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New to direct investing? Get your questions answered!

New to direct investing? Get your questions answered!

Don’t Shy Away from Being Empowered with Your Investments!

I’m not sure I can do this – I’m not an investor.

Actually, if you’re like a majority of the US population, you are an investor!  You may not think of yourself as an investor, but if you have retirement accounts, bank accounts, mutual funds, etc., you are an investor!  And you have options about where you can put your investment dollars.

I thought it was illegal for small businesses to ask for investment from regular people.

It is true that the laws governing investment in the United States (called securities laws) are complicated and can limit who can invest in certain investment offerings.  However, there are many legal pathways that allow regular folks to invest directly in small business.  If a small business offers you an investment opportunity, you should ask them whether they have received counsel from a competent securities lawyer.  If something is not done correctly from a legal perspective, the risk is on the business, not the investor.

What should I know before making an investment?

Wherever you invest, whether in a mutual fund that holds publicly traded stocks or in a small business, you need to be aware that there is no such thing as a risk-free investment.  You should not invest more than you can afford to lose.

Beyond that, it is up to you to decide what information you want to ask for to help you decide whether to invest.

Here are some things to keep in mind when evaluating whether to make an investment in a small business:

  1. Look at your whole portfolio and remember that diversification mitigates risk. If almost all of your investments are in the stock market, investing in a small business whose success is not tied directly to the ups and downs of the public markets can be a good way to diversify your portfolio.  Think about it – almost all of most Americans’ investments are in giant multinational public companies.  But 99% of US businesses are small private companies that account for half of all employment and half of all production.  Why put all of your investment dollars in only half of the economy?
  2. The stock market has been likened to a casino – it has become increasingly opaque, trading is often conducted by sophisticated algorithms, and financial instruments have become so far removed from the real economy that it is hard to trust that it will continue to be a safe place to put your nest egg.
  3. Warren Buffett’s advice? “Never invest in a business you cannot understand.”  Most investors not only don’t understand the businesses they’re investing in, they don’t even know what businesses they’re invested in!  They just let fund managers make all the decisions and hope for the best.  Why not invest in some of the businesses that you know and understand?
  4. Most of our investments are made through intermediaries (often more than one) like stock brokers, fund managers, and investment advisers. When you invest directly in a business, you eliminate the fees and percentages taken by these intermediaries and there is more transparency about what you are actually investing in.
  5. A business is all about the people who run it. When you invest in a small business, you’re investing in the founder based on your opinion of their commitment, integrity, and abilities.  A small business owner is generally going to be much more committed to their business’ success than a CEO of a multinational public company.  CEOs move around from company to company and get their golden parachutes when they leave.  Entrepreneurs usually start their businesses to express their most dearly held dreams and passions.  Their business is their baby so they will stick with it through thick and thin.
  6. When you invest in a business based on your relationship with the owner, that owner is going to feel personally responsible for your investment dollars. The last thing they want is for someone they know to lose money by investing in their business.  They will do almost anything to avoid having to tell their investors that they have lost their money or are unable to pay them as much as promised.  When you invest in a faceless multinational corporation, there is no similar feeling of personal responsibility to the investors.

Besides the financial returns, what are the other benefits of direct investing in small business?

When you invest in a small business, you often get benefits that go beyond purely financial returns.

These vary depending on the particular investment and business but they often include

  • Having the pride of knowing that you helped a business that’s important to your community
  • Being able to tell your friends and colleagues that you invested in a business they may know and love
  • Being part of a community of investors with similar values
  • Having the opportunity to learn from the business owner about the details of the business
  • Providing support to the business owner when she needs it – advice, contacts, business referrals, etc.
  • Having some ability to affect the success of the business as a customer and a source of referrals
  • Being invited to special events
  • Being recognized publicly as a supporter of the business
  • Discounts and perks
  • Knowing that your investment dollars are supporting something that is having a positive impact in the world

Remember, all investments have an impact – what impact do you want your investments to have?  When you invest in a mutual fund of public company stocks, does that create any positive impacts in your community or on things that are important to you?

Investing in small businesses allows you to invest in the real economy in a business that employs people and provides useful goods and services.  When you invest in public company stocks, your money doesn’t even go to that company – it just goes to the previous owner of the stock!

Why not use some of your investment dollars to invest in things that are important to you?  Community gathering places, alternative energy, businesses that create good local jobs, etc.  Imagine if everyone moved just a small percentage of their investment dollars to small businesses creating a positive impact in the world – we could create a better world by simply being more mindful about where we put our money.

Building an Inclusive Workforce with Second-Chance Hiring

Building an Inclusive Workforce with Second-Chance Hiring

Working Fields Offers a Path to Employment and Confidence to Formerly Incarcerated People and Those in Recovery 

 

Mickey Wiles is the CEO and Founder of Working Fields, a mission-driven staffing agency that helps individuals overcome barriers to employment — such as substance use disorder, criminal justice system involvement, resource challenges, or work history gaps — and build stable futures. A U.S. Navy veteran, Mickey has worked in leadership roles at Ben & Jerry’s, Seventh Generation, and Burlington Labs, and served as Executive Director of Turning Point Center of Chittenden County, Vermont. Mickey is a person in long-term recovery and was provided a second chance after spending time in federal prison. 

For the last 18 years, Mickey has dedicated himself to helping others who need a second chance after addiction and/or criminal convictions. By collaborating with businesses across Vermont and New Hampshire, Working Fields has fostered a community of recovery-friendly workplaces that treat people in recovery or those with past convictions as they would treat anyone else.

In this conversation, The Kassan Group founder Jenny Kassan chats with Mickey about how Working Fields is contributing to the development of an inclusive, regenerative economy.

 

Jenny Kassan: How do you stay true to your business’ foundational principles while also being flexible enough to meet the shifting challenges of the day?

 

Mickey Wiles: Our foundational principles are reflected in our company values: love, humility, honesty, equity in action, stability, and gratitude. Our team keeps these values front and center by focusing every two months on the continued development of a different value. Our leadership team, which meets weekly and addresses the issues and challenges of a changing environment, always considers the company’s values in making company decisions. We embrace change, flexibility, and agility as long as we also always challenge ourselves to make decisions consistent with our values.

 

JK: Your company helps foster healthy and resilient communities. As we face large-scale challenges on a global scale, to what extent do you consider social entrepreneurship “borderless” and to what extent do solutions need to be localized? 

 

MW: Social entrepreneurship means placing people, planet, and prosperity for all at the core of business. These principles apply across the board regardless of where we operate. If we collectively operate with other like-minded businesses, then our reach is borderless. However, with this as the premise, our challenges are to be inclusive and take into consideration all individuals, recognizing that different societal groups have different needs and practices. As we expand and serve communities and varied groups of people, we need to always be aware of these differences.

 

JK: How do you see the practices and core values of your business as distinct from the “business as usual” status quo? What do you do to resist the pressure to “fit in” to the old economy paradigms?

 

MW: Avoiding “business as usual” is not a difficult task for us as our mission and vision are so different from other organizations in our space. When we remain true to our mission, we automatically are not operating as “business as usual.” We have faced situations that raise questions in light of our company values. In that case, we invite everyone in the organization to discuss the opportunity and the pros and cons. We gain input from everyone to ensure we hear all arguments. Then we make a decision based on that input and the leadership team’s assessment.

 

JK: Who inspires you in the social impact world and what is the one question you’d like to ask them?

 

MW: I’ve been fortunate to work with and learn from three fantastic leaders in the social impact world. I first worked for Ben & Jerry’s when social impact businesses were not as common as they are today. Both Ben [Cohen] and Jerry [Greenfield] led us to not accept the status quo and to challenge every decision we made to ensure it took into account our “triple bottom line” (that’s how we referred to social impact business). My next mentor was Jeffrey Hollender at Seventh Generation. His leadership demonstrated that there was an additional level of impact businesses can have on the world. I would ask all of them the same question: If you had to do it over again, what would you change and how would you counsel your younger self?

 

ABOUT MICKEY WILES

Mickey Wiles is the CEO and Founder of Working Fields, a mission-driven staffing agency that helps individuals overcome barriers to employment — such as substance use disorder, justice involvement, resource challenges, or work history gaps — and build stable futures. 

Mickey has had a long career in the private sector business community where he held various leaderships roles starting with a Boston high tech firm, Microcom, Inc. In Vermont he continued in leadership roles with Ben & Jerry’s, Seventh Generation and Burlington Labs. Mickey also held the position of Executive Director at the Turning Point Center of Chittenden County. Prior to starting his business career, Mickey served six years in the United States Navy.

Mickey is a person in long term recovery and was provided a second chance after spending time in Federal Prison. For the last 18 years, Mickey has dedicated his work to helping others who want a second chance after addiction and/or criminal convictions. Mickey is on the Board and Executive Committee of VBSR, the nation’s first business association of businesses for social responsibility. Mickey is also President of Vermont Roots & Wings Alliance, an organization dedicated to supporting the drug court system and participants in Vermont. 

 

ABOUT WORKING FIELDS

Working Fields is a mission-driven staffing agency that helps individuals overcome barriers to employment — such as substance use disorder, justice involvement, resource challenges, or work history gaps — and build stable futures. 

We don’t just place people in jobs: Our model includes robust, personalized support for workers. Every Working Fields associate benefits from direct account management, ongoing peer recovery or life coaching, and coordinated support from community partners. These services enable our associates to get and keep the jobs they want, while helping employers realize the potential of these dedicated workers. 

We work closely with community partners, particularly social service agencies, across Vermont and in Manchester, New Hampshire, to identify individuals in need of supportive employment services. These referrals have enabled us to help over 1,300 jobseekers since 2017.  

 

 

Three Insights from My Trip to Baltimore to Meet Potential Investors

Three Insights from My Trip to Baltimore to Meet Potential Investors

I recently returned from a trip to Baltimore where Michelle Thimesch and I met with several potential investors for Opportunity Main Street, our place-based investment fund.

I love the process of raising money for my own business because I always learn so much that I can use to benefit my clients! I started helping entrepreneurs raise capital over 16 years ago and this is my fifth time raising money from investors. I have raised over $2 million from a total of over 150 investors, with check sizes ranging from $1,000 to $100,000.

Here are three insights I wanted to share from my previous and current fundraising efforts:

1. Investors can come out of nowhere. Sometimes the people that end up investing are not who you expected! We met with someone in Baltimore and didn’t even “pitch her” but she ended up letting us know she wanted to invest. The lesson from this: tell everyone (without violating the law!) that you are raising money – don’t limit your asks to the usual suspects.

2. The timing is not in your control. We have had several potential investors tell us they planned to invest and we celebrated, only to be reminded that a verbal commitment doesn’t always mean an immediate check in the mail. Unexpected events like illness, bureaucracy, financial setbacks, and many more can slow the process way down. The lesson from this: be patient and persistent.

3. Investors’ motivations are complex and incredibly diverse. Some of our investors are interested solely in our mission and asset class and are happy to be passive, while others are motivated by a desire to get involved by supporting the entrepreneurs we work with. The lesson from this: brainstorm a list of all the potential benefits an investor can receive from investing in your venture – financial, educational, connections, community . . . – and know that each one of these benefits may be what motivates someone to say yes.

For details on our current fundraising efforts, please visit www.opportunitymainstreet.com.

April is National Financial Literacy Month! Is That a Good Thing?

April is National Financial Literacy Month! Is That a Good Thing?

It’s the time of year when you may hear politicians wringing their hands about the low levels of financial literacy in our country and advocating for teaching financial literacy in our schools.

While I absolutely applaud efforts to help everyone become more knowledgeable and empowered about finance, I am concerned about what financial literacy programs teach.

A scholarly analysis that reviewed financial literacy teaching materials in the U.S. and Canada found the following:

  • financial misfortune is attributed almost exclusively to personal failures such as the failure to get an education, open a savings account, etc.
  • fewer than 10% of the materials mention wealth or income inequality and almost none provide explanations for it
  • conditions of financial insecurity are presented as natural and inevitable and instead of students being asked how collective solutions could remedy these conditions, they are urged to develop good individualized financial habits to increase their chances of survival.


When it comes to learning how to be a good investor, the message is simple: maximize your contribution to tax advantaged retirement savings accounts and choose investments that maximize financial return and minimize risk.

In their recent Harvard Law Review article, “Rethinking Retirement Savings,” Jason Fernandes and Janelle Orsi describe how U.S. law governing our retirement accounts requires our retirement funds to be invested in a way that maximizes financial returns. But as Fernandes and Orsi point out, this mandate has led directly to outcomes that create great harm to our society and planet – worker disenfranchisement, climate change, and the hollowing out of our communities’ economic well-being.

To address the existential threats created by the mandate to maximize financial returns, we need to re-examine our most basic assumptions – those taught in financial literacy 101.

Join Angels of Main Street, our club for people of all levels of wealth or income to learn about investing, if you would like to be part of these conversations!

Why Access to Capital is Not Evenly Distributed: Racism and Finance

Why Access to Capital is Not Evenly Distributed: Racism and Finance

What is finance?

Finance is the use of money to fund activities in the economy. These activities include everything from building buildings and starting businesses to buying stock in public companies and investing in exotic financial instruments that have no connection to any productive activity in the real economy.

How does it get decided what activities receive finance and which ones don’t?

Does the most money go to the activities that create the greatest benefit for all of us? Or does it go to activities that are spearheaded by those with the easiest access to funding?

In Econ 101, we learn that money flows to its highest and best use. But we all know that is not true. How many times have we seen ridiculous ideas for tech start ups garner tens of millions in funding while our friends’ amazing proven companies get turned down for loans and languish for lack of sufficient resources?

Why do some players in the economy have such easy access to more finance than they could ever need while others struggle for financial crumbs?

Who has easy access to finance?

Finance flows to those who

  • Have relationships with people who control large amounts of wealth
  • Come from families with wealth
  • Have an education from a prestigious university
  • Are seen as smart and capable
  • Seem less risky to those who control wealth

These characteristics are not distributed evenly among all members of our society.

Because of our country’s history of enslavement of human beings, the lack of payment of reparations for slavery, legally sanctioned discrimination in finance (e.g. through redlining), and the violent destruction of communities of color that have managed to build wealth in spite of the odds, people of color, and in particular the descendants of enslaved Africans, are much less likely to have the characteristics that lead to access to finance.

According to one estimate, if enslaved people had been paid for their work, the value of that income today, assuming 3% annual compounding interest, would be between $5.9 trillion and $14.2 trillion. After the Civil War, formerly enslaved people were promised reparations, but after Lincoln was assassinated, that promise was rescinded. Until the 1960s, blatantly racist practices in finance were legal and common. For example, during the New Deal, Black families  were excluded from federal backing of home loans by the Federal Housing Administration. Racism in housing finance didn’t become illegal until 1968 with the passage of the Fair Housing Act. Discrimination continued however and in 1974 Congress passed the Equal Credit Opportunity Act which “forbids credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or whether you receive income from a public assistance program.” While discrimination in finance was finally made illegal, there are reams of studies that show that it continues to be widespread. And in the world of private finance, like angel investing, venture capital, and private equity, it continues to be legal to discriminate.

When Black communities managed to build wealth in spite of the huge barriers resulting from our racist history, they were vulnerable to violent attack by white mobs. For example, in 1921, white mobs attacked the community of Greenwood (also known as Black Wall Street) in Tulsa, Oklahoma. An estimated 300 people were killed and approximately 35 acres of commercial and residential property were destroyed. According to the American Journal of Economics and Sociology, the value of the destroyed homes and property would be $200 million today.

No wonder there is such a wide gap between the wealth of white and Black households.

The net wealth of the average Black family in America is around one-tenth that of a white family and no progress has been made in reducing income and wealth inequalities between Black and white households over the past 70 years.

And wealth begets more wealth because tax policies favor asset owners over laborers.

What can we do?

What are some possible solutions? Reparations for slavery and a wealth tax would be a great start. On a more individual level, consider investing in a Black-owned business today. Here are two investment opportunities to consider: VegBox and East Bay Permanent Real Estate Cooperative.

What Businesses and Investors Can & Can’t Discuss: Six Guidelines for Business-Investor Conversations

What Businesses and Investors Can & Can’t Discuss: Six Guidelines for Business-Investor Conversations

By Jenny Kassan and Michael H. Shuman

What kinds of conversations can a business owner have with potential investors without breaking the law? Over the past year many local investment advocates and practitioners have sought our advice in answering these questions, and this blog attempts to provide some answers.

The law has been rapidly changing in this area, so not all our answers are crystal clear. But below is our best effort to summarize what’s permissible for individuals or groups that wish to have conversations about the possibility of investments in person or online. (We do not cover here new rules that apply to “pitch sessions” before groups of investors.)

(1) Public Conversations Unrelated to Investment – Green Light

The First Amendment protects free speech, including conversations between businesses and supporters. If you’re a fan, customer, or mentor for a business, you can freely talk about anything unrelated to investment.

Once the conversation shifts to investment, however, caution is needed because such conversations are regulated under state and federal securities law. Securities regulators consider any conversations between businesses and potential investors about potential investments, whether one-on-one, in group conversations, or via public platforms, to be an offering of securities. And unless or until you jump through the appropriate legal hoops for a securities offering, you cannot have such conversations.

If you run a web site encouraging conversations between businesses and supporters—say a mentorship platform—you might want to post disclaimers that the conversations should not touch on any potential investment opportunities. Better still, you might actively facilitate the conversations to prevent any violations.

(2) Private Conversations on Investment – Yellow Light

If a business has an informal conversation with a potential investor about a potential investment, this conversation may fall under the definition of a securities offering. A private conversation like this is often legal without the need to do any particular filings or make any particular disclosure. However, the details of what is required vary quite a bit depending on various factors such as what state the potential investor is in, what is being offered, and the potential investor’s wealth and income. Before actually offering an investment opportunity, even privately, it’s important to work with an attorney to determine what rules apply.

Does this mean that any conversation that even mentions an investment opportunity would be considered a regulated securities offering? Not necessarily. A conversation in which an entrepreneur mentions the possibility of raising funding in the future and does not mention any details about the investment offering (e.g. the size, the terms, the timing) is less likely to be considered a securities offering. Unfortunately, the line between an unregulated conversation and a securities offering is not well-defined under the law. Hence the yellow light.

(3) Social Mixers Involving Businesses and Investors – Green Light

Unstructured social gatherings among potential investors and business owners are fine as long as specific investment opportunities are not discussed. The original conception of LION, the Local Investment Opportunity Network of Port Townsend, Washington, was to deepen relationships between local investors and local businesses, to facilitate the possibility of future investments.

(4) Investment Clubs – Yellow Light

Groups of investors are welcome to come together, form a club, and collectively invest. They can have robust conversations about potential investments among fellow investors (but not potential investees). The presumption also is that members do not pitch one another to invest in their own businesses.

As soon as the club enters conversations with outside businesses about potential investments, the federal and state rules apply.

(5) Open, Online Conversations About Potential Investments – Red Light

Generally, an online public platform cannot host free-wheeling conversations between businesses and potential investors. This is regarded as facilitating general solicitation. And the host might be considered a broker-dealer, which would mean that it would have to register with the Securities & Exchange Commission (SEC), or under state law, as a broker. Some states are very strict about what constitutes a broker-dealer. One business was shut down by the state of California for hosting a platform that did nothing more than facilitate private investments for a flat fee.

But the next point offers a potential exemption for platforms that wish to help businesses “test the waters” (TTW) with potential investors.

(6) “Testing the Waters” Conversations in Preparation for an Investment Crowdfunding Campaign – Yellow Light

The SEC recently announced a new Rule 206 that permits businesses planning to raise money through investment crowdfunding to “test the waters” with potential investors. Participating businesses effectively must announce their interest in crowdfunding, agree to various disclaimers, and then conversations can begin.

But there’s a catch: If you meet a potential investor through public testing the waters activities, and then decide not to do a crowdfunding campaign, you may not be able to ask that person privately to invest in your business later. Thanks to little-appreciated rules around “integrating” separate offers, you cannot engage in general solicitation now, meet a bunch of new people, and then pitch them with a private offering later.

It’s important to point out here the difference between public and private offerings. Public offerings, like investment crowdfunding, allow you to advertise to the general public. Private offerings can only be made privately through one-on-one conversations. One of the virtues of the LION approach is that it is a legal way of developing relationships with people who you might be able to approach privately about a potential investment.

So if you’re a business seeking capital, the only way you can transform an investor you met through a public TTW discussion (a precursor for a public offering under Regulation Crowdfunding) into a private investor is by developing a substantial relationship with him or her after the public solicitation round. If someone you met online becomes your best fishing buddy, for example, you might be able to pitch him privately.

The good news is that if you only are pitching accredited (that is, wealthy) investors after your crowdfunding campaign, you can use Rule 506(c) to pitch them. Under this rule, public advertising is permitted and all investors must be accredited and their wealth or income status must be carefully established. If you want to also pitch unaccredited investors and include people you met through public solicitation, you will have to stick with investment crowdfunding going forward.

There’s one other possible opening that’s useless now but could be useful later—and that’s the newly announced Rule 241. It’s like Rule 206—permission for public “testing the waters” conversations with appropriate disclaimers—except that businesses do not need to announce that they are only interested in crowdfunding. All kinds of investment options, public and private, could be discussed. The problem is that the SEC did not preempt state laws that mostly prohibit such conversations. If you want to lobby your state to harmonize its laws with Rule 241, then this option could be helpful—especially to community investment groups having preliminary conversations with local businesses.

We should say, finally, that we are explaining the law, not defending it. Whether these legal rules are sensible is another blog for another day.