Investment Apartheid: 12 Ways to Fight Back

-- Yesterday, you discovered 28 different ways to become a local pollinator…

A pollinator, if you’re just joining us, is a private, self-financing enterprise with the sole objective of strengthening the local economic infrastructure.

But you don’t have to start your own pollinator to help put money back into your community.

In a moment, we’re going to show you twelve different ways you can invest in your own neighborhood.

As Americans, we invest an inordinate amount of money in companies that do not benefit our “villages” in any way, shape, or form.

All of our money is tied up in bonds, stocks, mutual funds, pension funds, and other investments. Though it all adds up to trillions upon trillions of dollars, not a penny goes into local businesses.

But it’s not because people don’t want to invest in the new dry cleaner on Saratoga St., or that new marketplace on Park Ave., or the pool hall on Collington St.

It’s because they can’t.

“Because,” says Michael Shuman in a TEDx talk, “we have securities laws that were enacted in the early Jurassic period. And they make it extremely expensive for small investors to find small businesses. We created a system of investment apartheid.”

In 1933, in the wake of the crash that slingshot America into the Great Depression, the SEC made it illegal for small businesses to sell equity of their companies to the “average Joe.”

Why? Because, if you’re not rich, so went the logic, you’re not smart enough to invest wisely in private businesses.

And, yes, this law still exists. Unless you meet the requirements of the “accredited investor,” you’re not allowed to own equity in your favorite coffee shop… your buddy’s pizza place… or your sister’s new local artisan pop-up shop.

“If you are an accredited investor,” Shuman goes on, “a rich person, 2% of the population… you can invest in anything you want. If you’re in the other 98%? Sorry, the business first has to invest about $200,000 in lawyer’s fees for a private placement memorandum, or a public offering statement, in tiny, single-spaced print, in all caps lettering, that no human being has ever been observed to read.”

Pretty ridiculous, right?

-- Fortunately, all that’s changing. Slowly, albeit. But it’s changing.

In April 2012, Obama signed the JOBS Act into law. Although Title III of the Act is hailed as “revolutionary,” all it’s meant to do is put the power of investing in companies on the ground floor back into the hands of the people.

Not very radical… moral is more like it.

Why shouldn’t small businesses be able to raise capital in their communities by offering micro shares of equity? It’s insanity.

We are allowed to invest in businesses on crowdfunding sites like Kickstarter and Indiegogo for knick-knacks and t-shirts, but heaven forbid we do the same thing — through what’s called “equity crowdfunding” — to strengthen our local economic infrastructure and make money doing it.

The most ridiculous part about the JOBS Act is that, three-and-a-half years later, Title III is still in limbo. The SEC has been sitting on its hands all this time, afraid that if they allow community members to invest in one another, all Hell will break loose…

Moreover, Title III is only going to allow non-accredited investors to put up 10% of their net worth. They are afraid to let us invest 10% of our money in private businesses!

(Or is it, really, that special interests in Wall Street are afraid that this will break up the investment monopoly? We only speculate.)

-- The SEC is expected to release the final rules by October or November. But we’ve heard that before.

Fortunately, the states aren’t waiting around: “More than 20 states to date,” author Amy Cortese writes on her Locavesting blog, “have passed laws allowing any local business to raise money from any resident of the state.”

Horizons Sustainable Financial Services, a sustainable investment firm based in New Mexico, reports on two examples…

  • “In Colorado, Governor Hickenlooper has signed a new “equity crowdfunding” law, co-sponsored by state representative (and my friend) Pete Lee. The “Colorado Crowdfunding Act” will allow Colorado’s smallest companies to raise up to $1 million by selling shares to non-accredited investors, who can each invest up to $5,000. The state’s Securities Commission must now issue some rules to tell us exactly how this might work — but the Commissioner has already come out in favor of the law, which might mean that a draft is being prepared.
  • “Meanwhile, in New Mexico, the Securities Division has apparently been told that it doesn’t need to wait for enabling legislation — it already has the authority to issue rules to enable similar “equity crowdfunding”. According to articles on the draft rules, New Mexico’s businesses will be able to raise up to $2.5 million, from non-accredited investors who can each invest up to $10,000. Our friends at “InvestNewMexico.US” are building out the “portal” technology that the state will probably require.”

Here are, upon writing, the states that already have crowdfunding exemptions…

Interstate crowdfunding exemptions

If you live in a green state, there are probably some very interesting ways to invest in local businesses opening up as you read this.

Even if not, there are incredibly simple ways to start putting money back into your community, and help to revive Main Street.

Here are twelve simple ways to invest local, courtesy of Amy Cortese, author of Locavesting.


12 Simple Ways to Invest Local 

By Amy Cortese, author of Locavesting

There are a growing number of alternatives for individuals who want to invest locally.

Some of these vehicles have been around for a long time — credit unions, community banks and community development loan funds, for example. Others, like investment crowdfunding, have been made possible by technology and recent changes to U.S. and state securities laws.

The following is a deep dive into the continuum of local investment alternatives (in alphabetic order).


Are you a high net worth individual? Maybe you’ve started and sold a company, or you’ve retired from a successful professional career. Angel investors are wealthy (accredited) individuals that parlay their funds and their expertise into helping fledgling ventures. Angels often invest with a particular focus, such as food, technology or women-led firms. Unlike venture capitalists, which pool money from institutions and wealthy investors into investment funds, angels invest their own money. (read more)


The easiest thing you can do to put your savings to work locally is to bank with a local community bank or credit union. These smaller establishments are the last vestige of the old-fashioned relationship-based banking system — think George Bailey’s Building & Loan. Because their primary business is making loans to local families and firms, the money you deposit with these institutions is much more likely to support your local economy, rather than being fueling speculative bubbles or complex derivatives. (read more)


A Business Development Company (BDC) is a type of publicly traded company that makes investments in small and mid-sized businesses. In a way, a BDC is like a venture capital fund. But only institutions and very wealthy individuals can invest in VC funds. In contrast, BDCs are publicly traded on the stock market, so anyone, including unaccredited investors, can invest by buying shares of the BDC. They can also sell those shares if they need to, overcoming the problem of a lack of liquidity associated with private investments. And their investments are diversified, lessening exposure to any one company. (read more)


Ignore the ungainly name, because CDFIs are one of the best-kept secrets for local investing. CDFI is short for Community Development Finance Institution, a class of financial institution that caters to underserved and often low-income communities. CDFIs, which are certified by the Treasury Department, can be banks, credit unions, venture capital funds or loan funds. They typically focus on a specific geographic region, making them a good candidate for local investors. (read more)


We’re all familiar with Community-Supported Agriculture, or CSAs. You buy ‘shares’ or subscribe to a local farm’s CSA program early in the season, and then get a box of fresh-harvested veggies delivered to your door (or nearby pickup spot) every week or two. That pre-selling model helps farmers smooth out the peaks and valleys of a highly seasonable business, giving them cash in the lean early spring months that can tide them over until harvest time. CSA customers, in turn, get to share in the delicious local bounty that their dollars helped to support.

The CSA model has been so successful, it’s spread to other areas. You can now find community-supported breweries, bookstores, fisheries, bakeries and art. (read more)


Cooperatives are associations run for the mutual benefit of their member-owners. They were established in the late 18th and early 19th Centuries in the face of social and economic disruption brought about by the Industrial Revolution, as marginalized members of society — whether workers, farmers, consumers or producers — banded together to protect and promote their mutual interests. Today, they range from grocery stores to breweries to locally produced energy cooperatives. Coops generally provide two types of investment opportunity: membership and loans. (read more)


Crowdfunding is a new and evolving fundraising alternative that marries social media and finance. With crowdfunding, entrepreneurs reach out to the “crowd”—including their friends, customers, supporters and social network—for funding. The idea is that lots of smaller sums of money can take the place of one or two large investors or patrons. Crowdfunding comes in different flavors:

Rewards-based crowdfunding

Title II “Accredited Investor” Crowdfunding

Title III “True Crowdfunding”

Regulation A+ “Mini-IPO”

Intrastate Crowdfunding

(read more)


A Direct Public Offering, or DPO. In a DPO, the company raising money sells shares directly to the public, bypassing the Wall Street intermediary (for that reason it’s sometimes called a It’s like a Do-It-Yourself IPO). So instead of the shares going to the Wall Street underwriter’s well-heeled clients, everyday investors, including the company’s customers, friends, fans and supporters, can get in at the ground floor, and reap the same kind of returns (or losses, it must be said) that are typically reserved for insiders. And, by cutting out the financial middleman, DPOs are accessible to companies that would not be able to afford a conventional IPO, which can cost $1 million and up. (read more)


A growing number of people—citizens like you—are forming investment groups to invest in local businesses. The groups tend fall into two types: Investment Clubs and LIONs. (read more)

NO-INTEREST LOANS: Midway Between Donating and Investing

Kiva popularized the idea of microfinance by allowing ordinary people to make loans to micro-entrepreneurs around the world — for example, to help a farmer in Sri Lanka buy more goats. Recognizing that there was also a great need closer to home, Kiva began offering its microloans in the U.S.  The individuals lending money receive their principal back, but earn no  interest — a key distinction that avoids triggering securities laws. (Once a profit is earned, the transaction is considered a security). (read more)


Slow Money is a national nonprofit organization that works to finance local, sustainable food and agriculture — or, to “bring money back down to earth.” Much of the action takes place through local chapters, which create local funding solutions that work for their particular community. These often take the form of investment networks or clubs. There are around twenty local Slow Money networks, from New York City to North Carolina to Northern California. Collectively, Slow Money has catalyzed more than $38 million in investments in more than 350 small food enterprises, from farms and restaurants to organic food delivery services. (read more)

Until tomorrow,

Chris Campbell

Chris Campbell

Written By Chris Campbell

Chris Campbell is the Managing editor of Laissez Faire Today. Before joining Agora Financial, he was a researcher and contributor to