Community capital is a set of strategies that allows people of any economic status to invest in their community. Community capital projects utilize locally-sourced and locally-invested financial capital, raised from an economically diverse group of investors. Community capital makes local investing accessible to all, not just the wealthy.
Community capital poses an alternative to traditional investment models that have contributed to increased wealth inequality, a concentration of power, and large-scale social and environmental disaster. Historically, Americans have understood investment opportunities as purchasing stocks and bonds issued by publicly-traded companies on a stock market, which effectively drains monetary resources from small businesses and main streets. Taking a closer look at our communities and the places where we live and work, we see that the real drivers of our prosperity are locally-owned businesses. A growing body of evidence demonstrates that small businesses, which constitute over half of our economy, are the most important creators of local income, wealth, and jobs. Community capital allows us to redirect investments away from Wall Street and back to Main Street.
Community capital also expands investment opportunities for “retail” investors, ~95% of potential U.S. investors (i.e., anyone who does not qualify as an accredited investor). While complex securities regulations make it difficult for retail investors to engage in private markets, or off-Wall Street investments, it is possible. Community capital models intentionally include non-accredited investors in capital raises. Without a conscious shift in who can participate in private capital markets, we are left with an economy where big decisions about the flow of resources are made by only 5% of the population. Unsurprisingly, accredited investors do not represent the range of identities and perspectives necessary to co-create a better economy. According to a 2017 Wharton study, 87.6% of Angel Investors in the U.S. are white and 78% are men. We desperately need an investment ecosystem that better reflects our country’s diversity to create an economy that works for everyone.
Community capital also expands investment opportunities for “retail” investors, ~95% of potential U.S. investors (i.e., anyone who does not qualify as an accredited investor). While complex securities regulations make it difficult for retail investors to engage in private markets, or off-Wall Street investments, it is possible. Community capital models intentionally include non-accredited investors in capital raises. Without a conscious shift in who can participate in private capital markets, we are left with an economy where big decisions about the flow of resources are made by only 5% of the population. Unsurprisingly, accredited investors do not represent the range of identities and perspectives necessary to co-create a better economy. According to a 2017 Wharton study, 87.6% of Angel Investors in the U.S. are white and 78% are men. We desperately need an investment ecosystem that better reflects our country’s diversity to create an economy that works for everyone.