By Elias Crim
If you’re like me, you’ve already had a meal or two at Valley Kitchen & Bar, our fair city’s new and very good “locavore” restaurant for folks who like the idea of eating locally grown food (especially when it’s tasty!).
So are you ready now for the next wave in localism? It may be locavesting, as former Businessweek editor Amy Cortese describes the movement to get small businesses everywhere off their capital-starved diets.
It won’t be easy. We know the Big Board no longer cares much about the productive use of capital, while most community banks—traditionally the mainstay of small business funding—are an endangered species. (Valpo is fortunate to have almost a dozen independent banks and credit unions.)
As citizens of cities and towns across the country have watched their downtowns (i.e., small businesses) decline over the last few years, a growing number are fighting back efforts such as the “slow money” movement, a grass-roots investment trend aimed at reconnecting capital with place.
Forget credit default swaps and derivatives. The kind of financial innovation we need, Cortese argues, is found in “crowdfunding” startups such as ProFounder, Funding Circle and Grow VC, in grassroots groups like Slow Money, and in communities like Lancaster PA and the Hawaiian Islands which are working to bring back local stock exchanges. (We had an Indianapolis Stock Exchange about a century ago, and towns such as Memphis, Cincinnati, Buffalo, Salt Lake City, Hartford, and Milwaukee, among others, also had their own exchanges, some as recently as 1991, when the Spokane Stock Exchange finally closed.)
Then there are local investor groups forming “nurture capital” who might simply band together to save their 111-year old bakery, as did nine cops in Clare Michigan three years ago, and thus saved their downtown area along with it. It’s not only the Green Bay Packers or startups like Ben & Jerry’s who utilize local investors. More and more new companies are choosing to bypass Wall Street and other financial intermediaries in order to sell directly to their own customers. It’s called community capital.
Locavesting is not intended to be the primary strategy for most investors. And if you call your Charles Schwab office for tips, you’ll be told the firm simply doesn’t make local recommendations. Why? Partly because they simply don’t know the companies and the management.
But that’s just the point: from your local base you can know them and even invest in them, maybe for 10% of your portfolio. In exchange for accepting some geographical risk and probably a lower return, you get the satisfaction of supporting local job creation (that’s how it’s really done, folks!), having a stake in the community and helping to sustain it long-term.
Could Valpo see the next Urshel or Family Express or (for that matter) Apple Inc. start up here from local investors using, say, the new vehicle of public venture capital (also known as DPOs or direct public offerings)? If you already try to buy local and even eat local, it may be time to consider investing in the local market—just as our ancestors once did all these things, just a short century or so ago. Given the times we live in, it beats the Wall Street casino or (more locally) a night at the Horseshoe, doncha think?