Thursday, June 30, 2011

Local Investing

When you think of investing, do you picture a website with a neat summary of your portfolio?  Unless you are an accredited investor (meaning you have at least $1 million in net worth not including your house), your options for investing are a limited menu.  No matter what the name of the product (mutual fund, ETF, stocks), you are investing in companies that are publicly traded.  What if instead you could invest in the bookstore or restaurant that's opening down the street?  "Right now, around the country, groups of citizens both small and large are reclaiming their money as a force for positive social change," wrote James Frazier, one of the founders of a Local Investment Opportunities Network (LION) in Port Townsend, Washington.  His group is spreading the word about the effect they've had within their small town.  Here's an article he wrote that tells their story.


I am part of a group in Bellingham that is creating a similar network called the Whatcom Investing Network (WIN).   WIN is not an entity - it's basically a loose association of individuals who are all interested in making local investments.  It's a forum for us to meet each other and for businesses to meet us.  Check out this lil video of me talking about WIN at the recent Business Alliance for Local Living Economies Conference:


We just had our first meeting of investors this Tuesday.  Leading up to that, our organizing group has been enjoying such activities as studying the securities law.  The existing securities laws were put into place around the Great Depression as a way to protect investors from being scammed out of their life savings.  They are restrictive and complicated but we've mostly figured out how they work and how we can work within them. 

Here's how it might work: Harold is trying to open a chocolate shop.  He will register with the state Department of Financial Institutions that he is planning to ask for private investments, but only up to 35 non-accredited investors and only within Washington State.  He will submit his business financials and pay $50.  Then, Harold will present to WIN members and he will let us try his delicious chocolates.  At the end of the presentation, Maude and Ruth are interested in more information.  They might meet together to research the investment opportunity and perform due diligence.  Then they could meet with Harold and come up with an agreement.  Perhaps Maude will loan $10,000 and receive a weekly box of chocolates and Ruth will loan $5,000 over 5 years and get 6% interest.  Just an example, but I like this model in general for its flexibility.  It certainly has a greater burden on both the business and the investor - it's not just a quick fund transfer - but it's your money, shouldn't you be keenly interested in what it is doing?

Check out our website at whatcominvesting.org for more fun.