Ecosystem

A Social Enterprise Magnifies The Power of Local Businesses

Amy Cortese | November 4, 2015

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When a shopping center was built on the outskirts of the Northwestern small town where Katrina and Michael Scotto di Carlo lived, the couple watched as one shop after another on Main Street closed.  They both had occupations—Michael as a professor and Katrina as an artist—but they were haunted by the closings. After doing some research, they decided that coalition loyalty—where multiple businesses band together to reward customers—was the solution: It drove revenue to the businesses, directly engaged citizens and could be measured via transaction data.  And it helped independent businesses compete with encroaching chains.

So in the middle of the recession, they took a leap. Michael quit his job as tenured professor and Katrina, an artist, put her work aside and the two launched Supportland, a digital loyalty platform that has been active—and beloved—in Portland, Oregon for five years. The platform lets customers earn points for shopping at local stores and redeem them across the network—which has grown to more than 180 businesses and more than 80,000 users.

Fresh off a name change and its first international foray (into British Columbia), we caught up with Katrina to talk about the company’s expansion plans and the financial challenges of being a social enterprise.

Amy Cortese: You recently changed the name from Supportland to Placemaker… why?

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Michael and Katrina Scotto di Carlo

Katrina Scotto di Carlo: Besides being playful and punny, Supportland was a recognized brand in the local economies movement, so it was hard to give up. But while it made sense in Portland, as we expanded into new communities we weren’t sure it made as much sense. Thankfully, our team in British Columbia has no qualms about knocking us out of our Portland tunnel vision. They felt strongly that a new name, especially one that embodied our social mission, would make more sense in their communities. That’s how we got to Placemaker.

AC: As a digital loyalty platform, you’ve attracted interest from traditional tech investors. But you recently turned down a big investment from a venture capitalist…

KS: It was a hard decision for us. We are very involved in the tech startup community and it’s easy to get swept up in the momentum. But, as a social enterprise, every decision we make has to be way more meticulous. For us, it was a question of does this fit into our vision? And the answer was no.  But it’s also a question of how much suffering can you take as individuals. Neither one of us has a regular paycheck. There’s food, shelter, taking care of my children—that’s where it gets dicey and the grass can seem greener.

“Building stronger local economies doesn’t feel political. It just feels like the future.”

I don’t think the social enterprise space knows what to do with a social enterprise that gains traction and is ready to scale. We’re good at getting folks up and running, but then you get to a point and it’s like, “OK, time to pull out your machete and hack your way through!”  The tech space doesn’t need machetes—they’ve got a superhighway. It would be quite a load off to only have to care about revenue.

AC: So what’s your Plan B?

KS: Right now we’re focused on leveraging partnerships. We’re also investigating becoming a consumer cooperative. The idea that every community would have ownership over this makes us really happy. We’ve been meeting with Equal Exchange and the folks at the NW Cooperative Development Center to ferret out the viability of a cooperative model, but again, there’s no blueprint so the planning must be meticulous.

Related: Coops Find new Options in Investment Funds and Crowdfunding

AC: Can you talk about other communities coming online?

KS: If you’re up against venture-backed startups and you’re going to eschew venture capital, you need to figure out a way hack the “Series A” fundraising event. For example, a typical startup in our space usually raises millions of dollars, which allows them to put “boots on the ground” and cold call small businesses. Our social mission may close the door on venture capital, but it opens doors with value-aligned partners like Think Local First campaigns. Our “boots on the ground” are folks that want to see their community thrive. This is a very people-powered, grassroots approach to scale, and we’re talking a number of communities. While the pace may be slower than the conquer-and-extract approach of venture capital, we’re staying true to our core mission and seeing sustainable success in new communities.

AC: What are the benefits of Placemaker for small businesses and communities?

KS: Customers are ricocheting off independent businesses. Since everyone’s operating in isolation, larger non-local competitors can easily swoop in with the resources of scale, like consumer psychologists, data scientists, marketing experts, etc. Breaking down this isolation is key since independent businesses make up an astounding one-third of the economy. One-third! Imagine if we all started working together to share customers with the sophistication of the big guys—we’d be formidable! Placemaker turns the interactions at one independent business into a sticky entry point for all independent businesses. This means more revenue for independents and healthier communities overall.

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Screaming Sky Gallery in Portland is a Supportland member

We did a recent impact analysis that found that when a customer goes to a business that’s engaged on Placemaker, on average they will go to nine other businesses in the network. That means we’re turning one interaction at one business into revenue for nine other businesses. We provide a dashboard and analytics so businesses can see this all more clearly.

AC: What’s your revenue model?

KS: While we aren’t able to eat any costs, we also aren’t trying to make out like bandits. So our negotiations with partners around revenue look a bit different than it does in Silicon Valley. The sharpest negotiating tool in our belt is transparency. Since our partners share the same social mission, it makes transparency really easy because we’re all on the same side. We just outline what revenue we need for operating capital and see if that works for them. In general, partners have decided to find a financial sponsor to cover administrative costs on their end (in Victoria it was a credit union) and pass through the revenue from participating businesses to Placemaker to cover our operational costs.

AC: What’s your vision for Placemaker going forward?

KS: After doing our impact analysis, I’ve got a new fire burning to scale this social impact to as many communities as possible. There are 142 communities that we’re looking at currently. Imagine those many communities networking their independent businesses together! That feels like a movement. There are also cool implications to having that many independents working in unison, and that’s the data we collect with every transaction. We keep the data anonymous, but we are able to use it in bulk to help further the goals of the local economy movement.

You know when they report holiday sales every year? I want it to be Amazon, Walmart and Placemaker, so that independent business is not this weird shadow economy. I want to hold the SBA (Small Business Administration) accountable. I want every politician to have data visualizations of the contributions of independent businesses in their districts. Right now independent businesses is left out of every debate because there’s no numbers. Placemaker at scale will have this data as a byproduct of our operations.

AC: So is this ultimately a political platform?

KS: Ha! I’d never considered that. We definitely want to leverage our data to help independent business be counted when it comes to policy, but building stronger local economies doesn’t feel political. It just feels like the future.

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Comments

  1. I write in support of your approach because economic and community development is more city focused than ever before. Author Jim Clifton from Gallop talks about the importance of cities becoming the best that they can be because each unique city competes for talent with every other city in the world. In the case of Placemaker, the structure of the “market” allows people of like mind to find each other within a city, with the best technological tools available that are a product of a highly competitive world. Amy Cortese might want to visit the City of Lincoln, Nebraska to observe the emerging small business revolution in process. Entrepreneurs are attracted to Lincoln because young business owners like the quality of the schools from K-12 to PhD as well as the safety, cooperation and farm to table values. The emerging Think Local First or Innovation Campaigns are also springing up in China. In summary, I think we should all share notes on what works within our evolving structures to help each other. Most importantly, the data that could be produced by Placemaker could be used to reshape how governments help small businesses grow. Everyone will win!

    1. Thanks for calling out Lincoln, Kim! Sounds like there’s a lot of momentum for local. And, yes, we’re hoping our data can be used by gov’t entities to get real time understanding of the importance of independent businesses in the greater economy.

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