SOCAP13 and the Promise of Democratized Finance

BY: ANDREW RODRIGUEZ

Two weeks have come and gone since this year’s SOCAP13, and yet my mind is just beginning to catalog all of the themes, the platform launches, the innovations, and the visions for a new financial paradigm.  It was a dynamic event, with too many sessions for any of the 1,900+ attendees to feel confident that they weren’t missing an important conversation in the next room.

I certainly felt this way, as a part of the content team for the Meaning Track and the inaugural Faith Cohort.  Thankfully, twitter has preserved some of the most important moments under the hashtag #SOCAP13 , should you find yourself with a few days to work backwards through all the content.  And, if you don’t have a few days, make the time to learn about the conversation on gender lens investing.

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Perhaps one of the most exciting themes, and the most relevant to the Slow Money community, is the brewing future of democratization in finance.  This was a timely conversation given the start of Rule 506(c) of the JOBS Act earlier this week, which changes SEC regulations restricting the open solicitation of accredited investors by startups and funds.

This is the first time this will be allowed since the landmark legislation was first enacted in 1933.  Yet, the question remains: why are investing options limited to accredited investors?  Many at the conference challenged the thinking that only the wealthy are wise enough to invest in companies they believe in.  While this in itself will not bring about a democratization of finance, coming rules within the JOBS Act will also allow crowdfunding platforms to offer equity investments from unaccredited investors.

SOCAP13 featured a few innovative organizations that aren’t waiting for legislation to pass in order to democratize finance.  Jenny Kassan, founder of Cutting Edge Capital, shared her experience championing a wider acceptance of the DPO model.  It provides a less expensive and time-consuming regulatory process, the ability to use novel investment models, and the ability to receive capital from unaccredited investors.   But don’t let that fool you, working with Cutting Edge Capital or another SEC lawyer is still a must and the process is far from simple.  Right before SOCAP13, Cutting Edge Capital released their new online platform for businesses with an active DPO.

James Frazier, who works with Natural Investments and helped found a LION in Port Townsend, Washington, is working towards the release of The Local Investing Resource Center, an online resource for those of us ready to jump right in to local investing.  With the knowledge he has gained investing over $3 million in his community of 9,000 people, this resource should be invaluable when it officially launches this fall.

This is just the beginning of a new financial paradigm that is building, and hopefully we can look forward to a future in which all local economic actors can participate.  I will end with an important caution: the SEC regulations were intended to protect people from investments they can’t afford to lose.  We who desire to pioneer a good, equitable, and local investing landscape must treat our neighbors’ investments with the utmost care.  This means more due diligence, smarter innovation, and all protective measures to make sure the best of a democratized finance can be had by all.

 

 andrew1Andrew Rodriguz is a Domestic Market Scout Fellow with Village Capital, a 2014 MBA Candidate with Bainbridge Graduate Institute, and is currently, working with Social Capital Markets. He lives in Portland, OR with his wife and dog, and is involved in organizing neighborhood scale sustainability as a founding steering committee member of the Foster Green EcoDistrict. He is interested in the intersection of faith and impact investing, and how they could come together to generate a resilient local living economy.

Win a Chance to Present at TEDxManhattan

Is doing a TED talk on your bucket list? Are you working on a project related to sustainable food and farming?

tedxTEDxManhattan is looking for individuals who are having a high impact in their communities by engaging a variety of stakeholders to participate in their TEDxManhattan Challenge.  The winner will speak live at their event “Changing the Way We Eat” in March 2014.

The 2013 winner was Cheryl Kollin of Farm to Freezer, who has roots in the Pacific Northwest as a Bainbridge Graduate Institute alum. Watch Cheryl’s video to get inspired to apply!  The deadline is October 1st.

Raise Your Voice to Help Define “Accredited Investor”

Even if you didn’t excitedly pore over the new SEC rules as we did, you may have read highlights of how they will affect a business’s ability to raise capital. While these rules still only allow businesses to take investments from accredited investors, the SEC is currently accepting feedback on how to define an accredited investor.

Here are the questions they  asked commenters:

  1. us-securities-and-exchange-commissionAre the net worth test and the income test currently provided in Rule 501(a)(5) and Rule 501(a)(6), respectively, the appropriate tests for determining whether a natural person is an accredited investor? Do such tests indicate whether an investor has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of a prospective investment? If not, what other criteria should be considered as an appropriate test for investment sophistication?
  2. Are the current financial thresholds in the net worth test and the income test still the appropriate thresholds for determining whether a natural person is an accredited investor? Should any revised thresholds be indexed for inflation?
  3. Currently, the financial thresholds in the income test and net worth test are based on fixed dollar amounts (such as having an individual income in excess of $200,000 for a natural person to qualify as an accredited investor). Should the net worth test and the income test be changed to use thresholds that are not tied to fixed dollar amounts (for example, thresholds based on a certain formula or percentage)?

This definition and the proposed rule changes will have a direct impact on the startup environment and the work that we do here at Slow Money NW.  Some platform based organizations fear that the changes the SEC is considering will hurt the startup community as they do not take into consideration modern financing models.  AngelList CEO, Naval Ravikant, submitted these comments and recommendations.

Care about the rules surrounding the higher bar that same-sex couples face to make angel investments? This is also an opportunity to have your voice heard on how to make these regulations more equitable.

Questions? Feel free to reach out to us at rachel@slowmoneynw.org.

ÜbrLocal Launches Peer to Peer Marketplace!

Don’t know what to do with your extra garden tomatoes or the apples on your tree? Need more jars for canning?

Head over to seattle.ubrlocal.com to buy, sell, gift or swap food related products with anyone in Seattle. The site aims to grow a movement of neighbors building stronger communities and economies through food by focusing on transactions within a 10 mile radius.ubrlocal

On a recent visit to ÜbrLocal we browsed kale, green beans and eggs for sale, kefir grains for  swapping, and a request for seeds to be part of a King County Seed Library.  Many of the users are capitalizing on recent changes to cottage food laws that allow for users to sell up to $15,000 of food products produced in their own kitchens.

The founders plan to expand their cottage and commercial goods offerings as they grow and provide advice and mentoring to new entrepreneurs.

Learn about Community Capital with Seattle Good Business Network

Want to learn more about local investment?  Seattle Good Business Network will be hosting an event series entitled Community Capital: Seattle.  The series is designed to educate, connect, and spark dialogue around the emerging field of community finance.

Community Capital Seattle LogoThe series kicks off September 25th at HUB Seattle with an all-day workshop with acclaimed author, speaker, and local economy luminary, Michael Shuman.  Shuman argues our investment system is broken, and that fixing it could result in $15 trillion transferred from Wall Street to Main Street, or about $50,000 per person. Come and learn how residents can invest locally, how local businesses can take advantage of these funds, and what new projects might be started.

Future monthly sessions will cover creative models that are pioneering the financing of the new economy. Whether you are an entrepreneur, consumer, philanthropist, policymaker, or student, you will never think about our local economy the same way!

Tickets and more information is available at  www.seattlenetwork.org/commcap. Friends of Slow Money Northwest receive a 15% with the code “GOODBUDDY.”

We hope to see you there!