Small business helping small business: part one

Conventional wisdom might say that if you have a web/technology-based business-to-business service company, then the pathway to rapid growth and revenues is to target large Fortune 500 companies as clients. Seattle enjoys the presence of many of those Fortune 500s: Microsoft, Boeing, Starbucks, Amazon, Zillow, and Expedia, just to name a few. Yet, Community Sourced Capital looks to businesses like A&R Solar, Starvation Alley Farms and Playback Sports as the future of our local living economy. These are the companies that make our neighborhoods more interesting to live and play in.

We get to work with these owners directly. There’s no corporate board vetting decisions and their possible impacts on quarterly earnings. Decisions are made by small business owners and CSC because they are the right thing to do and because they “pencil out.”

Both A&R and CSC experience success because of something we call social capital. Both of us are working against the grain, but we have lots of people supporting us. A&R installs solar (successfully) in the cloudy Pacific Northwest, and Community Sourced Capital runs a financial services company on the basis of sharing money. It’s a tough job, but somebody has got to do it. Somebody has to run these small businesses to bolster a new economy, and it probably won’t be big Fortune 500 businesses.

As I heard last month from a client, “it’s time for small businesses to start helping each other, no one else is.” It reflects the frustrations of small businesses owners drowning in marketing messaging from big banks and government about how important small businesses are to the health of the economy, but without action to back it up. I’d like to argue that, while we are nowhere close to being too big to fail, neither are we too small to succeed. We have to work together.

As CSC moves forward, we’re staying as true as possible to our small businesses customers, because we’re a small business too. We need each other to succeed.

This is the first in our series Small business helping small business.

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!

Swimming and diving: an update from the team

What does it take to pull off Community Sourced Capital? A wide range of talents and an insatiable passion for using finance to enhance communities. No big deal.

We share this story with you because we want you to see the kind of topics we’re thinking about in addition to everything we produce. It’s one thing to start a business, and it’s another to share that experience with our network of supporters.

Following the official launch of our first “live” community lending campaigns, we brought our entire team together last week for a full weekend “hang out” and a one day “retreat” at our Hub Seattle headquarters. Brent flew in from Roanoke, Meryl came up from Denver, and Alex, Casey and Rachel enjoyed short bus rides from their homes in Seattle. We also had the incredible opportunity to have the entire team meet with our amazing mentors: Jon Kroman, Todd MacDonald, and Carol Sanford.

Todd led us through a morning exercise of exploring how our team’s interactions ripple out and affect our customer relationships; the core of our team operations will show up in our everyday interactions with non-team members, and those interactions could even show up in our customers relationships with their customers. Whoa. It was an exciting reminder of how important a healthy team is for running a healthy company. And ultimately, it re-enforces our core purpose of building community through trust-based relationships.

In the afternoon, Carol took us down an incredible path of exploring how we engage with our customers and Squareholders in order to create systems of constructive dialogue instead of just asking for “feedback” and seeing what shows up in the inbox. We want to invite our customers and Squareholders to conversations that reward everyone involved through real conversations. “Feedback” often misses this target by a longshot. We hope you hold us to this challenge.

At the end of the day, we’re still swimming along, creating and growing our community finance platform. Our team retreat was a reminder that we should never hesitate to take deep dives into re-exploring our company’s essence, what we do, how we do it, and who we are when we do what we do.

Here’s to swimming, diving, designing, playing, and inviting people to learn alongside with us, all at the same time.

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.

Re-imagining our relationship with money

Imagine this: 20 people sitting around in a circle talking about money. It wasn’t bankruptcy counseling. It wasn’t a fundraising meeting. It wasn’t even a investment club. It was just 20 people, sitting in a circle, talking about their personal relationship with money. Continue reading “Re-imagining our relationship with money”

Generative design and local living economies

Last week, Casey and I returned to our Alma Mater, the Bainbridge Graduate Institute, to talk about Community Sourced Capital with about 20 MBA Students studying Local Living Economies in a class taught by sustainable finance expert Stuart Cowan. Continue reading “Generative design and local living economies”

Pitching sustainable finance to a few hundred

Just last weekend, co-founders Rachel Maxwell and Casey Dilloway pitched Community Sourced Capital to a few hundred friends, family members, social entrepreneurs and investors as part of Fledge Demo Day in Seattle. Fledge is the “conscious company” incubator that CSC has been working with for the last few weeks.

Continue reading “Pitching sustainable finance to a few hundred”

The CSC Team talks about their vision of Sustainable Finance

Last June the CSC Team mused on meaning and finance when on the ferry from Seattle to Bainbridge Island. Check out the video we shot on our phone and get to know us a little better.

The heart of money: what winning might look like

I had a dream last night where I was visiting with students in a college finance class. It was casual conversation about careers and post-graduation plans until I saw a prompt on the whiteboard. It was a chance to enter an essay contest. In 50 words or less, alumni had to answer the essay question, whereas undergrad students could take as much room as they like.

I should pause here to clarify that yes, I do in fact have dreams this vivid. So, here was the question I created in my dream:

If our entire financial system was competing in the Olympics, who would win the bronze?

I immediately started overhearing students discussing how AA versus AAA rated bonds are ranked. “Which one is better, again?” they asked each other. The girl at my table asked me to review what she wrote, but I had to write my response first. This is what I wrote:

As with most competitions, the winners and losers are determined by the judges. What Olympic competition are we talking about? Who are the judges? What are the metrics being used to evaluate the contestants? How might the rules of the game evolve over time to challenge future contestants?

I guess in my dream, I found it more valuable to throw questions back at the judges with which to score other essays, than for me to try and win the contest myself. Or maybe I just didn’t have the right answer ready. Either way, I’m sure I snuck my essay at the top of the pile so the judges of this competition might read my rebuttal before scoring the rest of the entries.

Think about the different Olympic competitions and what we expect from each one. Gymnastics: grace and perfection. Diving: form and execution. Running: speed and speed alone. The undisputed, most important element in each of these competitions: heart. The heart of the contestants is the determining factor in every competition. It has no official line on the rubric, but it absolutely shows up in every evaluated element.

What is the heart of the financial system you know? What is the heart of the financial system you want to know?

Go ahead and try this quick exercise. Write down the two or three variables you would consider while evaluating some financial system that your money is circulating through. It could be your checking account or your 401(k). How does heart show up in these financial systems? How might the lack or presence of heart in these systems affect the future of your finances?

Your money is in the middle of a worldwide competition, much like the Olympics. In which ways might instilling heart in this competition help guide contestants to a more likely and deserved victory?

And the best news: the rules of this race are still being determined. At the end of the day, we each get to decide what winning looks like.

 

Casey Dilloway is a co-founder of Community Sourced Capital. He took several finance classes in his undergraduate business education, but didn’t really fall in love with its potential until studying it for his Sustainable MBA at the Bainbridge Graduate Institute. You can follow Casey on twitter at @CaseyJD.