Local Investing

Here is a great story from Mendocino County – social impact lending using a Direct Public Offering (DPO) in which an investment opportunity is offered and sold directly to the public.

Mathew and Sarah Gilbert, owners of Mendocino Wool and Fiber, are long-time sheep shearers who wanted to start a local mill to make use of wool they see going to waste year after year. They worked with the Economic Development and Financing Corporation to raise funds for equipment and working capital.

Executive Director of Economic Development Finance Corporation, issued a DPO used to fund Mendocino Wool and Fiber, raising $350,000 from 88 investors who invested, on average, $3,954 each. The company pays 5% interest and the investors receive a 2% return on their money over six years.

In addition to structuring and issuing the DPO, EDFC led the fundraising effort, by reaching out to the community to find those 88 investors. While many investors put up funds because they are excited by the project and feel a personal connection to the owners, many also see direct relationship-driven investing as a way to direct their money away from Wall Street and into Main Street.

Cutting Edge Capital, who worked with EDFC on their DPO, helps social ventures and their partners navigate the securities law to raise capital from non-wealthy investors through development of offering memorandums, an online lending platform, and other services.

The much-anticipated federal regulations for JOBs Act intended to make crowd-funded capital more accessible, but have yet to deliver. In the meantime, the exemption allowing for DPO’s in the 1933 Securities Act are still a viable crowd funding mechanism.

Oregon has passed legislation to allow Community Public Offerings that significantly reduce the costs and allow investors to interact directly with the business. According to Cutting Edge Capital, “The Oregon CPO, which was championed by Amy Pearl and Hatch Innovation, was designed to be a community capital raising tool, and companies are encouraged, not discouraged, from raising those funds directly from their communities via meet-ups that allow people to look the CEOs in the eye.”