Slow Money seeks to catalyze investments into local foodsheds and to bring about a new way of investing, one that is appropriate to place, based on direct relationships and aligned with the values of caring for the commons, sensitivity to the carrying capacity of the planet, and non-violence.
Slow Money is also a response to Global Finance that has, on one hand made investing easy and accessible through intermediation and pooling of capital (think about all the ETFs and all the mutual funds, now in the tens of thousands, which are investment options available to all of us), while on the other hand it has allowed for the disconnect between our agency in the world, expressed through our investments, and the values we hold dear. In other words, Global Finance by making it easy for us to invest through intermediaries has removed our own investments from our sphere of awareness. Most of us are not aware of the individual holdings of mutual funds in which we might be invested, let alone how the individual companies in them are utilizing the capital and how they treat their employees, the communities they affect, and the environment.
The financial industry has also been shaped by the regulatory environment. Securities laws were introduced in the 30s and 40s to protect inexperienced individuals from unscrupulous financial operators. A good short summary of the main securities laws in the US can be found at http://www.sec.gov/about/laws.shtml.
Over time the regulatory environment has evolved to create two classes of investors: accredited and non-accredited. Accredited investors are people with significant financial means (either due to a high income or a high level of assets) and are considered by the SEC (Securities and Exchange Commission) to be able to “fend for themselves.” Non-accredited investors are deemed to be in need of greater protection against risky or unsuitable investments. In order to obtain investment capital from non-accredited investors, companies or financial intermediaries need to comply with federal and state securities laws that impose significant organizational, compliance and legal costs.
The result is that, while accredited investors have access to a very broad set of investment options, non-accredited investors can for the most part only invests in publicly traded companies (large companies that managed to have their securities registered and listed on a major stock exchange) or in mutual funds (either directly or through their 401K plan).
The type of enterprises that are looking for Slow Money capital, tend to be small food and farming enterprises that will most likely never be able to meet the requirements for listing their stock on a major stock exchange (just for reference, “small” for listed companies means less than $500M in annual revenues!) Most of the mutual fund companies that are open to non-accredited investors can invest primarily in publicly traded securities and need to have a substantial scale (assets under management) to be economically viable. For reference, a mutual fund company needs at least $50M under management to be a viable business.
Hence the Slow Money juggernaut – Slow Money wants to catalyze flow of capital to local food and farming enterprises and wants to be inclusive of all potential investors, not just accredited. Non-accredited investors can invest primarily, if not exclusively, through mutual funds or by buying publicly traded securities on the major stock markets. Yet, the typical Slow Money enterprises are too small to have publicly traded securities and therefore will not be part of mutual funds available to non-accredited investors.
What Slow Money is trying to do is therefore not easy; yet, it is necessary to revitalize and strengthen the local food economy and restore the fertility of the soil.
In the last couple of years there has been some positive movement towards reforming the Federal regulatory environment to make it easier for regular folks to invest directly in businesses and in their own local economy. The JOBS (Jumpstart our Business Startups) act of 2012 signed into law by President Obama, has a crowdfunding provision (title III) that would streamline the registration process for companies looking to raise $1M or less through crowdfunding platforms. While the SEC has not yet ruled on the implementation of this law, there are already a number of investment crowdfunding platforms in development ready to offer investments once the SEC provides the go ahead. At the same time, a number of states have been passing similar state crowdfunding laws that might be even more relevant for local investing.
In the meantime, a number of approaches have been tried in various parts of the country.
The most common and accessible way to invest in the local food shed is by prepaying for products or services. The CSA (community supported agriculture) is a common example. People prepay for their yearly delivery of produce. Gift cards are another form of prepayment of services or products. A new platform called Credibles takes this funding option to a new level by making it easy to redeem and keep track of “edible credits”.
The next avenue for investing locally is making a direct personal loan to an entrepreneur in need of capital. Some arrangements have included creative in-kind payments for interests and sometimes part of the principal.
Another option is to form an investment club where a number of investors pool some of their funds and collectively decide where to invest. Most of the investment clubs in existence in the US invest in publicly traded securities. A few investment clubs inspired by Slow Money have invested in small loans to food and farming entrepreneurs.
Investments in the equity of Slow Money enterprises tend to be limited to accredited investors, or, if the securities are private offerings issued under specific registration exemptions (e.g. regulation A or regulation D), to a limited number of non-accredited investors. A newly rediscovered and promising tool for local investing, including equity investing, is a Direct Public Offering – a way to register an investment with State regulators in each State where investors are sought, which allows non-accredited investors to participate. Clearly, taking an equity position in a small privately held enterprise is not an easy proposition and requires the proper assessment of the liquidity and financial risk associated with it.
What we are doing at Slow Money is building the new restorative economy. Our financial, regulatory and cultural institutions are not set up to accommodate the emergence of a restorative economy and it will take a lot of learning, experimenting and co-creating to bring about the necessary conditions for such transformation to take hold. This is a collective endeavor that requires our creativity, engagement and participation. Thank you for being part of it!
Don’t miss the upcoming Slow Money conference November 10 to 12, 2014 in Louisville, KY!
Marco came to the US as a Fulbright scholar in mathematics and economics at the University of California in Berkeley. After a stint in the financial industry, Marco worked as visual artist on a full-time basis for 5 years and obtained a MFA focusing on the intersection between public art and ecology. He later worked for 6 years managing investment equity portfolios primarily on behalf of large foundations and endowments. In April 2009 Marco left the finance industry and has since been instrumental in the formation and development of the Slow Money Northern California chapter. He is sharing his experience doing direct Slow Money investments with communities around the country to help them increase their capacity for local investing. Marco is currently developing Essential Knowledge for Transition – a curriculum for engaged citizens to understand the money and banking system, the economic system and the financial system and how we need to transform them.