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Neighborhood economics funding kit

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A platform for community investing & giving where venture capital doesn't work.

Published in: Economy & Finance
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Neighborhood economics funding kit

  1. 1. Neighborhood Economics funding kit 1.15 How to fund things in places where venture capital doesn’t work.,
  2. 2. It has four parts Lending, both funds & lending clubs A donor advised fund that invests philanthropically Giving circles A kids community savings bond
  3. 3. Lending  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 Sourced Capital.  Benefit: Further democratization of funding in an arid capital environment.
  4. 4. Our innovation  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.
  5. 5. 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.
  6. 6. 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.
  7. 7. Giving Circles  Two forms:  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 $1,100.
  8. 8. 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.
  9. 9. 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 kit.
  10. 10. 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.
  11. 11. 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 Foundation.  They have not been combined and used with a holistic lens that decides which tool a community should use in which instance.
  12. 12. The payoff  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.
  13. 13. The package  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 investing.  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.
  14. 14. Network possibilities  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.
  15. 15. The backend  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.

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