Local Investing Interview with Deborah Stinson of LION

The Local Investing Resource Center presents this interview about starting a local investing network between James Frazier and Deborah Stinson of the Local Investing Opportunities Network (LION) of East Jefferson County, WA from August 2013.  The following topics are discussed at the times noted:

  • [0:17] Benefits of local investing
  • [5:36] LION structure & results
  • [8:16] Introducing new members to local investing
  • [11:24] Starting a new local investing group
  • [15:13] Local economy ecosystem
  • [19:40] Local investing stories


James Frazier: Hello, and welcome to the Local Investing Resource Center interview series. My name is James Frazier and today joining me is Deborah Stinson.

Deborah Stinson: Hello.

Hi, Deborah. You are a member of LION. You've been there since the very beginning. Can you just introduce yourself and tell us what you're doing nowadays? And then go back to your background and what brought you to LION and local investing?

Sure. I've been in Port Townsend for about a little over 10 years. I retired here from the East side of Lake Washington, and since then, I've been very involved in the community, and most recently, in the last year and a half or so, I've been on the City Council, which has been a new challenge in my life and very rewarding. Like I said, prior to that I was involved in a lot of other community efforts that led to LION. Would you like to hear a little bit about how that came about?


One of the first things I got involved with here was to create a group called Local 20/20. Many of you out there may be familiar with the Transition Town initiative with communities coming together to work towards sustainability and reliance as we face the pressures of global warming and peak oil and potential economic collapse. We formed our group in tandem with Transition Town; we hadn't heard of that effort at that time. But it’s very similar, and we work on balancing the ecology, economy, and community, and we do a lot of education and a lot of action.  It was about 2006 or so. And in 2008, George Bush did the first Economic Stimulus and sent everybody a check for $250. We were in a meeting at Local 20/20 and some of us were saying, "Well, what good is that going to do? I don't see that working all that well. Can we pool our money somehow and do some real good in our community? And working on our economic localization, can we get the ball rolling there?" So we decided anybody interested could come to a meeting, and that's really where the seeds of this LION got started. Fortunately, it was about one or two meetings into that, we realized this wasn't as easy as we had all hoped, and you showed up. So that was a real opportunity for making this thing work.

Around the time that I came in, we started looking at different models that we could use as a group, and we veered away from pooling money and more towards everybody doing their own individual investments.

Right. Kind of channeling of money, and then in a way, we even referred to it as matchmaking.

We went towards a networking model.

Networking, we settled on networking, but we originally called it matchmaking.

Yes. Absolutely.

And it was great because I think everybody realized the people that were in the room knew that there were a lot of high energy, entrepreneurial, very creative people here who wanted to do good businesses that would be strong for our economic development and our economic well-being, but also help the community and the environment in the process. But they didn't have the financial means to do that. We are very fortunate here to have a pretty strong influx of retirees who bring with them nice portfolios. A lot of those folks, at that time especially, were looking at Wall Street, and not happy with what their money was doing. It didn't feel good to many of us that our money was being invested in things that we didn't necessarily believe in, nor could we be confident that it was going to be there for us when we needed it either. But that was a model that many of us had built our retirement on, to be able to live off investments. You know, whether that's the long-term model, I don't know. But for the people of a certain age, that's how we developed our financial strategy, to be self-reliant as we moved into later years. So we wanted to have a way to channel that money locally.

And basically meet two needs. Meet the investors' needs to have more of an impact and support their community, and at the same time, the local businesses that were challenged to get financing, especially in the credit crunch in 2008, meeting their needs as well.

We saw real risk of losing a lot of our really solid businesses that we wanted to see here that makes our living here such a rich experience. So while there's many philanthropic opportunities, and most people take advantage of those, there were also these other needs that needed to be met. And we realized that if we could do this in a smart way and get that money to the people we wanted to see in our community, creating the businesses, the types of businesses we wanted, and creating the jobs that kept the young families here and kept the rich diversity that we have. That really was our goal.

And so, how has it worked out? You started with eight people and that was, I guess, over five years ago. So how's that played out?

I'd say it's played out very well. I think most people are very pleased. It was an experiment like so many things are. And here we are today, LION is still going strong in our own community; we've grown to probably around 70 members or so, last time I looked. And the opportunities come in on a steady flow. People that have brought opportunities to LION and had success, introduced other businesses or people they know to the concept, so we get people that way. Then we also get new members that way. People that have had successful investments say, "Hey, you should look into this," to their friends, and so we do have a lot of businesses in town today that would not be here if it had not been for LION.

I think that's one of the most compelling aspects about this, that the community gets empowered to shape itself and retain businesses and people that it wants to have, instead of just letting them go and saying, "Oh, well, we can't do anything about that."

I also like the way we developed it. We can talk a little about the details, but by the way it's so individualized, the people in the network are free to pretty much just invest in the things that they feel most comfortable with that are in line with their values, that support the kind of businesses that they want to see here. We didn't draw any hard, firm lines around, “it has to be a certain kind of business,” or that we all have to agree that, “this is a worthy business.” I think that's been important too, because it's a reflection, again, of the strong diversity that I think so many of us really cherish in this community.

So there's no centralized vetting or due diligence of these opportunities. It's more like an introduction, and then people can take it from there, and everybody makes their own decisions.

That's right.

So everyone needing to do their own research and due diligence, has that raised the bar in terms of who can participate, or what have you seen as far as new people coming in and being able to do this?

Well, frankly, there has been some hesitancy on the parts of some people that don't have that kind of financial expertise. They're a little out of their comfort zone and they want advice on how to do it, and because of the nature of LION needing to be strictly a network and not a group, that's giving advice. [Ed: LION members agree not to give each other customized investment advice.] It's a little challenging, but what we found is that people go ahead and join. There's no requirement that you invest. You can join and sit back and watch. You know other people in the network. You can talk to other people in the network about their experience, how it worked. And I think most people have access to good financial advisors and planners that are now starting to understand this. I think, at first, some of the financial planners were a little hesitant because it was outside of their realm of experience, but I think most people, once they understand that if they have money that they can set aside, they know what their risk tolerances are and can look at a business. One of the things, I think, is really key to this, is that these are businesses in your town. They're people you know. You can walk in the business on a regular basis, see how it's going, talk to the owner. They know you; they don't want to let you down.

There's an accountability that you don't have with Wall Street.

There is an accountability. Exactly. So I think people understand that, and then they also understand, "Okay, I'm just going to take out." The nice thing too, we've had enough of the opportunities that come in where they're willing to take multiple investors to keep the individual risk level to a tolerable level. I think that has helped a lot of people too. It lets them dip their toe in, see how it works, understand how it does pay off over time. And then they build their confidence that way.

It's creating community, and there's mentorship relationships forming and…

And even mentorships between investors and business owners.

Oh, absolutely.

It's really been fun to watch.

Those are all things that wouldn't be happening without local investing in this community.

That's right, that's right.

So it's really compelling.

I just love walking down the street; of course, I love this community, I just love it on many levels. It's just so rewarding to be able to walk down the street and look at all these businesses and have some knowledge, even though I didn't personally—no way I could participate in all of them, I'd love to—but just knowing that they're there because my friends and neighbors stepped up to help make this happen. It's pretty cool.

And you helped create the organization that's making that possible.

That's true, and there is that little added satisfaction.

Very cool. Tell us a little bit about the actual process of starting a LION group or a local investing group. How did that start and then evolve?

Okay, well, I mentioned earlier on that we had really just got started and you joined us. One of the key points I left out there too, though, is once we thought about this networking model, we realized there were people in town that did this naturally in a very informal way. This is the kind of thing that has been going on, probably, for a very long time. We didn't create it, you know. But we're just kind of formalizing it and reintroducing the community to the concept. So we invited people that had been doing this in recent years in this informal manner, and asked them about what worked well and where were the challenges. I'm glad we did that because it gave us a heads up of a few things that they had run into over the years that had actually dismantled some good opportunities. Part of that has to do with confidentiality, which is key, because new businesses, people with new ideas, you got to keep that under your hat or somebody might beat you to the punch. We’ve got to make sure people with the opportunities are confident that they have the confidentiality that they deserve. And the other was exit strategies. When you go into forming LLCs and these other group things, it became a challenge for people that, all of a sudden, had an unexpected expense needing to do a rapid exit. So that kind of led us to these kinds of independent deals.

So everybody is doing a separate deal. There's no pooling money in an LLC or group. It's more like businesses might sign a promissory note with a few separate investors.

But then they can each have their own exit strategies and work independently, and that was a big, big part of it. Once we understood that those challenges were out there, we realized we needed to protect not only the investors, but also the businesses. So we created what we call the membership agreement and crafted that, ran it by some lawyers to make sure we were staying within the legal boundaries, and they were all very flattering that we had figured out something very creative and threaded that needle. We got that done, and so the next step was to get the membership built up. To build the reserves before we went out big. Many of us just started making phone calls to people we knew might be interested. We advertised in the newspaper and other media outlets. Reserved some rooms and had these nice social events, you know, a little food and beer and wine always helps.

And then had people tell stories, had investors talk about their experience, had some businesses stand up and speak about their experience of working with local investors.

Shared our vision for how we could grow this and how it would be, again, very important to our economic development here locally, and our resilience in troubled economic times. That really struck a chord with a lot of people.

Just through word-of-mouth.

Exactly. So we just had several of those events, and then as we got new members on board, those of us that were there in the beginning would step up and have little orientation meetings for the new members.  Because, again, you mentioned earlier, this is a new model, and it’s kind of confusing. We wanted to make sure people understood how it worked and the importance of the confidentiality. And what they could expect on how it worked. So that's how we got started with members. And then we realized though, it wasn't just the members and the businesses, it was this whole ecosystem. That we're not in this by ourselves. This is a full, rich community. And so you helped us make some of those connections.

Absolutely. What we realized is that businesses don't exist in a vacuum, and they needed, not just funding, but a lot of times, mentorship, basic entrepreneurship education, accounting.  So we connected with the local community college to actually present at some of the entrepreneurship classes that were being given there. Tell them about what we do and how we fit in.  We talked to the Small Business Development Center because that's a place where a lot of businesses would go through, work on their business plan, and get to the point where they could present to investors. I personally saw when businesses came through there that they'd have a much higher rate of being invested in because their plan was solid.

Everybody wants them to be successful. And again, we weren't there to be their business coaches so much, but we were there to support them financially.  I think it was important, too, that those folks [SBDC] were aware of us so that they could let people know when they came to them that this was another option, especially during that economic downturn time when the banks had to pull back so hard. I thought it was also good when we reached out to the banks to let them know what we were doing, because we actually had one bank here in town that started. They were frustrated because the new rules prevented them from making investments or extending loans that they probably would've done in the past. So they were actually sending people our way, to bridge them... They realized that you can get some local investment to get you the success to the point where you meet the new rules, right? Then you can come back to us, pay back the local investors so that they can invest in the next up-and-coming, and we'll carry you forward. I just thought that was amazing. I really, I just thought that was great.

It was almost unprecedented because you might think that the banks would view local investors as competition, but instead it's been more like they exist at a different level of the businesses' growth process. They come in at a different point, and so early on, the local investors can be thought of as more like friends and family, which really that is how we work. It’s creating those kind of friendship and mentoring relationships before the investing starts happening.

Well, it's in the new economy, right? I think that in the new kind of sharing economy, and the way we're evolving, the friends and family in the social network concept is really what we're talking about here. It's just expanding what friends and family means.


But I thought that was key. And then again, getting to those entrepreneurs. When they’re learning about running a business and putting together a business plan and running their finances, and understanding what all their options are, we actually presented those classes side-by-side with, not only traditional banks, but also some of the new, like Craft3 was one of the other banks that presented alongside LION.  They just thought, these are all opportunities, and they also presented the whole—what are the ones online? You're more familiar with all of those. The crowdsourcing.


And all of that, so we're just part of this new rich mix…

Part of a much bigger system, but I think a lot of people are really glad that that it exists, because it does have a special niche in terms of building community, creating local connections, and funding ultimately that wouldn't necessarily have happened any other way.

That's right, it's a very key part of that mix, I think. We really need that for the very reasons you stated.

Okay. So where do you see is this all heading as we go forward?

Boy, you know, it's hard to say. I think it's here to stay. I mean, it definitely has legs in this community. We constantly are getting inquiries at a pretty regular, I would say, not trickle, but you know a nice level pace of both new members and new opportunities. I think what we're seeing now, we started with a lot of startups, and now what we're seeing are more expansions and even, and of course, hopefully we won't be seeing as much of this, but the whole line of credit and the loans that established businesses had, and then the banks had to pull back on. It was wonderful we were there to catch that. I'm hoping the banks are able to loosen up on that again for the existing businesses, but we are seeing more in that arena as well as the new businesses.

Okay, how about you personally? Have you had any local investing experiences of your own?

Oh, yes, yes. We have very rich experience.  In a local hostel that was going through a major transition , we were able to help bridge that until they could find what was going to work for them. Something we really believed in and I personally really felt strongly that needed to be in this community. And was doing good work and that was very…

You are able to help make that happen.

And it was very successful, got paid back early, you know.


It was great and we just had a brand-new one come our way that we got involved in. They are really excited to see it happen here in the near future and it has a lot of great fun community implications.

And that's really cool that you get to use your investing money to help make things happen that you want to see happen that you can go and enjoy yourself.

And we’re just so looking forward to being able to go to that first gala event that brings this new venue to the community and then just watch it blossom and flourish. It's going to be done.

Okay, wonderful, well, any final bits of advice you might have for our audience if they’re thinking about starting a LION or a local investing group of their own?

I'd say just do it. You know, we've got this great Local Investing Resource Center now that you're putting together, which I think is a wonderful, very heartening outgrowth of what is happening here, building on that success.  I just say, "You've got the resources, it's there, it's ready. It's proven, and it's just such a rich experience." I just think everybody should look into doing it, and you can do it to whatever level your finances can afford.

In your community.

In your community. It's a good thing all the way around for building a resilient community.

Great, thank you, I really appreciate you joining me today and again, this is Deborah Stinson and James Frazier. Do you have any contact info you want to share with the audience?

Well, the only other thing I'd mention: we talked about this group, Local 20/20, at the beginning, that's this Transition Town initiative. If you're interested about the other types of work we do, you could visit our website at L2020.org.

Great, okay, well, thank you so much for joining us, and I appreciate it. Take care.

My pleasure. Take care James.

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