News

Understanding Crowdfunding

Nov 9 2012

Because of securities law developed in the 1930’s, it has been next to impossible for an individual to invest in a local business down the street. These restrictions have led to investment patterns that are almost entirely non-local, robbing our local economy of investment capital that could put more people in business and more people to work.

Crowdfunding may help individuals finally start to reverse this trend.

Crowdfunding describes a group of individuals who pool their resources to support a particular project. Having spent the past few years garnering interest as a potential way for local residents to invest in local businesses or causes they support, crowdfunding received a major boost from the Jumpstart Our Business Startups Act, or JOBS Act. Signed into law by President Obama in April 2012 and passed with bipartisan support, the JOBS Act relaxed various depression-era securities regulations to allow for-profit enterprises to raise funds from everyday individuals.

In New Orleans, crowdfunding is already having an impact. Rebirth Financial has been providing loans funded by New Orleanians to New Orleans businesses since 2010. Loan recipient NOLA Brewery used their loan from Rebirth to purchase the equipment necessary to get their brews in cans. And New Orleans is one the nation’s three “Kiva Cities,” along with Detroit and San Francisco. Kiva, via Accion, provides micro-loans for New Orleans entrepreneurs who have been turned down by conventional lending sources.

As the SEC continues to hammer out rules for this new game, it may be years until we find out the true impact that crowdfunding has in redirecting investment from Wall Street to Main Street.

What is certain is that crowdfunding presents a mechanism by which we can keep our investment dollars in our local economy while benefitting the businesses and causes that we want to support.

Crowdfunding is one of several local investment opportunities that will be presented at the Local Investing 101 Workshop scheduled for February 27, 2013 in New Orleans. The workshop will be led by renowned economist and author Michael H. Shuman and is hosted by The Urban Conservancy and Stay Local! with assistance from the Twomey Center for Peace through Justice at Loyola University. Generous funding for the workshop is provided by IberiaBank and the Federal Home Loan Bank of Dallas. For more information, contact Mark Strella, Stay Local! Project Coordinator, at 504-561-7474 or mark@staylocal.org.

This article was written by Mark Strella, Stay Local! Project Coordinator. Strella holds a BA in Political Economy and Environmental Studies. When not grappling with thorny issues related to the local economy, you can find him playing guitar with local band Gold and the Rush.

Filed under: Projects