Local Stock Exchanges Offer Hope to Small Businesses Looking to Raise Capital

The almighty dollar. Acquiring it is the most commonly cited challenge for entrepreneurs: how to raise sufficient capital to grow, expand, hire, or simply survive.

The growing fields of impact investing and socially responsible investing also make it clear that the investment environment is ripe for locally-sourced capital infusions in mission-driven businesses….if only the dollars were accessible by those companies. The main challenge is not interest…it’s mostly legal.

Some advocates of impact investing and others who may fall under the umbrella of the “loca-vestor” movement are looking at local stock exchanges, a concept that almost went extinct as the Nasdaq, NYSE and other major exchanges bought up smaller ones and modernized. It appears they may be poised to make a recovery.

Local stock exchanges offer a number of advantages:

  1. fees associated with public offerings through NYSE or Nasdaq can be too high for the small to mid-sized companies that need equity infusions the most…according to the Wall Street Journal, a smaller company would have to pay about $1M to raise $15M through a public offering. Given that the company might have to buy those shares back, that price is simply too steep.
  2. people get to invest right in their own community, helping to keep dollars local and giving locally owned companies the capital needed to hire and retain a quality workforce, thus making them attractive as economic development engines for municipalities
  3. they can leverage some “wiggle room” in SEC regulations that allow companies to sell stock through these smaller exchanges to citizens of the same state (this, indeed, was how Ben & Jerry were able to raise capital in 1984…and how different would the world be now if they hadn’t been able to?)

Toronto, Lancaster (PA) and Hawaii are exploring the possibilities, and local exchanges are being set up in Europe, Africa and Asia as well.

Scott Cooney is the author of Build a Green Small Business (McGraw-Hill), and teaches sustainable business web classes through GreenBusinessOwner.com, including an upcoming class in raising capital.

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Scott Cooney, Principal of GreenBusinessOwner.com and author of Build a Green Small Business: Profitable Ways to Become an Ecopreneur (McGraw-Hill, November 2008), is also a serial ecopreneur who has started and grown several green businesses and consulted several other green startups. He co-founded the ReDirect Guide, a green business directory, in Salt Lake City, UT. He greened his home in Salt Lake City, including xeriscaping, an organic orchard, extra natural fiber insulation, a 1.8kW solar PV array, on-demand hot water, energy star appliances, and natural paints. He is a vegetarian, an avid cyclist, ultimate frisbee player, and surfer, and currently lives in the sunny Mission district of San Francisco. Scott is working on his second book, a look at microeconomics in the green sector.In June 2010, Scott launched GreenBusinessOwner.com, a sustainability consulting firm dedicated to providing solutions to common business problems by leveraging the power of the triple bottom line. Focused exclusively on small business, GBO's mission is to facilitate the creation and success of small, green businesses.

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