Local Investment Landscape is Changing
by Martin Miron
The idea of investing locally seems easy enough; we have capital, we love our community, and we know some business owners have a harder time than others getting the capital they need. State and federal laws have even shifted to increase access to investors and investees in the last decade. But the problem persists.
Revalue is an impact investment firm that studies and influences the underlying principles and priorities of the emerging marketplace while providing direct services to investors. In 2019, they undertook three research partnerships with the Ann Arbor Area Community Foundation, The Initiative for Local Capital and Michigan State University Center for Community and Economic Development. Here are some key findings.
Legal aid services are cost prohibitive. Business owners that need less than $100k will pay a hefty price in both time and money to work with an attorney to register a security, increasing the risk that smaller businesses will curtail securities laws and raise capital in the underground economy.
There is an across-the-board education gap. Not only do investors and business owners lack access to education about how investing locally works, but technical assistance providers and coaches, accountants, attorneys, bankers, marketing firms and the philanthropic community all reported a thirst for education suited to their perspective.
The Washtenaw County ecosystem moves at least $2 billion in investment capital every year, and 99.4 percent of that is not mission-driven. This county is economically prosperous, highly educated and philanthropically focused. It is also one of the most economically segregated in the U.S., and health disparities are stark, where black and brown residents are expected to live more than 10 fewer years than white residents. Despite our collective attention on these issues, when it comes to progressing beyond philanthropy into local impact investment to improve people’s lives, our county is arguably starting from scratch. We need mission-driven individual and institutional investors to act and shift the return on investment calculation norm from profit-only to a generative triple bottom line of stewarding people, place, planet and profit.
Micro-economy developers play a crucial unacknowledged role. Economic development is a large and thriving industry which tends to focus on attracting and retaining employers that will bring significant jobs to a given area. However, 70 percent of our workforce is employed by businesses with less than 10 employees. It is common to find one business owner, community center volunteer or nonprofit leader that is single-handedly helping people in that neighborhood start and grow their businesses, often without any dedicated resources or technical assistance. Recognizing these cornerstone community members as a legitimate and important part of local economic development efforts by providing them with training, resources and compensation would go a long way to ensuring that businesses continue to launch and grow directly in and with the capital from the communities in which they serve.
Fear is driving the investment advising industry, which has been so damaged by corruption that regulators have erected onerous rules to ensure protection for clients. This has created a situation where advisors are incentivized to keep assets on Wall Street because the world has generally accepted that Wall Street is risk adverse, even while acknowledging that all investments carry risk. The industry must step up and accept the challenge to provide meaningful and consistent education for advisors.
Revalue is located at 220 W. Michigan Ave., in
Ypsilanti. For more information, call 888-642-2728 or visit RevalueInvesting.com.