, is part of the People’s Economy Project. He says his mission is to help small businesses with a hand up instead of a handout.
“Creating a solution to alleviate poverty through economic empowerment,” he states. “So, what does that mean? It’s like creating business development training programs and really educate these communities on how do they budget better.
“How do they make better decisions about their money? How do they change their relationship with their money?”
The People’s Economy Project brings together small business developers with the goal of increasing minority owned businesses and providing assets for lower-income communities in Seattle, noting that small businesses act as neighborhood anchors.
The project takes its agenda on the road this fall to neighborhoods that have benefited least from the city’s rapid growth.
Rachel Maxwell, executive director, Community Sourced Capital, is also part of the People’s Economy Project. Her organization helps crowd source zero interest loans for local small businesses. She says the project came out of a concern that the economy isn’t serving all Seattle residents.
“All those folks were convened to consider what were the questions, and design some initiatives that they could present to the civic leaders in Seattle around how it might look, or what might be different, or new things that could happen that would develop a people-powered economy here,” she explains.
Maxwell notes that the project’s agenda can be implemented in any city. She credits the Northwest for being open to new approaches to protecting communities’ assets.
Eric Tegethoff, Public News Service – WA
We are living in an historic moment. This moment makes us consider what is right, as in morally right. It’s easy to talk about what is wrong. What’s hard is to articulate what is right. This can also be said of our financial world.
In fall of 2015, I was invited the United Arab Emirates to represent Community Sourced Capital at EFICA, the Ethical Finance and Innovation Challenge, an annual award made to a financial organization that represents the values of ethical finance. This brought the question of “What is ethical finance?” to front and center for me. “Ethical” and “finance” are words you just don’t see together here in the United States.
I was the only American there. And I was the only woman and the only non-Muslim in my category. I made the long trip to the UAE twice for the competition and had the pleasure of meeting Nobel prize winner Muhammad Yunus—Founder of Grameen bank and considered the grandfather of microlending. He said about CSC, “It is a good business.”
At CSC, we’re engaging with the question: why not put ethics and finance together? We ask, why are people always consumers buying something for themselves, investors looking for the highest return, or philanthropists giving away their money. We think the narrowness of these categories leaves a lot of room for something else– for generous reciprocity in finance.
In the UAE I learned about Islamic Finance, which is considered to be ethical finance. Zero interest lending is one of the components of Islamic Finance and is part of Sharia Law. Islamic Finance, where lending is always “riba-free” (non-interest-bearing) teaches us something about the generous instinct that lives within our Squareholders. Whether or not they know it, Squareholders are taking part in ethical finance.
When I blogged about my trip to UAE back in November 2015 I said:
“…we find that people intuitively understand that their money is creating value when they participate in making a zero interest loan to a business in their community….People WANT to make generous loans to their neighborhood businesses.”
Squareholders use their money to create real value in their communities, and do this outside of the traditional investor, philanthropist, or consumer roles. At CSC we believe it is morally right—it is ethical—to consider money as a tool for creating value in our world, and not to think of it as an end in itself.
One of the exquisite pleasures of launching our fundraising campaign has been connecting with the CSC Squareholders. Most Squareholders found out about Community Sourced Capital when a business or business owner they know and love asked them to participate in their loan by buying Squares. CSC wasn’t a familiar name to them when they first got introduced to the possibility of becoming a Squareholder, but once they heard about our way of building connected, community finance, they wanted to participate!
Here are some things Squareholders had to say about CSC when they first bought their Squares:
I love the concept of supporting a business that I want to see succeed because it’s existence enhances my community.
I’m really excited to be part of the Community Sourced Capital program. I may need it some day!
I love having strong local businesses and this type of micro loan arrangement makes sense to me.
More recently, we’ve heard from Squareholders when they responded about our own campaign to fund CSC’s nonprofit reemergence:
We are in! Donate all & best of luck….we’re rooting for you & CSC. ️
Congratulations on CSC’s evolution into a non-profit. Best wishes for future success in accomplishing your goals.
Happy to donate my (small) square balance to this cause. Best of luck!!
Thanks for your email. I would like to leave the balance alone for now and support a future loan. Thanks for reaching out and offering this option – I had forgotten all login info and would probably have taken no action if I hadn’t been offered the email choice.
I would love to donate the balance of my account. Thanks for all that you do!
We would like to withdraw the balance, which we will forward to our son and new daughter-in-law, who will certainly pour this gift right back into the community!
I think [Community Sourced Capital] can be life-changing. One starfish at a time. Thanks for the work you do. It matters.
During our campaign, Squareholders have made different choices about what to do with their money. And we love hearing every single story about why they made their choice. The spirit of a Squareholder is generous and connected to community. And we are so grateful! Thank you to each and every Squareholder—we love you!
John Berdes, the CEO of Craft3, lost his life to lung cancer and we are deeply bereaved. John was Our friend, partner, and mentor. We loved him. He was a brilliant visionary who worked his whole life to build just and equitable finance for communities.
We met John almost three years ago. He pinged CSC and said, matter-of-factly:
I would be interested in sitting down sometime and figuring out what possible synergies there are between us. We seem to share some core beliefs.
Who could resist? That was the beginning of a beautiful collaboration and friendship. A delightful aspect of working with John was how he wrote. In the follow-on to our first meeting, he sent this morsel embedded in a list of what he could offer to CSC:
3. I am personally available to provide depressing perspectives and irrefutable truths (and generally opine on your considerable options).
Yup. That was John. We learned that his depressing perspectives were pretty much right on, and his irrefutable truths, well, despite our best efforts, they turned out to be just that.
John wanted to accelerate our brand of healthy community capital and he put 500,000 of Craft3’s dollars to work on our platform. He recognized the power of community based finance and supported Squareholders by matching their Squares one to one. Craft3 matching capital has built larger loans for 40 small businesses in Oregon and Washington.
John wasn’t only generous, he was also tough. He challenged us every step of the way– to do more for small community businesses (especially those left out of the financial system), to do it responsibly, and to build our business in a way that was sustainable so we too would survive. Sometimes it was tough to hear his perspectives. And often that was just what we needed.
In his frank way, shortly before he died, John said:
I’m not here to read tributes, just stories of love and life.
And so, John, this is not a tribute, but a love story.
Human scale investments and financial institutions that care;
Collaboration among competitors;
Businesses that build goods and services for the benefit of people and communities.
All things we are coming to expect.
I’ve been on several grand adventures in the past month. Some close to home and one far away – all close to my heart and strong indicators of a world turning its focus on the well being of people and planet.
B Corps Champions Retreat
My first visit to the B Corps Champions Retreat was inspiring. It’s an annual gathering of leaders of B Corporations – a group of businesses large and small, who have embraced the concept that how a business treats people and the environment matters as much as the finances. The business-for-good movement is growing: Etsy became a B Corporation this past year and Kickstarter is a BCorp too. Even Unilever has announced that it’s interested in becoming a B Corp. BCorps voluntarily meet high standards of transparency, performance and accountability to all stakeholders (not just shareholders). As a B Corporation for two years now, Community Sourced Capital signed a Declaration of Interdependence, signifying we are both dependent on and responsible for each other and our mutual well being.
Money on a Mission, Portland
Beneficial State Bank, where we bank, is one of few B Corp banks in the country. For the second year in a row, we co-hosted an event called “Money on a Mission” in Portland, Oregon to bring together small businesses and mission-driven financial institutions that provide healthy capital. It was a sell-out event. The Governor of Oregon and the Mayor of Portland both showed up. There’s a lot of new ways for small businesses to access capital right now, and many online sources choose not to disclose their fees to potential borrowers (and they do that for a reason). That message was continually reinforced throughout the evening: all borrowers can and should fully understand how much a potential loan will cost. If you don’t want to take our word for it, just check out what these entrepreneurs had to say about it.
Ethical Finance and Innovation Challenge
Finally, my biggest travel opportunity of the last month took me all the way to Dubai, twice. We were selected as a finalist for the Ethical Finance and Innovation Challenge. Islam, the official religion in Dubai, has embedded rules in its principles and laws about what money is for. I first learned about Islamic Finance when a colleague sent me an article from the Guardian with a provocative headline: Can Islamic Finance Save Capitalism?. The article started with a question: Is there a place for ethics and morality in the global economy? I can only think — How could we have a global economy devoid of ethics and morality? Our economy is a reflection of our society. Islamic finance holds that money is merely a means of exchange, not something with intrinsic value itself. Money should be used for things that build real tangible value for society. It was an honor to share an American perspective on this. After all, I was the only American presenting (and the room was filled with 350 people, including Nobel Peace Prize recipient Muhammad Yunus).
At Community Sourced Capital, we find that people intuitively understand that their money is creating value when they participate in making a zero interest loan to a business in their community –- over 90% of the businesses that run CSC campaigns are successful in finding people to fund them. That’s compared to other kinds of crowdfunding which often only see around a 40% success rate. People WANT to make generous loans to their neighborhood businesses. It feels good!
And here’s an amazing thing about finance that feels good: real value is created. Measured in jobs alone –- the $1.5 million dollars deployed via CSC so far has already contributed to creating over 100 new jobs. Real value, on the ground. That’s the goal.
Starvation Alley Farms is located on the small coastal town of Long Beach, Washington. It was one of the first funding campaigns on our lending platform. The leaders at Starvation Alley are cranberry farmers and business people, plus they have their eyes on the prize of influencing the food system. To do that, Starvation Alley completed a three year process of certifying the first organic cranberries in Washington State. Since then, they have recruited several other farmers to follow their lead.
Transitioning to organic can be an expensive process, and Starvation Alley knew they needed to beef up their business model to pay for it. They thought that juicing the berries and selling the raw, unsweetened juice to bars and restaurants would increase the per pound value of those newly organic berries. Not only would they make more per pound, they could also freeze the berries after harvesting them and then make sales year round to create a more stable revenue stream.
The lowest end industrial juicer they could find was $12,000, and since they liked the concept of seeking the needed capital from their community, they took a chance and raised $12,100 from over 100 people in the form of small generous 0% interest loans. They bought the juicer. That was three years ago.
That small juicer is the manifestation of what a little moment of possibility can turn into when it has a community of supports behind it. Following Starvation Alley’s example, four more businesses in Long Beach ran Community Sourced Capital campaigns. Now there are hundreds of community lenders who have deployed over $90,000 into their small town: an independent hotel has installed solar energy (twice), a bakery purchased a stove, a industrial designer manufactured a new product line, and another hotel opened its doors just down the road. Big changes made bigger by the people who see possibility.
A few weeks after Starvation Alley paid off its first community loan, it took out another loan for a bigger and better juicer. They raised over $30,000 to buy this one. This new juicer makes it possible for them to open a channel for other farmers in the area to make the transition to organic by selling their berries to Starvation Alley for juicing.
Jared's belated birthday present: OUR NEW BOTTLING LINE! Remember when y'all supported our @squareholder campaign in the spring? Well, thanks to you we are able to make more juice and help more farmers! Stay tuned for when we get to unwrap our new toy! #buylocal #behindthejuice #itsthelittlethings #microfinance #CommunitySourcedCapital
One little juicer changed the entire landscape of farming and small businesses in Long Beach. The spirit, commitment and action of the people in this small coastal town has helped create a world of possibility for small businesses and farmers everywhere.
Ever since JP Morgan Chase started talking about Impact Investing as a “new” asset class in 2010, it’s been a topic of discussion amongst elite investors in the know.
Impact investing is described in Investopedia as an investment that “actively seeks to make a positive impact.” Today, many of us are invested in mutual funds and we’re taught to look for the most money we can make on our investments in the shortest period of time, regardless of what we’re actually investing in. The focus here is on dollar impact, not social impact.
I can remember way back when my grandfather talked to me about investing. He was born at the beginning of the 20th century and believed in investing in companies that did things he liked. He was an engineer and he relished having shares in 3M which was, at the time, probably the most innovative company going! I miss his excitement about the places he invested. And even though 3M may not fit in today’s standards of social or environmental impact investing, it sure was making an impact on innovation back then, and this was an impact that my grandfather admired and sought out with his investment.
Continue reading “The community kind of impact investing”