Investing for All Series
Rabble talks ‘local investing’ with Amy Cortese
We sat down with award-winning journalist Amy Cortese to discuss how a small shift in investment toward locally-owned enterprises can empower investors, communities, and the country as a whole. We devoured her book “Locavesting: The Revolution in Local Investing and How to Profit From it,” which Nobel Laureate Joseph Stiglitz described as “an inspiring look at what local businesses can achieve.” As someone who coined the terms “citizen investor,” we wanted to dive into her views on what makes local investing so powerful, how people can become involved, and how she came to where she is now.
November 17, 2016
20 years ago, could you have pictured yourself as an advocate for local ways to raise capital?
When I was an editor at Business Week, I would have been shocked to see where I am now. It is a big leap to go off on your own, and leave behind a good, stable, and rewarding position. But I found my passion: helping to build a more just and robust economy.
Have there been in any breakthroughs in local investing?
Until very recently, it was nearly impossible to invest locally; you had to be an accredited investor, or personally know an entrepreneur who was raising money. Now, there are mainstream ways for average people to invest in private, local companies.
The financial crisis in 2008 inspired people to turn their disgust with Wall Street into action–there was a strong desire to fix what was broken. People were stepping up and voting with their money. They were looking for ways to invest that could help rebuild communities that had been devastated by the mortgage crisis, and investments were their tool.
Then, in 2012, the JOBS Act blew the door open for local investing. With investment crowdfunding, all Americans are now able to invest in small businesses and new ventures. And suddenly there is an outpouring of innovation in this area. There’s a new CD product, for example, that lets investors provide seed funding to African American entrepreneurs starting in Oakland, CA. And there are new community-focused loan funds starting to emerge.
What is so powerful about local investing?
First, local investors bring a lot to the table that conventional investors cannot. Businesses found this out during the economic downturn. When a business struggles, traditional investors are often quick to cut their losses—banks may pull the loan or cut credit lines, or venture capitalists may replace the founder. Local investors, in contrast, are often patient and supportive, and this makes a huge difference.
Second, local investors help to level the playing field. They can provide much-needed capital for entrepreneurs, particularly women, minorities and those in rural regions who have often struggled to get funding from conventional sources. This is especially true with crowdfunding, where the early results suggest that women, in particular, are benefiting.
Finally, it can be very empowering for people to invest in the kind of business that fill a need in their community, whether that’s a coworking space, a small manufacturer that plans to hire locally, or a microbrewery.
What does this look like in real life?
The Greenlight Bookstore in Brooklyn is a great example. The neighborhood really wanted a bookstore—that was always the number one amenity that people cited in surveys. So people were thrilled when two women decided to open a bookstore there. They were set to open in 2008, but the bank pulled their loan, as many banks did then, leaving them with a big funding gap. So two-dozen locals loaned the women money to make up for that. The bookstore was profitable its very first year. The investors made 3% or 4% interest during a time when the stock market tanked. And they are its biggest fans; they are ambassadors, evangelists, and loyal customers.
There may be simpler ways for a company to raise money, but the customer engagement and marketing advantages of local investors cannot be underestimated.
Was there a personal juncture that led you to where you are now?
Yes, there were two. 9/11 was a profound moment of reckoning for me. It made me want to focus on more meaningful things. I had been covering tech at the time, but the dot-com experience really busted any illusions. I had been a VP at an internet startup that went public. I thought I was in good shape (at least on paper!) to leave there and freelance.
I started writing about sustainable business, writing some of the early articles on it for the New York Times. I wrote about local food. I tried to contribute something to the world about how the role of business was changing.
The second catalyst for me was the financial crisis, which made me much more of a populist. I realized the problem is not capitalism – it is corporate capitalism. We are captured by corporations. They buy our politicians, write our tax laws, and run rough-shod over Main Street. 98% of businesses in the US are small businesses, but everything is stacked against them. They create 2 out of 3 jobs, and create much more stable and resilient economies. There are numerous studies showing the contributions they make to society and the economy – not to mention to the health and social well being of their neighborhoods.
Yet the laws and tax subsidies are all tipped in favor of big business.. And that’s why I got involved in the local economy movement.
What do you love about your neighborhood?
I live in Boerum Hill, which is in Brooklyn, New York. I love so much about this neighborhood – especially the walkability. I just walked down to the Brooklyn Bridge park, which has gorgeous views of Manhattan. There is a human scale here. I love it.
To learn more about Amy Cortese and her movement, visit locavesting.