Local Investing Interview with Judith Culver of WIN

The Local Investing Resource Center presents this interview about starting a local investing network between James Frazier and Judith Culver of the Whatcom Investing Network (WIN) from March 2013.  The following topics are discussed at the times noted:

  • [0:30] How WIN got started & grew
  • [6:52] WIN's investing process in detail
  • [12:40] Local investing opportunities, challenges, and insights


James Frazier: Good morning, and welcome to the Local Investing Resource Center interview series. My name is James Frazier. I'm a financial adviser with Natural Investments and the project coordinator of the Local Investing Resource Center. With me today is our very special guest Judith Culver, who is in the leadership of the Whatcom Investing Network. Judith, thank you so much for joining us today.

Judith Culver: You're welcome. I'm glad to be here.

Thank you. So just to start out, could you tell us a little bit about your background and, you know, how you came to local investing?

Okay. A few years ago, I was a member, and am a member, of Whatcom Transition. And in that pretty large group of about a thousand people, there were some of us who thought it was very important to create financial resilience within the community, and that local investing would be a very important part of that. At that time, we really hadn't heard of any other groups that were doing similar investing. So we formed a small group focusing on personal finance, and started researching on the internet. It was at that point that we identified the Port Townsend LION Group, the Local Investing Opportunities Network.  That just seemed to be a perfect fit for what we wanted to do.  We were really grateful that someone else in the state of Washington had already blazed a trail down this way.  So that's how our group got started.

Okay. Yeah. I remember you reaching out to me. I was the LION community outreach person at that time.

I had a list of questions, and you were very helpful to us to get started then.  And then after about six months of talking and thinking about it, we again reached out to LION and asked James if we could have copies of all their forms and procedures. So we tried to stick to those, exactly what you had done in Port Townsend.  It got us started well.

Okay. Great. Well, as far as getting some momentum for your group, you know, growing beyond that early small core group of people.  How did that happen, and what was the catalyst for really expanding there?

Well, in Transition Whatcom, we had a social networking platform. Probably seven or eight months before we actually formed our investing network, we did a survey.  And that was to survey, among the thousand people, how many might be interested in borrowing money locally, and how much.  And then who might be interested in investing. Even though we didn't connect those to specific people, we did have an indication of a total amount of maybe $850,000 available for local investing among that group.  And so we said, "This is enough to get going."

Then when we were ready to start, we again put a meeting announcement out to that group.  That's how we got started. The first meeting, we had 22 people.  Most of them signed up that night. Then we also made another decision, and that was to meet every month, because we wanted to get to know each other, and to always be there to welcome potential borrowers.

And so, those 22 people started telling their friends.  Within a few months, we had more than 40 members.  And we've never done any kind of recruiting program.  Even after a few months, we stopped announcing when our meetings were going to be.  It was all spread by word of mouth, through the grocery store, the co-op, etc.  Soon after that, we had about 50 members, and that's where it's leveled off.

And how long has it been running as of now?

I was thinking this morning. I think about 21 months.  Of those, 20 to 25 are pretty active.  And the others are waiting in the wings to see what happens.

That's something we've seen with LION, as well.  It’s that there's a learning curve with local investing. And some people that dive in are maybe more comfortable with assessing businesses and investment risk, and others that are kind of wading in to learning, and waiting to see how things go, and waiting until a compelling opportunity comes along.

We had done a pretty widespread Move Your Money campaign in the community.  A lot of people had divested from Wall Street and had money sitting in local banks.  And so that was one source of money waiting for investments.

Great. So as your group has grown, how have the group dynamics been with the larger group?  And how have you dealt with those?

[laughs] Well, it's really been amazing how well everyone's gotten along.  We're basically a group that didn't know each other to start with.  But through the process, I think one of the things that people like the most is how many new friends they've made.  In our meetings, we consider ourselves to be friends, and especially where we have a process of doing subgroup evaluations of businesses.  That process is really where you get to know people and start to develop more trust.  We really haven't had any personality clashes, or problems with the development of our group.

You guys are fortunate.

We really are. [laughs]

Could you tell me a little bit more about the investment process?  Like, you mentioned subgroups. You know, once businesses contact you, and they go through an orientation . . . Which I got to see last night at your meeting.  How does it proceed from there?

So the first requirement is for . . . we call them fund seekers.  The first thing they have to do is come to an orientation.  That's important so they'll get a good understanding of what WIN is and what WIN isn't. [laughs]

Ah, that's key right there.

And how they will interact with us.  And so we have the orientation. Then, following that, we have a regular monthly meeting. At that meeting, each person has a chance to introduce themselves and their business.  We try to give them up to five minutes to do that, if they really want to take that amount of time.  Following introductions, we always have a break of about 15 minutes where members can talk to the business owners.  It's just a really nice time to get to know people. Then we let the business owners leave, if they want to do that.  So the next step is that we have a submission form on our website.  It's a five-page document that gathers information, and also sets the agreement between the business and the lenders. If they've been to an orientation, we immediately email that submission form out to all the members.

So that's when members get a little email saying, "This is a business that's interested in finding funding."

Yes.  And they've already been to one meeting.  So a lot of the WIN members have made a decision as to whether they might be interested in the industry that's involved.

And have some sense of the person, and are getting to know them.

Exactly.  So now we have the document that describes the business and what the offering will be, the terms of the loan. We do primarily promissory notes, but we have some members who have made equity deals.  Then the business owner has an opportunity to give a live presentation at our next meeting.  That presentation is 15 minutes of talking about themselves and their business and the offering.  I encourage them to really talk about themselves, because a lot of the connection made between WIN members and the fund seeker is made at that meeting.  When they find out where this person came from, and what prompted them to get into this business, and information about their families, even is included sometimes.

People really can get a sense of who they're dealing with there.

That's right.  In some of the deals, the family has been equally important.  Especially if it's a family business, like a dairy. One was a dairy, and it was a family business.  And so we needed to know about all the family members.  But they only have 15 minutes, and then we have about five minutes to ask questions.  At that point, we're just deciding if we are interested in pursuing more information.  Then, in a members meeting, we ask if anyone's interested. If there's a group that's interested, then they form a subgroup, and a leader is volunteered. [laughs]

So from then, the subgroup meets with the business owner. If they have a location, a lot of times they meet at the location, whether it's a warehouse or a restaurant or whatever it is, and start to do a due diligence process. So over the process of the last 21 months, we've gotten a lot better at due diligence, for a number of reasons. One is that we have a few people in our group that are CPAs.  They have kind of guided us in the process of looking at financial reports.  One has set up a quarterly training session for us.

That's amazing.

Most of our members are really interested in becoming more effective at the due diligence process.  When that's completed, each person makes their own decision about whether they want to invest in the company.  Then is the process of signing contracts and giving the money. [laughs]

Wow. Okay. And so then the business goes off with their plans, and . . .

They do. And we monitor whether we receive any interest or interest in principal payments as we go along.

Okay. Great. So, what kind of challenges has WIN experienced along the way? Any bumps in the road that you want to share about?

Well, I will say that one area that I like to put a lot of emphasis on is a consistent message to fund seekers.  So we have an orientation. I try to be consistent about what I say. But at a certain meeting, maybe I leave something out. I think one of the biggest challenges is not having misunderstandings about how quickly we'll respond, or how many people are really interested.  Because sometimes to a borrower, it seems like lots of people are interested. And then by the time we get through the due diligence process, maybe no one is interested.  They feel like they have committed a few months of their time to a process that didn't work for them.

And that very well may be the case. I mean, in our experience with LION, that was at least half the time.  At least half the businesses aren't getting funded.  I think that that's probably just a natural part of it, that it's good to set expectations up front, it seems.

That's right. And it seems like no matter what I say, they still believe they're going to get funded.  So I try to encourage them to seek other funding sources along with WIN, and to stress that any work that they're doing getting together financial statements or fulfilling request of WIN members for the due diligence, that those steps will also help them seeking funding from other sources.

Okay. So WIN, it seems like, is just, a part of a bigger funding ecosystem. You know, include banks and possibly credit cards, and angel investors.

And a lot of times when they hear about us, they've exhausted all the other possibilities.  So they have high hopes. [laughs]

They have high hopes, but do you think that . . . is it easier to get money from a local investing network at the end of the day?

Well, I think that we have different standards than banks have.

Okay. Can you tell me about that?

And we have different values. Because some of us really want to invest in local food supply.  And so a farm or a dairy might have a better chance of getting funding from us than from a bank. Because we are really committed to them.  And so sometimes we don't make as good a judgment as we might. [laughs]

Okay. Speaking of that, how have your own personal local investments been turning out so far?

Well, my husband and I have made six loans.  They've all been loans. And we don't have any failures yet. We're receiving checks from all of them on whatever the schedule was that was laid out.  We do have one that paid back early.  And I was glad for that. [laughs]  Because one of the big questions we're always considering is will we get our money back?  You know, during the whole process, that's the main consideration, is will we get our money back?  So one of the loans is a year and a half old, and the other's a little less than that.  So far so good.

Great. Okay. How about current projects? What direction is WIN going in? Where do you see everything going from here?

Well, James, we have a steady stream of businesses coming to the orientation and finding out about our process. And so we want to strengthen that, and I think there are members that would like to do a little more recruiting in areas that they're especially interested in.


Yes. I think so.

But it's pretty much just building on success.

Some people talk about being able to help small businesses with their presentation to us and their business plans, and things like that.  To strengthen their opportunity to be funded.  We might look at more training in that area, as well.

Yeah. Education seems to be a really key component.

It is, because no one's done local investing in this area.  Well, few people have done it.

So there's a lot of learning to be done.

There is. There really is.  On both sides.

Well, I'm really happy to see that your group is gaining experience, and is interested in sharing that.  I really appreciate that you're here to share your insights and experience with our viewers.

Well, thank you for inviting me.

Thanks so much. This is, again, Judith Culver with the Whatcom Investing Network. How can people contact you if they want to find out more about WIN, or talk to you?

Okay. Sure. Well, Whatcom is our county name, and I'll invite you to come to our website, which is WhatcomInvesting.org.

Well, thank you so much. Again, my name is James Frazier, and thank you Judith, again. This is coming from the lovely city of Bellingham, Washington. And until next time, thank you so much for joining us today.

Thank you.

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