Economics funding kit
How to fund things in places where venture capital doesn’t
It has four parts
Lending, both funds & lending clubs
A donor advised fund that invests philanthropically
A kids community savings bond
For deals that don’t make sense to do as convertible
debt, heading to venture equity.
For deals that are good for the community that can pay
back investors at below bank rates
It includes interest free platforms that make loans to
small businesses, like KivaZip, and Community
Benefit: Further democratization of funding in an arid
We are going to look at a community and decide when
it makes sense to give with no financial return, when a
philanthropic investment makes sense; where the tax
deduction is enough to justify a deal that is mostly for
public benefit but can return capital to the Donor
Advised Fund (DAF) to replenish the money that is
given. It’s third leg is lending, either through a local
fund or less formal local lending clubs.
What’s really new
We offer a holistic look at community investing and
giving that erases the outmoded and destructive
bifurcation of investing versus giving. We can no longer
afford to invest for personal financial return and then
put some of the excess aside to do good with, often
trying to amend the ailments caused by investment.
We are going through a transition that requires we look
at our resources differently and act in a new way;
investing and giving for good in our communities.
Donor advised fund
The DAF can do loans or equity (probably mostly
loans) but the individuals get a donation tax credit by
placing their money in a DAF. The loan from the for
profit or non profit business is paid back and the capital
returned to the DAF (not the individual donor). The DAF
owning group uses the money to either give away as a
grant or recycle into another investment.
Any return above $1 makes the donation side of the
DAF a more powerful force for giving. This is the place
to do long term investing, when getting close, as in
horseshoes, is a win.
Groups that meet regularly and trust each other, from
book clubs to Sunday School classes meet and one
member gets to present a cause to donate to each
month. The sponsor of each cause keeps the group
updated on the progress of the non profit recipient. We
have a software platform to enable this.
Or more established, larger scale groups like Women
for Women in Asheville, where each person puts up
Following smart givers
Giving circles could follow smart Women for Women
which is particularly effective. In WfW, each woman
puts up $1,100 per year. They have become
exceptionally strategic. For instance, they funded a
social worker at ABTech, which has led to battered
women graduating at around 90% in trades compared
to under 25%. The social worker starts documenting
instances that become an on campus restraining
around a woman trying to get her life back together.
Ideally, the giving circles would pay attention to Women
for Women and other smart larger scale giving circles.
Influence on both poles
The tool will also find ways to let the average person
join in investing in deals being done by smart angel
investing lending & investing circles, (where people put
up on average $5,000 to $25,000 or more) like the
lending circle created by Accelerate Appalachia.
Enabling people who have $25 to invest in local
businesses following people putting in more money
who’ve gotten smart about where to put their money is
a key to both the giving & investing side of the funding
Kids savings bonds
This is the only slightly original idea of this tool.
Kids save each week, say $1, take it to school and put it in a little
manila envelope with a red button closed with a string.
Instead of saving $18 in a school year and getting a $25 savings
bond at maturity, they invest in a local project, involving kids and/or
their local community and environment. They would organize as
Riparian Justice Scouts
For first graders, it matures in 12 years, but they are involved in
the project they invest in (river restoration in a poor neighborhood,
eg.) during that 12 years.
Parents and grandparents can top up their kids deals and help
make them turn out well.
The combination is new
Lending circles and local funds exist, as do giving
circles, and some DAF’s have turned into effective tools
to invest for goods, especially those on the Impact
Assets platform that is a spin out of the Calvert
They have not been combined and used with a holistic
lens that decides which tool a community should use in
That tripartite flexibility; giving, investing with a full tax
deduction and lending where you get your money back
at an appropriate return, will make this Neighborhood
Economics Funding Kit a lower cost, but more powerful
tool for creating a vibrant, thriveable community.
Together the four elements offer a variety of ways for
churches, clubs and individuals to get involved, from
giving, to donating and then investing, to outright
And they provide a way for kids to get involved and
learn, and for the adults to learn from the kids; they
would do due diligence, assisted by an adult on
projects each year, as I see it, though ideally some
projects would be 12 year timeline projects with enough
variety to make them interesting.
This model would be replicable in a lot of towns, and I
think might scale down in Burnsville, and upward as we
bring in Nashville, scale up for use in Asheville,
Nashville, and Allentown, PA.
It might need a local CDFI or other community
organization to help administer the package.
It would require a full time staffer, a Jane Hatley type,
who would thrive in a more flexible atmosphere
Seven percent is what Kiva gets for tips; seven percent
would be a good local operating budget for this
package of DIY local merchant banking tools.