Community Capital Makes Strange Bedfellows

Community Capital Makes Strange Bedfellows

These past few months have shown us an America more politically polarized than ever. Any proposed solution is viewed through a conservative vs. liberal lens, and each side vows to oppose any proposal by the other. So it may be worth asking where community capital fits on that spectrum.

As our readers know, the term “community capital” refers to community-focused investment opportunities that are open to anyone in the community, including both wealthy and non-wealthy investors; in other words, everyone can participate in community capital. But is that a liberal idea or a conservative one?

Our answer: Both. And neither.

You could say that community capital is conservative because that is the way capital was raised for centuries until economic power became concentrated on Wall Street in recent decades. But you could also say it is liberal because it defies the dominant Big Money-driven paradigm.

It is conservative because it is fundamentally pro-business. It is liberal because it reflects the belief that business can be a force for good.

It is conservative because it restores economic power to local communities. It is liberal because it restores economic power to local communities. Oh wait, what was that?

Maybe the traditional liberal vs. conservative distinction just doesn’t make sense when we’re talking about democratizing the economy and empowering everyone to invest, grow local businesses, and build wealth in their communities. Don’t we all want those things regardless of our political views?

It’s true that our firm is based in left-leaning Oakland, California. But our work transcends the political divide. Our mission is to build an economy that works for all. The economy we envision offers opportunities for everyone, regardless of economic class, to participate in the economy, profit from investments, and thereby to build wealth, while financing the growth of local businesses and other values-aligned ventures. When this happens, everyone benefits.

In fact, we see our work as a way for liberals and conservatives to work together toward a common goal. Perhaps the distinctions between those two groups aren’t as important as our common interests. We all want a fair and equitable economy, with opportunities for everyone to achieve their full potential. And we all hope this results in a safe, prosperous, and cohesive community where we live and beyond. Maybe it’s time to forge a movement to democratize the economy and seek these common goals, a movement that includes both liberals and conservatives.

Strange bedfellows? Maybe not so strange.

At Cutting Edge Capital, we’re fortunate in that there is no real opposition to what we do. Our biggest challenge is simply the need for education: Entrepreneurs don’t realize it’s possible to raise capital from their own community. Regular people don’t realize it’s possible to invest in local businesses or in alignment with their values. They only know what Wall Street offers, and they have learned to live with those disappointing options. Because that’s just the way it is. Except that it doesn’t have to be.

We would love your help in getting the word out about what’s possible. How? Invest in local businesses, nonprofits, and community investment funds. Tell your friends about direct public offerings. Help start a community investment fund in your community if there isn’t one already. Little by little, we can together change the culture, and make community capital as ubiquitous as a corner convenience store. Are you in?

What is Community Capital?

What is Community Capital?

Community capital is investment sourced from a broad spectrum of a community, including both wealthy and non-wealthy investors. While typically defined by geography (like a city or county), it can also be based on a common interest (like education or biodynamics).

Why is Community Capital Better for My Venture?

Better terms: Your community invests in you to help you succeed, not just to maximize their profit.

Deeper connection with your community: Your investors can be great ambassadors, and sometimes customers.

Why is Community Capital Better for My Community?

Keep wealth circulating in your community: Through a cycle of investment, growth, returns, and reinvestment, you can help your community build wealth sustainably.

Democratize the economy: You can level the playing field for wealthy and non-wealthy investors alike, and help narrow the wealth gap.

How Can I Raise Community Capital?

Directly, using a direct public offering. This approach offers maximum control over the terms. And engaging your community directly has non-financial benefits.

Indirectly, from a community investment fund, which raises community capital and invests in community ventures. For entrepreneurs, this approach can be easier and quicker. For investors, it offers diversification and efficiency.

What Types of Community Investment Funds Are There?

Charitable loan funds: Some (though not all) nonprofit lenders raise community capital via direct public offerings. Examples include NCCLF and RSF Social Finance.

Diversified business funds: This type of fund supplements another primary business and makes equity or other types of investments, while sharing profits with investors.

Real estate funds: While not a source of funding for ventures, a fund that deploys community capital into real estate can be a key revitalization tool.