Last week I spent four days at SOCAP - also known as Social Capital Markets – a convergence of social entrepeneurs and investors who are looking to make an impact in the world.
I went partly to learn from other entrepreneurs, partly to learn more about the whole impact investing world.
I walked from seminar to seminar and the one entrepreneur who's story I most resonated with the most was a young man who was trying to build grocery stores in a depressed area of Oakland, California. The area had a population that represented up to $47 million in groceries every years – yet it was a wasteland for groceries. No major grocery chain would build there.
For many of the residences of West Oakland, getting high quality fresh vegetables and other groceries would mean several bus trips or expensive cab services.
So not surprisingly, many of them relied on what was offered at their local convenience store. If you've ever tried to put together a meal from one of these places, you know that a combo of beef jerky and Snickers is sometimes your only option for dinner.
I listened to how he had gone through all the hoops that stand in the way of getting investment. He applied for all the grants, the scholarships and the opportunities to pitch to investors.
He said that everyone agreed this was a noble, worthwhile idea - but when it came down to it - very few investors were interested in the small profit margins that are typical in retail grocery stores. Others balked at the idea that this entrepreneur was committed to making sure this grocery store maintained its independence instead of having a 5-year exit strategy.
Instead he turned to the people who were really going to benefit from this grocery store and asked them to pitch in and help. He explained a new law that would allow ordinary people to invest in corporations - without being accredited.
The way he did this was to offer his customers 10-year notes that would allow the grocery store to be built and maintained - and they would be paid back in the form of groceries.
In effect, he gained a bunch of micro-investors, they prepaid for their groceries by investing and the store stays open. This was the next level of 'crowd-funding,' and I like the sound of it!
The world of Kickstarter, Indiegogo and all the other crowd funding sites is wiping away the middle-man-decision-maker. Instead of waiting for the angel investors of the world to decide what idea to fund and bring to life and which to leave on the shelf, the customer is put into the driver's seat.
Don't like that there isn't a dry cleaner on your block that doesn't use harsh chemicals? Find one that does and donate to its survival. Ever feel the annoyance of seeing something on a fashion runway you love but which you never see in a store - nevermind - in the future you just 'vote' for it to be put into production.
I recently learned of a promising drug for Alzheimer's that is based on a natural substance. Even though preliminary trials showed great promise, the article I read said that no pharmaceutical company was interested in developing it and without ‘big pharma’ spending the approximately $1 billion it takes to get a drug through the FDA, it was just languishing.
I say if there are 5 million Americans suffering from this disease - and who would be directly affected by whatever benefit it might provide - shouldn't they be given the chance to fund its research?
The other reason I love this new age of crowd funding is because it democratizes the investment process. Instead of trying to find those few wealthy individuals who are willing to invest in Indigo Handloom, I’d rather build a community of people who share our passion for sustainability, for preserving cultural skills and art forms and for giving people the dignity of work.
I would greatly prefer an investor who is sincerely committed to the growth of Indigo Handloom and who loves our fabrics and what we do over an investor who loves our numbers.
I also love that crowd-funder get to have that pride in knowing they supported a company that shares their values. They were the ones who spotted an idea early and had the foresight to support it.
So I came back from SOCAP and basically canceled my trip to NYC to present my company at Investor's Circle. I also found out Indigo Handloom was not picked to present this round - but we were still invited to showcase our company in an informal booth. I decided that since it coincides with the L.A. Textile Show - it was too difficult to do both. I also thought that right now, I'm more intrigued with the power of crowd-funding.
As for all the donations that came in – first of all – thank you for all those who contributed! It was so heartening to see how many people got behind us so with 24 hours. I will use that money at the next meeting of Investor's Circle in March. I'm not giving up on finding a angel investor- just exploring other options.
So don't be surprised if you see a request to view our Kickstarter or Indigogo video in your inbox some day soon!