Neighborhood

Economics funding kit

1.15How to fund things in places where venture capital doesn’t

work.,

It has four partsLending, both funds & lending clubs

A donor advised fund that invests philanthropicallyGiving circles

A kids community savings bond

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.

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.

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.

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.

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 kit.

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

Foundation.

They have not been combined and used with a holistic

lens that decides which tool a community should use in

which instance.

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.

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.

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.

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.