A Love Story for John Berdes

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.

The community kind of impact investing

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.
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Give trust a chance

We live in an era of possibility. Everyday new leaders and companies are rewriting long-standing rules to create value and unlock promise. These new leaders realize that many times the very norms and rules meant to protect us from risk end up blocking us from true potential. If you have a credit score below a certain number, you cannot take out a loan. If you’ve had a criminal record, you can’t get certain jobs.

We live in an era of possibility. Everyday new leaders and companies are rewriting long-standing rules to create value and unlock promise. These new leaders realize that many times the very norms and rules meant to protect us from risk end up blocking us from true potential. If you have a credit score below a certain number, you cannot take out a loan. If you’ve had a criminal record, you can’t get certain jobs.

What if we could suspend those rules? What kinds of opportunities would emerge? A beautiful thing can happen when people rely on trust and connections. Infinite possibilities are allowed to emerge. At the community level, where personal connections, history, relationships, and human emotion flourishes, there is less need for so many rules.
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A community line of credit: when possibility meets potential

There’s something exciting going on with Community Sourced Capital. Two businesses which  found success getting a loan from their community are at it again. Last summer, the Adrift Hotel borrowed $18,450 to finance a solar hot water installation for their sustainable hotel in Long Beach, Washington. They took on the loan, executed the project, held a party for their Squareholders, and perhaps best of all, they paid back the loan on schedule.
Continue reading “A community line of credit: when possibility meets potential”

Local finance matters

When people put their money to work for a business they can visit in person, an opportunity to see the impact of money in your community is born. Money doesn’t have to be thousands of miles away in New York. It can be just down the road.

We just wrapped up a fantastic loan with The Food Shed, a local business bringing healthy and local food to their community in Kingston, Washington. But we’re thrilled that the campaign brought more than local food to their community. It also brought local finance.

In fact, more than 90% of their Squareholders live within 40 miles of the business. We think that’s a pretty cool statistic, and not just because it’s fun to look at a map of Squares and Squareholders!

Kitsap Food Shed from Kitsap Sun

When people put their money to work for a business they can visit in person, an opportunity to see the impact of your money in your community is born. Money doesn’t always have to be thousands of miles away in New York. It can be just down the road. (My apologies to anyone reading this in New York. I hope you know what I mean.)

So here comes the part about persistence. Even though study after study confirms that locally-owned businesses improve the quality of life for communities, the collective impact of those businesses is still bundled in a complex set of benefits that are sometimes hard to see. In fact, it took a financial crisis for many Americans to see just how much we had taken for granted all along.

The concept here is simple, and perhaps a little redundant: the value of local finance is in visualizing the connection between your money, the financial system, and the health of your community. There’s a dollar bill at one end of the system, a resilient economy at the other, and a whole lot of thriving small businesses in between.

The photo included in this post is of Pam Buitinvield, an owner of The Food Shed. The photo is from the Kitsap Sun’s article Homegrown Loan Helps Kingston Cafe to Grow featuring The Food Shed and Community Sourced Capital.

Breaking the binary paradigm

Our team has been learning from mentor and friend Carol Sanford over the past six months. If there’s one thing we can count on, it’s that she’ll say something to flip our world upside down, and then follow it up with concepts, nuanced language and intention that reveals the full potential of where we can go from that moment of feeling flipped upside down. Continue reading “Breaking the binary paradigm”

Six months in, and we’re just getting started

Just six short months ago, our little company Community Sourced Capital was born with the purpose of changing the way society thinks about finance. It’s a unique challenge to change how we think about finance, especially if most of us aren’t thinking about it in the first place. That is, unless finance is bad to us. Then we think about it all the time.

We believe finance can be good. It can be good to people and it can be good to businesses. Like when finance enables 113 people to fund a $12,000 loan for an organic cranberry farm. Examples like this demonstrate the potential for finance to embody the qualities that form our generally accepted definitions of “good” like “community” or “sharing” or “love”.

And here’s the “good” news: because money is a human invention, the purpose it carries is ours to invent as well.

Here at CSC, we’re six months into giving money a purpose in our local economies. This is where we’re at:

2 funded campaigns raised $15,000 in loans for community business

Lots more campaigns in the pipeline

6 incredible team members

150+ card-carrying Squareholders

750+ friends (seriously) helping us achieve our vision

We love doing what we do. We spend each day meeting with incredible business owners bringing remarkable products and services to their communities. We identify their financial goals, tell their story, and then help them find purposeful money to finance the next iteration of their business.

So far, we’re a small drop in an enormous bucket. But here’s the “good” news: that bucket—that pesky financial one our society rarely talks about in a positive way—happens to hold remarkable possibility for creating the world we want to live in. Everyone reading this article holds a handful of water from that bucket and all the potential in the world to do something amazing with it.

Cheers to another six months of funding the world we want to live in.

Harvesting Social Capital: a renewable resource

This week, we’re launching our third and most ambitious campaign to-date with A&R Solar, a Seattle-based renewable energy company. Having A&R approach us to help them raise money for their new office space is an honor. One of the highest compliments I’ve received in my young business career was from Dave Kozin (A&R Solar’s CFO), stating “we could probably find other ways of financing this project, but we want to do it with you guys. We think it will be more fun getting CSC and our community involved.”< It's this kind of intuitive and values-based decision making in business that I identify with, and it's where I see CSC having continued success in the future. Actually, there are a lot of parallels between the two companies. Both are small, owner-operated, bootstrapped service businesses. A&R is a registered B-Corp. CSC is a Social Purpose Corporation. Both are built with sustainability at the core of the business model. We’re creating new jobs in a radically different economy than we might have planned for a decade ago.

In prepping for A&R’s $20,000 Squareholder Campaign, we spent the afternoon shooting a campaign video in their new headquarters (it’s a bit empty in the picture above) with a few members of the team. It was way too much fun to be considered work.

And having fun matters. Every day, the way we carry ourselves in the world impacts relationships and connections to those around us–either growing them stronger, letting them fall apart, or missing opportunities to build new ones by blowing by at life’s busy pace and forgetting to look up and meet your neighbor. Social capital fosters reciprocity and the willingness to share resources–knowledge, connections, equipment or even money!

So, how do we put social capital to work? After all, social capital is a renewable resource if we are conscious in how we use it. Consider the companies CSC has had the honor of working with so far. Each harvests a renewable resource, generating new value without being extractive. Recycling sporting goods at Playback Sports, organic farming of a perennial berry with Starvation Alley Farms and now solar energy with A&R Solar.

CSC’s business model is intentionally designed in a similar way. We harvest social capital in the form of shared money. In returning the money to Squareholders, we don’t deplete their ability to share it again. We believe this is part of a larger movement as we transform how we collectively think about money. We’re grateful for the small business owners, the squareholders and all the people in our world who are making their decisions based on their deepest values. This is what will bring in a new economy!

Realities of modern lending remind us what we’re working on

A recent article from Inc. Magazine is reminding us what we’re working for: a better financial ecosystem for small business. The article describes the negative relationships between banks and some small business owners following the financial crisis.

When it comes to the future of small business in America, it’s easy to say that “small business is important to our economy” and leave it at that, but we should really take it a step further. We’ve learned from our economy over the last few years that strong, local economies will require networks of many strong, small businesses.

This is not to say that big business is bad or has no place in our future. It’s just to say that we’ve done a great job supporting big business for a while now, and it’s probably time to focus some more energy on our friends at the “small” end of the business spectrum.

Back to the article– author Burt Helm draws examples of successful small businesses being dumped by big banks because of their industry, major trends in big bank density across the banking landscape, and it asks what might change to fix the whole system.

My own understanding of systems suggest that this current dominant system probably won’t change anytime soon. It’s too big to move, too big to adapt, too big to… well, you get it.

Instead, we can focus on introducing new financial systems that make the entire ecosystem more sustainable. At Community Sourced Capital, we believe these systems will (and should) more heavily involve large groups of people (read: communities) in decision making, and ultimately, in an ongoing education about how our financial system works in the first place.

All this said, I think it’s important to specify when you might see exactly what we’re talking about at CSC . We’re designing and testing sustainable financial solutions, and that process requires lots of care and patience. The last thing we want to do is scale half-baked solutions that end up harming small businesses, or worse, the local economies we’re trying to strengthen.

If sustainable finance, design and collaboration piques your interest like it does ours, then I strongly encourage you to read through this article. Then, consider taking our short survey on small business lending in your own community.

The state of small business on the eve of the election

Small businesses are the heart of our communities and the life-blood of our economy. Few politicians would disagree with that.

Every day, small business owners roll up their sleeves and bring you and me some of our most basic services, often with a smile from a friendly face. They make our lives better by creating spaces where we can enjoy coffee with friends and by making delicious food when we’re too busy to make it ourselves. They create jobs. Small business owners are some of the hardest working and most creative Americans. Every politician agrees with this.

So how do we “vote” for small business? Both the Republican and Democratic Party platforms say we need to make the tax code friendlier to small business. USA Today recently published an article, Q&A: Looming Small Business Tax Hike Explained. It’s an ominous headline, but, in fact, all the looming tax hike has to do with is raising personal income taxes for people earning over $200,000 a year. This possible tax hike might affect as much as 3.5% of all small business owners, maybe—probably fewer. Most small business owners just don’t have that kind of income. That means, when they need to grow, they can’t afford to just cut a check.

I’m worried about what’s happened to access to capital for small business. Bank lending in the smallest sized loans, loans under $100,000, has plummeted. Overall lending is starting to improve for larger loans, but these “micro-loans”, the size most often needed by our neighborhood businesses, continue to decline precipitously. A recent Federal Reserve study says small businesses identify “access to capital” as the greatest impediment to creating new jobs. I want my neighborhood businesses to create jobs for my neighbors, and they need access to capital in order to do it!

So while the presidential candidates focus on tax codes, how can we, we the people, help our neighborhood businesses get what they need?

I don’t believe we need to wait around for banks or government to solve these problems for us. We can start by making appointments at the locally owned hair salon and frequenting the locally owned coffee shop (an easy task for Seattle). We can recommend neighborhood businesses to our friends and start to build local economies that are less likely to tank when Wall Street tanks. But that’s not the whole story.

We also need to ensure that small businesses have access to financial resources; they need the capital to start, run, grow, and improve their businesses. Banks simply aren’t lending to small businesses like they used to. Let’s put our money to work where it can do our neighborhoods some good!

Crowdfunding puts financial power in the hands of many people, but its application to small-business financing is still new. Kickstarter, the most well known crowdfunding website, recently helped a business on Bainbridge Island raise nearly $20,000 to help start their business, but Kickstarter was designed to help artists fund creative projects with donations. That’s why my company, Community Sourced Capital, was designed from the ground up to meet the needs of small business through crowdfunding. We’re so passionate about it that we decided to become one of the first Social Purpose Corporations in Washington State. That means our corporate charter includes a mandate to help small businesses and local economies thrive. You can count on us to live up to that mission!

This election year, we aren’t focused on the power of the politician. We’re focused on the power of the people. We should never forget that we the people are what elections are really about. We hold the power to collectively make decisions, and when we aren’t voting for politicians and policies, we can vote with our dollars by supporting small businesses with our purchases and our investments. We don’t need politicians to help us with this step. We can roll up our sleeves and put our money to work to fund the world we want to live in, today.