Neighborhood economics funding kit.yancey

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Designing in inter-generational collective intelligence and dividends linking the commons and a business balance sheet into a unified metric of value.

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Neighborhood economics funding kit.yancey

  1. 1. NEIGHBORHOOD ECONOMICS FUNDING KIT 1.2 How to fund things in places where venture capital doesn’t work…
  2. 2. IT HAS FOUR PARTS… 1. Lending, both funds & lending clubs 2. A donor advised fund that invests philanthropically 3. Giving circles 4. A kids community savings bond
  3. 3. LENDING THAT… …works for businesses that are not high growth or fast enough growth to call for venture capital. …works for loans that are good for the community and that can pay back investors at below bank rates.
  4. 4. LENDING There are a growing number of Interest free platforms that make loans to small businesses, like KivaZip, and Community Sourced Capital, or community loan funds and relationship-led lending circles. We would experiment with peer due diligence models like Village Capital, where the entrepreneurs join the funds’ investment committee, and eventually lead due diligence. This reduces investment costs by 50%. The lending would be in context of its sister modes; philanthropic investing and giving. This reduces the power of investment capital alone and synchs it with the needs that the community has agreed on. The bank is not calling the shots; the people are. In Yancey County, this starts with the food hub and adolescent female agency.
  5. 5. COLLECTIVE INTELLIGENCE TO REDUCE THE COST OF CHANGEThese tools are designed to create self sustaining collective intelligence in the community about what is good to fund locally. This sets up the long term bond the kids invest in. It is a long-term perspective. This should reduce the cost of change and enhance buy- in. This suggests that the Food Hub might be owned cooperatively by the community. More about that later…
  6. 6. THE COMMONS TAX Each loan would include a tax to the food hub, representing the commons, paid by the lenders. An equal part of that tax would support efforts at enhancing adolescent female agency, which has been quantitatively proven to be the key leverage point in creating community wealth and health. We could also design the commons tax as a part of every gift that goes over the DAF platform, including giving circles.
  7. 7. ECOSYSTEM ANALOGY This tax on the platform creates abundance. The food hub, coupled with support for female agency, follows the ecosystem management pattern that resilience scientists at Stockholm Resilience Center say creates thriving watersheds. The signals are to: • make sure the top raptors are growing, the representatives of abundance, and “systemic profit”, and • that the most fragile ecotone; the connecting space between two sub ecosystems, like bugs one inch below and one inch above flowing water, ishealthy. In a social system, that fragile ecotone is the adolescent female; if they stop asking questions in math and science, a community’s productivity declines. This is a case where the market and justice overlap, with exponential results.
  8. 8. BENEFIT The democratization of funding makes both the rich and average people part of the solution Local people powered capital.
  9. 9. OUR INNOVATION We look at our community and decide when it makes sense to: o give with no financial return; o when a philanthropic investment makes sense such as where the tax deduction is enough to justify an investment that is mostly for public benefit, but can return capital to the Donor Advised Fund (DAF) to replenish the money that is given; o or simply lending, either through a local fund or less formal local lending clubs or online crowdfunding platforms like KivaZip and Community Sourced Capital, which can ignite the Yancey diaspora.
  10. 10. WHAT’S REALLY NEW? We are going through a transition that requires us to look at our resources differently and act in a new way. We must invest and give for good in our communities. 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 our own investments. Our multi-part approach will reduce friction & increase the amount of capital available in a community.
  11. 11. DONOR ADVISED FUND (DAF) The DAF can do loans or equity (mostly loans) but the individual donors get a donation tax credit by placing their money in a DAF. The loan to the profit or non profit local 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 an unrestricted operating 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.
  12. 12. GIVING CIRCLES Two forms: Groups that meet regularly and trust each other, from book clubs to Sunday School classes. They meet and one member presents 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. All grants made through the DAFR would be unrestricted operating grants; the most valuable kind of money for non profits. We can become a magnet for the best non profits. The Yancey Neighborhood Economics platform itself could take a stand and decide to accept no program grants, and only take unrestricted operating grants.
  13. 13. FOLLOWING SMART GIVERS Giving circles could follow the smart, effective Women for Women group in Western North Carolina. 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.
  14. 14. TACTICAL NOT STRATEGIC PHILANTHROPY If we take foundation money, perhaps we only want to work with a certain kind of foundation. Most foundations think of themselves as strategic philanthropists. That makes the foundation the entrepreneur, and reduces the non profit they fund to being merely their agents to carry out their plans. The giver is the landscape architect; the non profit service provider or social enterprise merely the gardener, working at the direction of the giver. We want tactical givers, foundations like Mulago and others, who trust the entrepreneurs and let them make decisions on how to solve the problem. We want to avoid the mission creep that program grants create. We know what to do in Yancey County.
  15. 15. INFLUENCE ON BOTH POLES The kit will find ways to let the average person join in investing in companies vetted 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. This enables 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. This is a key to both the giving & investing side of the funding kit, the crowd can listen to the experts, but make their own decisions. This is counterbalanced by everyone having to listen to and help the kids create their long term bond.
  16. 16. KIDS SAVINGS BONDS This is the only slightly original idea of this tool. Kids save each week, for example $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, kids invest in a local project, involving themselves and/or their local community and environment. They would organize as Riparian Justice Scouts For first graders, their fund matures in 12 years. During that time they are involved in the project they invest in (river restoration in a poor neighborhood, eg.). Parents and grandparents can top up their kids deals and help make them turn out well.
  17. 17. THE COMBINATION IS NEW Lending circles and local funds exist, as do giving circles. 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. These tools have not been combined and used with a holistic lens that decides which tool a community should use in which instance.
  18. 18. APPLYING THE TOOL TO THE FOOD HUB We have as our goal using the Neighborhood Economics Funding Kit to fund and create a long term sustainable business and giving model around the Yancey County Food Hub. That means designing the Food Hub into the economic fabric of the economy we want to build together in Yancey County.
  19. 19. MAYBE THE FOOD HUB IS A COOP As a long term, intergenerational investment in creating a platform to enable smart Yancey County young people to move back home, the Food Hub would eventually be able to pay dividends, as it reached its potential. This is a standard feature of many agriculture related coops, and enables them to last across generations. That would enable local community buy in in a literal way. The people of Yancey County would literally get the long term payoff from creating an entity that existed mostly in the commons but that supported businesses and community health and wealth. We would be using a frame that unites the commons with each participating company’s and individual or family’s balance sheets and budgets. We would look at our resources and use them to create the community we want. We would not be ruled by old myths of capital that divide investing and giving into two separate realms.
  20. 20. FOOD HUB DIVIDENDS A business’s Food Hub dividend could be measured several ways; by a percentage of its proportional contribution, with early funding counting for more. Each business could also receive dividends through a community wide application of the three part B Corporation metric; reporting on what you did for the environment this year, what you did for the community, what you did for your employees. Adapting the B Corps rating to a rural Southern Appalachian county is a project we could get colleges involved in. The higher your businesses Community B Corps score, the higher your Food Hub Dividend. B Corps metrics for each family could also be designed; your families collective quantifiable commons gifts results in higher Food Hub dividends, or could count towards their kids’ investment in the long term bond. This causes the parents to think longer term, in partnership with their kids.
  21. 21. FOOD HUB DIVIDENDS The food hub coop creates reliable abundance, a safe, “annuity feeling” in the present, like suddenly discovering an extra check in the mail just when you need it. Parents and kids then decide how much of the dividend goes in mom & dad’s checking account & how much should go into the kid’s bond. The family would be delivering its resources to the children on a regular basis with a goal set by the kids for what they want to have happened by the time they leave home for the first time. The kids are responsible to their parents as their investors.
  22. 22. WISER TOGETHER: HOME AND THE YANCEY DIASPORA The Yancey Diaspora, the kids who’ve left, would want to invest in things that make it possible for them to come back. They can do this on the platforms built by Joy Boothe’s techie kids and their peers. The Yancey Diaspora donates and gives, informed and led by their little brothers and sisters at home. This keeps the dialogue happening; the ones going off to see the world learn from the ones still at home. The parents, having to convince their kids to fund a project with the kids’ bonds, would, in conversation with the Yancey Diaspora, carry the hope of the community and would make everyone wiser together.
  23. 23. FOOD HUB EDUCATION Education needs to be a key component of the Food Hub. People need to know why it matters, and what it will do for them, their families, for their businesses. It has to be clear how it will enable their kids to move back home. This project will attract students from Warren Wilson’s sustainability degree program, as well as that of Berea College and Western Carolina, to start with. Part of the education baked into the Food Hub is to help the kids decide on what their own long term, 12 year bet will be, incorporating that learning into the bonds they invest in every month, for as low as $1 a month.
  24. 24. THE PAYOFF The threefold flexibility of giving, investing and receiving a full tax deduction before getting the money back to give with or invest with again coupled with traditional lending where you get your money back at an appropriate return, makes the Neighborhood Economics Funding Kit a lower cost, more powerful tool for creating a vibrant, thriveable community. Then add in the kids, who will not only lend, but build their own culture of local investment, and their parents who have to decide how much of their annual Food Hub dividend they put in their checking account and how much in their kids long term bonds, which could make it feel like an intergenerational savings account. Imagine that for a minute.
  25. 25. 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. Ideally some projects would be 12 year timeline projects with enough variety to make them interesting.
  26. 26. NETWORK POSSIBILITIES This model could be replicable in many 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 or Tupelo, MS.
  27. 27. THE BACKEND It might need a local community development financial institution (CDFI) or other community organization to help administer the package. It would require a full time staffer, say an experienced CDFI leader, who would thrive in a flexible atmosphere Seven percent is what Kiva gets for tips; seven percent would be a good target operating fee for this package of DIY local merchant banking tools.

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