A few weeks ago, Twitter made the news by joining the ranks of other huge companies with a successful initial public offering. What I loved about their approach was that it was done relatively quiet; making the announcement with a tweet and conservatively pricing their offering.
They’re not the first social media company to join a major stock exchange, but the fanfare they received made me think about the IPO process in general and how it could be applied to raising resources for smaller groups of businesses; perhaps even targeted eco-systems of enterprises like those found in urban neighborhoods.
Ultimately, stock exchanges are just platforms where investors can invest in a set list of businesses. When a business is accepted into an exchange the public is offered the opportunity to invest in the businesses through the purchase of “shares.” In many cases, big institutions with tons of capital own significant portions of businesses (in Twitter’s case, about 6 major funds own most of Twitter). Raising money through a public exchange is often attractive to businesses because they’re able to raise a significant amount of capital.
My favorite things about stock exchanges are:
- A limited set of business to invest in (businesses have to go through a process to enter the exchange);
- Anyone can buy shares (i.e. crowd-funding); and
- It helps the business raise money quickly by pooling everyone’s contributions (or share purchases).
So why can’t we do it in a neighborhood-based way? Why can’t we create our own exchanges that invite the public to invest in businesses in our community?
Fortunately for us, this isn’t a new idea, and various interpretations of this model have seen success. One of the coolest leaders in the arena of pooling wealth and investing is Reverend Leon Sullivan from Philadelphia. Realizing that economics was at the root of poverty, racism and other bad things, he mobilized his community (mostly through his church) to pool wealth. How did he start?
By asking 50 members to chip in $10/month for 36 months.
The amount from that first ask (or initial public offering) was directed into a scholarship fund, as well as the development of a new entity (for-profit) called Progress Investment Associates. Each contributor received one share. Through this entity, they invested in and started new businesses in the African-American community.
Pretty awesome, right?
We should explore more ways to find capital to local businesses. Part of the work, I think, includes organizing consumers and educating them about this type of micro-investing, but another part is policymaking, helping businesses re-structure their businesses in a way that will allow them to easily issue stock. New Mexico seems to have a relatively easy process to help small businesses issue stock when they need capital.
I love this stuff, and I may write about it more moving forward. If you’re interested in reading more, check out this cool transcript from a speech Michael Shuman gave on the topic. It inspired me.