Tuesday, April 27, 2010

Backyard Investing

"In the absence of major reforms at the Securities and Exchange Commission, following LION's {Local Investing Opportunity Network] lead might be our best way of investing in the economic ecosystems we actually inhabit."

Andrew Price, "The Lion's Share," GOOD,Spring 2010

That seems a bit farfetched. The basic idea of LION is to connect local investment resources, you and me, to business opportunities in our neighborhood or community. Started in Port Townsend, WA, "LION has provided local investments for a wide variety of businesses, including a diary, a bike shop, a nightclub, and even local schools."

LION keeps investment resources local and helps local businesses. Seems like a good idea. "Keeping investment money in the community creates positive echoes through what's known as the 'local multiplier effect.'

The nightclub probably was not going public, so the SEC analogy is a bit of a stretch. And there was no discussion about the kind of capital provided -- venture, equity, debt, etc. Was there a real credit gap that banks and public agencies could not meet?

And,inevitably, there will be business failures or at least repayment problems and perhaps lower-than-expected returns for local investors.

That said, this is one of those local experiments in community economic development that is worth watching. It's happening on the internet for far-off places, why not face-to-face in our own backyards.

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