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FOR IMMEDIATE RELEASE
WEBSITE HELPS MAIN STREET TAKE ON WALL STREET
Local Investing Gains Nationwide Resource
An online “MBA” in local investing has just been launched at local-investing.com. The Local Investing Resource Center (LIRC) was created by James Frazier, 40, a Wharton-educated financial advisor and former hedge-fund manager who now advises his clients on Sustainable, Responsible, and Impact (SRI) investments.
Since the Great Recession hit in 2008, a growing number of investors have been looking away from Wall Street to financial opportunities within their own communities. The result has not only been more diversified portfolios, but more resilient and closer-knit communities.
Without local investing, many businesses would not have survived the big banks pulling credit lines or weathered reduced tourism as families tightened budgets or dealt with unemployment.
But this resurgence of capital pouring into communities rather than commodities has grown by fits and starts with little clear guidance. The LIRC provides all the tools necessary to take local investing out of its Wild West infancy and grow it into a more mature choice for investors’ portfolios and entrepreneurs seeking funding.
“For the first time, the best practices learned by local investing pioneers around the country are available in a clear format designed to help others replicate successes and avoid failures,” says Frazier, who is speaking from personal experience as one of eight founding members of LION, the Local Investing Opportunities Network, whose members have invested over $3 million in small businesses and nonprofits in the area of Port Townsend, Washington, two hour’s drive outside Seattle.
“This website is a fantastic resource! The article on ‘Building your Local Economy Ecosystem’ was refreshingly detailed, with just the right number of links,” says Shelly Randall, Blogger/Activist at SustainableTogether.com, “not too over-the-head and not too dumbed-down. Kudos!”
The LIRC provides two tracks of study: for Investors and Community Leaders. (A course for Entrepreneurs will launch in 2015.) Each course requires no prior experience, bringing each student from novice to “ready to go.”
The courses include training on how to properly evaluate local investments (which is more hands-on than conventional investments, and requires getting to know business owners), starting local investing clubs and networks from the ground-up, organizing small business showcases, and many other elements unique to local investing and critical for success.
The LIRC makes 95% plus of its material available free to the public, but offers significant benefits for becoming a paid member, including access to members’ only downloadable content and forums and quarterly conference calls with experts in the field. Annual memberships are 100% tax-deductible and available now for just $5 per month, with discounts for groups. The LIRC also welcomes sponsors and donors of larger amounts to further build its curriculum and capacity.
While local investing has similar risks to traditional investing and should be one part of a balanced portfolio, benefits are more than monetary.
“You cannot do local investing from behind a computer screen. You have to go out into your community, meet people, and see the business from the inside. And it doesn't just stop when the check is written; local investors can become mentors to business owners. There are connections created, there are relationships built,” says Frazier.
And the economics of local investing create financial benefits beyond the businesses that directly receive the investments. Through what’s known as the Local Multiplier Effect, most of the money invested in local small businesses is re-spent on local wages and goods and services from other local businesses. This capital continues to cycle through the local economy, spreading prosperity broadly. Businesses are started and expanded, jobs are created, the local tax base is increased, and the whole community benefits.
“For people who are doing traditional investing, outside of the temporary high of making profits and spending them on experiences or stuff, you don't take away very much,” says Frazier. “But by investing locally, there are businesses in your community providing real goods and services to real people – and you are behind their story.”
Lance Laytner, Public Good Relations
Founder & Director
P.O. Box 901311
Kula, HI 96790
James Frazier is the Founder and Director of the Local Investing Resource Center. He is a Certified Financial Planner™ specializing in Sustainable, Responsible, and Impact (SRI) investing with Natural Investments LLC. He serves clients nationwide from Washington State and Maui, Hawaii, and has over twenty years of experience in the investment industry. He is a founding member of the pioneering Local Investing Opportunities Network (LION) of Port Townsend, WA. He earned a Bachelor’s degree in economics, specializing in finance, from the Wharton School of the University of Pennsylvania.
Outside the financial world, James’ passion for sustainability has inspired him to explore natural medicine and nutrition, permaculture, renewable energy, green building, community living, and more. In his personal time, James enjoys hiking, playing Ultimate, DJ’ing, and travelling. His personal mission is to help grow the pool of “Intentional Money” that is dedicated to building a better world for all.
What is local investing?
James Frazier: We define it as investing in local small businesses and/or nonprofits for the mutual benefit of the investors, investees, and the community as a whole. These benefits can be financial, in-kind (products & services), cultural, and more.
What is the Local Investing Resource Center?
The Local Investing Resource Center (LIRC) is a not-for-profit online resource providing detailed information on how to succeed in local investing from the perspectives of investors, for- and non-profit entrepreneurs, and community leaders/organizers (including those in economic development and government). We provide a way for local investment practitioners to find each other, collaborate, and advance the field as a whole.
Is local investing new?
Actually, no. In the early days of investing, all investments were local, as neighbors came together to pool money and help start essential businesses in their communities. Now, as a result of social movements towards reinvigorating communities, increasing local sustainability and self-reliance, and impact investing, we are seeing a return to local investing.
How does local investing benefit communities?
Through what’s known as the Local Multiplier Effect, most of the money invested in local small businesses is re-spent on local wages and goods and services from other local businesses, and continues to cycle through the local economy, spreading prosperity broadly. Businesses are started and expanded, jobs are created, the local tax base is increased, and the whole community benefits.
What are the advantages of local investing for investors?
In addition to enjoying the benefit to their local communities, and financial returns, local investors can build relationships and goodwill with the entrepreneurs they invest in that last well beyond their investment time horizon. They can directly engage with their investments to improve the way a business is run, reduce their risk, and maximize positive outcomes for all involved. They can also direct their investments towards goods and services they want to make available in their community.
What is your background?
I've been in the investment industry for over 20 years. I am a Certified Financial Planner with Natural Investments where I focus exclusively on Sustainable, Responsible, and Impact (SRI) investments. I co-founded a hedge fund shortly after graduating from Wharton with an undergraduate degree in finance, but sold my stake in 2007 to dedicate myself to helping investors use their money as a force for positive change in the world.
How did you discover local investing?
During the Financial Crisis of 2008, I was living in in Port Townsend, a small community two hours outside Seattle that has a long history of self-reliance. Many businesses found themselves in trouble as banks pulled credit lines and tourism dried up. I was one of eight citizens who came together and created a group called LION, the Local Investing Opportunities Network, in order to connect local investors with local small businesses. LION grew to over 70 members who eventually invested over $3 million dollars in a wide variety of local businesses and nonprofits, such as farms, construction businesses, real estate developments, conservation projects, a public radio station, entertainment venues, and retail stores.
How can someone support the Local Investing Resource Center and what are the advantages to LIRC membership?
The LIRC is a non-profit and all donations are tax-deductible. We offer paid annual memberships that support our work. Members are able to access premium content, our members-only forum, and a quarterly conference call with experts – which is basically free consulting time. We offer discounts for members of community-based groups.
Interview with James Frazier
James, start by telling me about your background.
James Frazier: I've been in the investment industry for over 20 years. It is the only industry I’ve worked in my whole career. My background is in hedge funds and I co-founded one myself a couple years out of college. That went really well for many years, but I started running into some values conflicts, and ultimately sold out of that business. I restarted my career in what I am currently doing as a Certified Financial Planner and investment advisor with Natural Investments, where I focus exclusively on Sustainable, Responsible, and Impact (SRI) investments.
What are natural investments?
Natural investments are investments that have a story – they are doing something in the world to improve communities, to finance renewable energy projects, to fund companies that are leading the charge to a more green and sustainable economy. Private equity funds are digging up the next generation of high impact companies that are creating new solutions for our challenges. We do all of this in a traditional diversified portfolio approach, asking ourselves: How can we achieve the long-term financial goals of the investor, and at the same time, invest in things we believe in and want to see more of in the world?
How and when did you discover Local Investing?
I was fortunate enough to live in Port Townsend, Washington, which is a small town about two hours outside of Seattle. I was early on in my Natural Investments career, and I heard through the grapevine that a group of people were meeting and discussing local investing. It was right around the time of the 2008 Financial Crisis and there was a lot of disillusionment with traditional investing and Wall Street. People wanted alternatives. And people had already been investing locally there because it is a small, isolated community of just 9,000 people. It is surrounded by water on three sides; it is on a peninsula. Ever since people have been living there, they have been more self-reliant and have had to work with their neighbors to get things done. That sense of community was already there, but in the Financial Crisis it really kicked into overdrive because banks were pulling back lines of credit, tourism was drying up, and a lot of businesses were suddenly in trouble. And to the credit of the local people there, those with money really wanted to step in and help save the day. They wanted to come in and prevent a bunch of businesses from failing and dropping the local economy into a total meltdown. These investors felt empowered to do that when we got together and created a group called LION, the Local Investing Opportunities Network. I was one of eight co-founders.
What has LION gone on to do?
I believe it has been incredibly successful. It has expanded to over 70 members. It has invested over $3 million dollars locally. You can do a heck of a lot with $10k, $20k sometimes – you can launch whole business for that much. I believe there are many businesses that exist most likely only because of LION. If LION members had not stepped in, those businesses would either not be here or would have had to raise money through traditional means at much worse terms that also might have resulted in their not being here today.
Was it a healthy investment for the investors, as well?
Yes, for the most part, yes. There are a few investments that have run into trouble, and that is always going to happen. The investors that have done the best have followed traditional diversification principles, just on the local level. They do some local farms, some local construction, and some local restaurants. And then they stay engaged afterwards. They don't just write a check and walk away; they build a relationship with the business owner and stay involved. They are not only building relationships, which makes the social fabric of the community stronger, but they create a mentoring relationship with the business. They bring more to the business than just money, ideally.
Now that is unique to local investing, correct? You could not do that on Wall Street?
Absolutely. That is perhaps the defining characteristic of Local Investing. You are able to engage directly with who you are investing in. And this is not just monitoring after you invest, but to do your research before you invest, to get a sense of “Do you trust these people? Do you trust them with your money to execute their strategy? Do you trust them to deal with the unexpected?” You believe in them when you invest in them. The old-fashioned principles of investing are very much in play when you invest locally.
This gathered steam in 2008, but is this new or a resurgence of something that has been going on for a long time?
It is definitely a resurgence. It is the original kind of investing, people helping each other in communities. Before the advent of the global electronic trading network, the way I see it, all investments used to be local. There was always some kind of connection there. It used to be something where you would get involved and be more engaged and build up a level of trust. That is what we are getting back to in local investing.
You get an idea of someone's reputation more in local investing rather than it just being a portfolio with cold numbers on a page?
Yes. You need to.
There is also the aspect of building up communities. Tell me a little bit of that side of local investing?
To me, that is the best thing about it. At the end of the day, whether you have made money from local investing or made money from an international stock trade, it is just money. But if you look at what it takes to have a successful local investment, you cannot do that from behind a computer screen. You have to go out into your community, you have to meet people, you have to see what they are doing, and you have to see the world through their eyes. You have to see the business from the inside and really find out “Is there something you can provide each other with on mutually agreeable terms?” That is what it comes down to. You have to get to know people. It is an engaged practice of community building. It doesn't just stop when the check is written. It can include mentoring if the investor has those skills to offer.
It seems so often that people don't talk about their money, but this helps bring money out and makes it a resource to benefit the community. It can help activate money that was previously stagnant or neglected, not really invested in anyone or anything in particular. Maybe it was making profits off some big corporation halfway around the world, but this is a way to mobilize money to help people right where you are– to create jobs, to ensure that the goods and services that you want to see available in your neighborhood continue to be there.
And then there all these secondary effects because the businesses you invest in go out and hire people. It is called the Local Multiplier Effect. The people who are hired pay taxes and increase the tax base which lead to better schools, they buy goods which help other local businesses, and the whole community becomes more prosperous, continuing the process in a positive loop.
Tell me a little more about the Local Multiplier Effect.
When you take a dollar and spend it at a local business, a higher percentage of that dollar is re-spent locally than if you spent it at Wal-Mart. If you went to Wal-Mart and spent a dollar, that dollar is going off to pay the suppliers in China, the management in Arkansas. There is a chunk that does stay in that community to pay the managers and cashiers and so forth, but it is a much lower percentage than is paid out to that community for a dollar spent at a locally-owned business. The local business' suppliers are likely local, so is their staff. Because all of those people are local, they will go out and re-spend that money in the local community, as well, boosting local prosperity as a whole.
Does this only work in small or medium size communities, or could it work in a big city, as well?
I've seen signs of it working in bigger cities. There are groups in Milwaukee; there are groups in New York. There are big city groups I've seen focus on neighborhoods to re-localize in a smaller area. And then there is investing in a sector. Slow Money NYC members, for example, invest in food; they invest in upstate farms, local restaurants, a whole variety of food businesses. The investors are spread out all over the City, but they are looking to build out what is called a Local Foodshed so that there is more high quality, healthy, local food going into the City. It can work in a City.
You are putting together a website that is designed to be a public resource. What prompted that? Tell me about that.
It all started when LION began receiving media coverage. People were writing us, asking how they could replicate this model. It occurred to me that despite the two quality books that were written on local investing (Locavesting by Amy Cortese and Local Dollars, Local Sense by Michael Shuman), there was no online resource that offered the specific details and information on how to do local investing from all the different perspectives: the investor's side, the business' side, and the community leaders’ side. Also, there was no place online for local investment practioners to find each other, communicate, and advance the field as a whole. So that is what the Local Investing Resource Center is designed to do, to fill that void.
Why did you choose a non-profit model?
I want it to be objective and independent. I believe that being 100% tax-deductible, not being required to constantly produce profits, would allow us to be more effective, covering local investing from every proven and promising angle, and helping build a grassroots local investing movement that brings money down to earth, as Woody Tasch (founder of Slow Money) likes to say.
How do you plan to make this financially sustainable?
We're offering paid annual memberships with discounts for local investing group members. Members are able to access members-only forums, some premium content, and a quarterly conference call with experts, which is basically free consulting time. We offer additional helpful services. But we are going to be sure to always offer 95%-plus of our content at no cost so the public can always get high-quality information about local investing at the click of a button.
For advocates of local investing who are philanthropists, can they donate to your non-profit?
Certainly. We have accepted some very generous gifts that have funded the creation of the site. Memberships cover overhead and keep the site fresh, but larger donors will always be appreciated for their ability to help us implement bigger initiatives, advancing and building the site to offer new and better services over time, and helping us get the word out more widely. We definitely see a big role for our supporters in helping to build the future of local investing and what we can offer to the world. Talk to us.
Before you even launched, you attracted the attention of major media. What do you think makes Local Investing so attractive to the world of traditional investing? Why all of a sudden has this gained so much steam?
It is a great story. For people who are doing traditional investing, outside of the temporary high of making profits and spending them on experiences or stuff, you don't take away very much, unless what you are doing has a greater purpose. By investing locally, there are connections created, there are relationships built, and there are businesses in your community providing real goods and services to real people… and you are behind their story.