Maker Monday: Community Financing


Here’s a short note on a new and promising development called community financing.   It’s going to be very important to our efforts to build resilient communities.

Here’s a simple question:  Outside of your home, what have you invested in?

For most of us, the answer is: Mutual funds.  Bonds.  Gold.  Basically, ways to speculate on the fate of the global economic system.  In contrast, we DON’T own many investments in what matters.  Business that are tangible, productive and local.

Why?  The way most businesses are financed is literally medieval.  Really, nothing much has changed since the Renaissance.  Fortunately, Community Financing is on the way.

In short, Community Financing is a set of legal and technological frameworks that makes early stage financing a market based activity.  How?  It allows customers (in aggregate, acting as a community) a way to finance a business they want to BUY a product or service from.

If you want to get a feel for how quickly the shift to how this works, give “24 hours” from Kickstarter blog a read.   As you can see, on financing platforms like Kickstarter, companies can now raise millions of dollars in financing from future customers.   Wow.

Why does this work so well?  This type of direct financing, via lots of small contributions, cuts out all of the extremely expensive overhead (banks, law firms, venture capitalists) that makes small scale finance impossible.  It also radically reduces venture risk by allowing customers to VOTE with their wallets on the companies they want to see built.

Community financing provides the legal and technological framework to make it possible for you to invest in:

  • The establishment of a local farm or greenhouse that can deliver fresh seasonal produce (from veggies to beef) to you every week.
  • A local energy business that leases solar heating systems to homeowners in your community.
  • A company that has designed and plans to make a product for a new and emerging market (or a very small but passionate market you are part of).
If you can’t see it already, this type of financing is going to be very important for getting resilient communities going during this transition period.  From building the systems we need at the local level to enabling local entrepreneurs and inventors to sell their products to a global audience.

Resiliently Yours,

John Robb

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  • Mike Grace

    Yes! I love this idea and hope we see it take off. This was part of the reasoning behind my wife and I moving our banking from a nation wide bank to a local credit union. A local starters infrastructure would be even better since I get to vote with my money and support future business directly. This concept is great but what is the call to action? What can each of us do to make this happen now or get the ball rolling?

    • johnrobb


      Moving to a Credit Union is a great fist step. It reduces risk (little of the financial speculation you typically see at banks) and it increases the likelihood of loans being made to local people/businesses (i.e. you).

      However, as you point out, that’s just the beginning. A local starters infrastructure is needed. A group of people that seek out entrepreneurs that want to start a new local business, help them find customers and get funded, and then guide them to success…. Find that entrepreneur.

      Sincerely, JR

  • Scott Supak

    Many communities have credit unions that do this kind of thing now.

    • johnrobb


      Yes. However, it’s really hard to get a loan and/or in many cases a loan isn’t workable with a start-up due to cash flow issues.

      In those situations, you need customers to make an investment in the development of the venture they want to see built.


      • Scott Supak

        True that. Kiva and Kickstarter are great, but on a local level, we are members of a few CSA’s (community supported agriculture), and we have loaned money to our favorite local farmers for improving a hen house (coy dogs were cleaning them out), and we get paid in eggs, discounted, over time.

        I’m looking forward to micro-financing where the investors can actually own a small share of the company, something like what this site is heading towards:

        In fact, I understand our clunky ol’ political system might be about to legalize more micro-financing and crowd funding.

        • johnrobb


          Exactly. The only impediment to community equity investing are laws that protect wall street.


  • Richard Lee

    I can’t help but think that the whole process would be improved by shifting the majority of financing to local.

    A quick non-scientific search on the Web, tells me that the average bank loan default rate was 7.2% in 2010 (Source:

    But boasts: “98.91% repayment rate to date.” I’ve made 43 loans on and my personal default rate is 1.44% and my delinquency rate is only 2.01% which is way lower than any bank is going to do!

    My loans certainly aren’t “local” but I think you see my point.

    • johnrobb


      As you point out, the goal isn’t 100% local, it’s mostly local. And if you/me/us are able to do that, we are MUCH better off.

      We lost control. It’s time to get it back.

      Re: Kiva and micro-loans. A good model if loan circles are used. However, in the end, it is just debt.


  • Jan Steinman

    We’ve been trying to do this sort of thing as a British Columbia Cooperative Association.

    We’ve been moderately successful in financing a herd-sharing scheme for distributing raw goat milk products, and spectacularly unsuccessful at trying to pay off the mortgage by selling shares in The Big Picture.

    We have five classes of investment shares set up. Besides Class A (financing the land and buildings) and Class D (financing the dairy herd), we plan to sell Class C shares for Community Supported Agriculture and Class E shares for energy (biodiesel) production and distribution.

    But my personal feeling is that people are not yet hungry enough to cooperate. In ecology, when energy is plentiful, competition dominates, but when energy is dear, cooperation dominates. I’m still waiting for the latter to occur…

    • johnrobb


      Thanks for sharing that. The success of CSA’s appears largely due to a desire among people in urban/suburban settings for superior food products. There are also lots of intangibles such as knowing the farmer, etc. Re-connection.

      However, if you are in a depressed rural area… You are aren’t going to find customer support of that type. You need different strategies.


  • OWSBuenosAires

    Grant, Why don’t you start a Kickstarter project to fund your project, or a crowdtilt project.

    Ben, Kickstarter already has local functionalities, the problem with them is that they pick and choose the projects and even cancel projects as in the case of the couple that designed the helicopter drone, their project triplicated their goal and was canceled. Another thing is that you need to have a US bank account to start a project, and they take 6% of your funding, thats abusive, and they require contributors to contribute via CC or bank cards. Details, details, I know.

    Perhaps a really innovative community financing site should be outside of US jurisdiction

    and use alternative payment methods so as to reduce the transactional overhead and

    allow for some level of conceptual congruency.

    • Grant Henninger

      I had looked into Kickstarter a while ago, and they wouldn’t accept projects where you were trying to start a company. Maybe that policy has changed, I’ll look into it again, because I think many of the users of Kickstarter would be very interested in what I want to do. Although I also think that Kickstarter would see it as competition.

      • johnrobb


        Yes. They don’t accept requests for general funding for a company. As in: I am starting a company to build widgets, give me some money because I’m smart. There’s a good reason they don’t support that: it doesn’t work well.

        The approach that works. Direct pitches for a specific project. I’m going to build this widget. If you invest $20 I will give you a widget when I make them…



        • Driss

          John, if the above is true, if funding a business doesn’t work, how do you propose a community fund local businesses like the ones you listed: farm, greenhouse, energy company, etc?

          • johnrobb


            Funding a business is not something that Kickstarter allows (since it gets them into legal problems with the SEC). What you can do via Kickstarter is to fund a “project” that makes a product. You can offer the product to the people that fund you.

            You can use the same approach (and people have) at the local level. Lots of people that are really interested in a new business and their early purchases of the product (or outright gift) can serve the same function as an equity investment.

            Another is to form a mini-venture fund at the local level. Pool a couple of hundred micro investments and invest. Goldman Sachs used that method with Facebook, and we can copy it.

            I’ll do a mini-report on this after I do some more interviews.



    • Azlinea

      How about a kickstarter-like site that allows any one to donate money and get gifts in return, if the project runners set it up, but allows local people to buy shares in the venture or even send donations of supplies kind of like a reverse of the kickstarter gift system where sending lumber for the new coop will count for say 50 dollars towards the goal. Encourage giving special benefits, beyond mere ownership, for holding one or more shares in the company.

      I’m sure there is a way to facilitate at least basic portfolio management so if you are a prolific backer or your area is heavy in up-starts you can see all your shares. Could allow people to sell their shares to other locals as well.

      You can work bitcoin into the site simply by putting in the infrastructure for it and allowing it as an option when starting a project. And organizations like Dwolla and other anti-paypal groups would be happy to have more business from your site.

  • David Fraley

    An old idea in new clothing. In our little town, it was how our first hospital was constructed in the ’40s. It’s how our local electric co-op is currently constructing a solar pv farm, voluntary customer investment via an adjustment to their bill. It is, by and large how our local irrigation system is maintained. Applying the concept to our current challenges will be a great tool in creating localized solutions less dependent (or independent) of the central systems of food, energy and water delivery.

    • johnrobb


      Definitely an old (ancient) idea, but it’s the differences between how it was done before and now that make all of the difference. Any detail on those projects that you can share?


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