While Wall St. and Bay St. have revealed themselves to be deeply disconnected from the process of true value creation and unable to respond to Main Street opportunities, there is a new set of tools — crowd funding — that is giving rise to the citizen investor. There is a unique role for social enterprise to play as a part of this new movement.
On July 16th, the Centre for Social Innovation, in partnership with Cdling, is hosting an event with guest speaker Sherwood Neiss, a key driver behind the crowd funding regulatory changes in the US, and several other experts to explore the potential of crowd funding, crowd financing, crowd equity and other crowd-based investment strategies.
Powered by the internet, crowd funding is profoundly shifting the power dynamic and reconnecting entrepreneurs with their market (constituents/investors). These new tools are uniquely suited to social enterprise.
Whether the project is to raise $5,000 for an art project, or $30,000 to pay for equipment for our fair trade café, or $200,000 to capitalize an online collaborative consumption platform, crowd financing will provide more than just money. Crowd funding:
- Leverages the power of community and connects projects to real constituency. Community groups and mission-related initiatives almost always have a vibrant constituency already tapped into a key social issue. Whether it is a school eco-garden or mobile app for managing diabetes, there are communities that “care” that can be tapped into to test the viability of your project. They’re often willing to offer their support, advice, networks and investments to make great ideas that matter come to life.
- Fills the gap for smaller initiatives that are rarely able to access the capital that they need to get started. Venture capital is changing. The cost of start-up has dropped tremendously. With knowledge and service as the foundation of the new economy, smaller amounts of investment are needed to finance an agile, boot-strapped enterprise. There is less of a need for giant capital & equity investments, and more need for loans and support for cash flow. Crowd financing promises to fill the smaller financial gap without needing the entrepreneur to enter into complex equity agreements during the early start-up phase before they have tested the viability of their model.
- Democratizes investment, providing a meaningful place for citizens to put their money to work. We learned through the sale of CSI’s Community Bonds that there is a huge community of people that are looking to align their investments with their values. The banks have a stranglehold on the common investor – with their assets trapped in an RRSP framework with little flexibility to invest outside unless they’re already rich. Crowd financing is the beginning of a larger effort to “invest locally” and to bring amplified meaning to our investments. Social enterprise fulfills an investor’s financial and values-based goals, creating meaning and a reasonable rate of return.
CSI is advocating for regulation that strikes a balance between investor protection and a diversified funding and financing strategy for social enterprises and start-ups.
Our work bridges the space between for-profit and nonprofit, and crowd financing serves both. We believe that the social mission sector will be uniquely able to leverage this exciting social innovation — reconnecting our social missions with the citizens that care so deeply about what we do.
Let’s work together with the Ontario and Federal governments to create an enabling environment that will empower citizens to put their money where their hearts are.