New rules on funding could aid sustainable business
Portland Business Journal by Erik Siemers, Business Journal staff writer
Date: Friday, May 4, 2012
New rules making it easier to use the Internet to attract equity
investors could provide a new pathway to capital for the world of
sustainable business.
But questions over when and how the “crowd funding” structure may be
applied still hold equal weight to the excitement over its potential.
The JOBS Act — an acronym for Jumpstart Our Business Startups — signed into law last month by President
Barack Obama will enable small businesses to use the Internet to raise up to $1 million in small investments from lots of people.
The funding mechanism has generated excitement in the world of
sustainable business, where goals are often driven by a mission rather
than profits, making it difficult to attract angel investors or venture
capital.
“I think everyone can really benefit from this,” said
Jenny Kassan,
CEO of Oakland, Calif.-based Cutting Edge Capital, one of the earliest
advocates of crowd funding who stood alongside Obama at the White House
Rose Garden bill signing ceremony.
Before the JOBS Act, soliciting equity capital online was forbidden
under U.S. Securities & Exchange Commission rules. Companies were
limited mostly to seeking out “accredited investors” — individuals with a
net worth of at least $1 million — giving them just a tiny fraction of
the population from which to solicit equity capital.
The JOBS Act, though, opens the field to an endless array of equity
investors and could allow sustainably focused enterprises the ability to
link-up with investors that believe in their mission.
“There are all kinds of people out there with all kinds of different
motivations for investing,” said Kassan. “Some might be looking for the
next Google. Some might be looking for a business in their community.
Some might be looking for businesses that promote women’s equality. It
opens up a huge new potential group of investors.”
Though the bill was signed into law, Kassan warns that it could take at least two years before it can really be applied.
The law requires companies to use an SEC-approved intermediary
service to solicit investors online, and it could be a while before the
SEC completes the rule-making process. That isn’t stopping advocates from thinking about the possibilities.
“We have a lot of entrepreneurial activity looking at things like
energy, water, shelter, food that’s really improving the quality of life
for our community,” said
Tom Osdoba, the former director of the Center for Sustainable Business Practices at the
University of Oregon’s
Lundquist College of Business. “We now have the opportunity to let
people in our own community have access to these investment
opportunities they didn’t have before.”
The community-backed solar energy projects that have become popular
in Portland, now reliant on tax investors, could become truly community
owned under crowd funding, said Osdoba, who now runs the sustainability
consulting firm TAO Strategies.
Developers of environmentally friendly real estate projects that
struggle to attract bank loans could take their pitch directly to the
community in which they want to build.
“All of a sudden people can put $20,000 and $50,000 into those kinds
of investment projects they weren’t able to do before,” Osdoba said.
Jean-Pierre Veillet can certainly see the appeal.
The president of Portland-based Siteworks Design Build last year
developed EcoFlats Northwest, a net-zero apartment complex that opened
last year that had its own share of troubles attracting bank financing.
Though the concept is attractive, Veillet said he turned away the
several offers he received from people interested in putting $5,000 or
$10,000 into the project.
The reason? There was no easy way to manage multiple stakeholders.
“I quickly conceded that I had enough on my plate with the whole
project,” he said. “I had already consolidated all these costs into one
person. I couldn’t manage multiple investors.”
The challenge for sustainable industries in wading into a larger pool
of investors comes is that their projects are often rooted in a set of
beliefs. And those viewpoints may not intersect cleanly with those of
the people from whom they’re attracting investment.
“How do you deal with micro investors and get everybody on board?”
Veillet asked. “If somebody can put that together, it really does make a
tremendous amount of sense.”
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