Community capital provides new access for citizens to invest and removes barriers to entrepreneurship. Historically under-served communities (i.e. African Americans, Native Americans, Hispanics, women, and rural), can now invest in the enterprises they believe in. They are starting businesses and accessing capital from sources other than those reinforced by the status quo (credit card debt, mortgage, etc.). Local economic development relies on the engagement of it’s local citizens, and community capital encourages that engagement.
Businesses are now being created by the community to benefit the community, and being financially supported by that same community.
Social Equity & Community Resilience
More access to local capital means more local businesses, means more local jobs, which means more financial resilience, etc. Communities are no longer reliant on big box stores, franchises, or other big businesses to swoop in and solve their short term economic problems (only to later close and leave behind even more problems).
Entrepreneurial citizens, intimately familiar with local issues, can use community capital to fund the best solutions for themselves. They can enlist the support of their fellow community members, and everyone benefits! Local business isn’t just a way for people to make money, it’s a way to address the needs and desires of an entire community.
Who are the players in local economic development?
Small business owners, “buy local” advocates, economic developers, community developers, non-profits, entrepreneurs, and citizens looking for investing opportunities all have a huge stake in their local economies. These organizations and individuals will shape the future of community capital.
Small business owners can leverage community capital when other options are insufficient. Competition for resources, ineligibility for bank loans, and socioeconomic barriers are some of the huge challenges that entrepreneurs face. Local investing is a new and accessible avenue for acquiring startup and growth capital.
Citizen Investors & Local Investing Advocates
Every citizen can invest directly into businesses, in a way that was previously available only to a few. This new-found status does require awareness building and cultivation of financial literacy. Luckily, there are folks in every state ready to champion this work. “Buy local” leaders, sustainability leaders, and social equity leaders are recognizing the overlap that community capital has with their causes. Nationally, economists, non-profit leaders, and journalists, have taken on local investing as their life’s work.
And… Economic Developers!
This sounds like a movement that everyone can get involved in in one way or another. Where do we start?
Economic and community developers are poised to bring together of all these stakeholders. They already work with city officials, business incubators, citizen coalitions, and business professionals. This is why we created ComCap17 with economic developers in mind. These folks have the power to go back to their states and enroll their community stakeholders in this modern form of funding.
In the past, the attract and retain model was looked at as the holy grail. Now, economic development professionals are becoming increasingly aware of the economic multiplier effect generated by growing business from the ground up, locally. Our friend, economist, Michael H. Shuman, talks about this often.
The Community Capital Ecosystem:
Capital that is sourced from a community, stays in that community, and benefits the community. Economic engagement with the businesses in our backyard.
There are now many state-based crowdinvesting mechanisms across the country which enable 100% of the population to invest. Direct investing is no longer just for the wealthy.
Community capital opens up business financing for communities who are typically underserved & underrepresented—Native Americans, African Americans, and women for starters.
Not all businesses are eligible for bank loans, and most are not suited for venture capital or angels. Community capital gives entrepreneurs a way to convert social capital into investment capital.
“Growing our own” versus “attracting and retaining”—community capital is a locally sourced tool for cultivating business and increasing wealth in a region. It’s local economic development at it’s best.
Communities being able to develop and finance their own businesses means that they are not dependent on big box stores for employment. Capital and creativity are retained in the community.
From buy local to invest local, community capital provides an opportunity for citizens to influence their economy and actively support the kind of businesses they want to see in their community.
Community members who benefit from a business with a social mission are more incentivised to invest than angels and vc’s who are focused on big returns.