When the JOBS Act was signed into law, it was hailed as a major step in democratizing finance and opening up new pools of capital for small businesses, especially those run by women, minorities and social entrepreneurs who have traditionally struggled to raise funding. For the first time, everyone could be an impact investor.
So is money flowing from business-as-usual into these categories?
It’s still early, and the picture is mixed. The first companies to take advantage of the new law have included a sprinkling of B Corps and social enterprises, as well as women and minority-owned ventures. There have been innovations such as the “bionic kidney” produced by public benefit corp. Beta Bionics and funded mainly by the Type II diabetes community, and ambitious undertakings like Elio Motors’ three-wheeled electronic vehicles.
But many of the offerings under the JOBS Act have been tech or hardware-related—a category that typically has not lacked for funding options. And the bulk of the businesses have been in California, New York and Texas, leaving large swaths of the country untouched. And, mirroring broader funding patterns, they’ve been predominately run by white males.
There are some options for socially-driven entrepreneurs and investors. CircleUp, a San Francisco-based funding site, focuses on emerging natural/sustainable consumer brands, and has a diversified fund of B Corps. But the site is only open to accredited investors. Republic is targeting innovative and mission-driven ventures. And there are funding platforms dedicated to solar projects, such as Solar Collective.
Now a new crop of funding platforms is putting social impact front and center. Here are four mission-driven funding sites that are launching soon.
For Eve Picker, a Pittsburgh-based architect and urban developer, many real estate crowdfunding sites treat buildings like an afterthought, a thing to make money on. So she created her own site, called Small Change, to fund projects that make cities better. The first campaign raised $100,000 from accredited investors to build an affordable and eco-friendly “tiny house” on a vacant lot in an underserved neighborhood of Pittsburgh. To highlight a project’s sustainability features for investors, Small Change provides a Change Index which lists criteria such as green building practices, Walkscore and Bikescore, jobs creation, street activation and other features. The site’s first deals were reserved for accredited investors only, but Picker just received SEC approval to become a Title III crowdfunding portal and is lining up its first offerings that will be open to all investors.
“Everyone should be able to invest in what they care about most, and in places they love,” says Katryn Bowe, cofounder & head of impact for New York-based rabble, which bills itself as an impact investing platform that connects people with projects that strengthen communities and provide social, environmental and financial returns.
Rabble will initially focus on Regulation A+ offerings. While that exemption allows companies to raise up to $50 million, rabble aims to fill the financing gap for “impactful, innovative projects under $5 million that are otherwise overlooked by traditional sources of capital,” says Bowe. That might include community solar projects, small businesses, green buildings, healthy food and other double-bottom line projects. Bowe and her colleagues will manage the entire process from due diligence, forming the investment vehicle, and communicating with project backers. Rabble plans to launch with its first project in January 2017.
Neighborly began its life as a civic crowdfunding platform. More recently, it has set out to transform the municipal bond market and reconnect it to its civic roots. Muni bonds are loans that are taken out by cities, towns and other governmental organizations to pay for projects for the public good, such as roads, bridges, schools, renewable energy projects and parks. Over the past few decades, the multi-trillion dollar market has become complex and opaque, with a large chain of Wall Street middlemen driving up fees, especially for smaller issuers and investors. Neighborly works with municipalities and other issuers to structure and directly offer bonds to local investors. After securing a broker-dealer license, the company plans to conduct its first bond offerings—from five cities selected through a nationwide competition—starting early next year.
It’s crowdfunding’s most unlikely pairing: former Talking Heads guitarist and keyboardist Jerry Harrison and former Morgan Stanley wealth manager Brian Smith are teaming up to launch Red Crow, a crowdfunding platform that will raise money for companies under Titles II and III of the JOBS Act. The duo will focus on high impact, early stage companies, starting in the healthcare and medical devices field. Future verticals may include cybersecurity, fintech and artificial intelligence. The idea, they say, is to allow people to invest in companies that matter to them or in fields that that they have expertise in. To that end, Red Crow will initially target doctors and medical professionals as investors when it launches in November. As a broker-dealer, Red Crow plans to professionally vet each company, and will allow novice investors to invest alongside experts and pros.