The opportunity with the Financial Crisis

[MarcD]

I talked yesterday with an entrepreneur who opened up a real
opportunity for Entrepreneur Commons:
- her company has cash in the bank that exceeds the $250K that are
protected by FDIC
- she considered what to do with the money above that limit: create
many bank accounts, or invest in something else
- she finally decided to invest some of this extra money into other
businesses that had issued promissory notes

This is great news to me, as it is exactly what we are talking about
with Entrepreneur Commons.
She has taken a risk and invested in other businesses: peer to peer
lending for businesses.
Once the idea is out there, 2 notes are not a statistically relevant
number and so a better way to do this would be to mutualize the
investments through a Fund that would then spread investments into a
larger number of deals. The side effect is the dilution of the due
diligence, you have to rely on other people's judgment. But if every
investor in the fund (in this case through their business) does its
own due diligence chances are the quality of the deals will be good.
And then if we apply the mutual guarantee fund concept, we can add a
layer of protection.

So if you are in contact with entrepreneurs whose businesses have
extra cash today, we should explore how we can build on this
opportunity.
Feedback welcome :-)

[Sam Rose]

Is this a United States-based effort or elsewhere?

If US, let's pool research efforts on what is legal.

For instance, there is definitely some leeway in http://sec.gov/investor/pubs/invclub.htm
for investing clubs

But then again, there could also be a legal framework for information
and rating, that has nothing to do with the actual exchange, which
could be facilitated by the businesses themselves, until formal
frameworks are produced. I don't think there is any requirements for
registration or regulation on people discussing businesses, mentoring,
performing due dilligence, and rating businesses on multiple factors,
with the hope that this will lead towards individuals deciding to
invest in an enterprise.

I have argued in the past that we should not just explore loans, but
also *investment*. This is something that we are going to explore in
depth with http://localfoodsystems.org in the coming months.

The flip side of the coin is that, instead of investment, or loans,
when an enterprise is working within existing commons, like open
license content, open source software, and open license hardware/
product design, that people might pool resources around ventures as
*donations* instead of loans or investments. See http://openfarmtech.org/weblog
for an example. I think this can work best when an enterprise is
based on a commons. The enterprise does snot have to be organized as
not for profit formally. Mine is not, and I work extensively with the
development of open source software and open license content, and am
entering the realm of open source hardware/product design. If you can
find stakeholders who recognize that you are working towards
contributing to a common pool resource, they could be willing to pool
money, time or other resources with you towards creating commons-based
building blocks that can be re-used for both for-profit and not-for-
profit ventures in the future. Some enterprises (like mine) may be
compelled to continually contribute to a resource pool in order to
help sustain or accelerate the development of open licensed "stuff"

Consider building commons-based building blocks for independents and
social enterprises, or contributing towards their development.

[Marc Dangeard]

The idea to do loans to entrepreneurs through other means than the banks that have failed us is being explored here and in France (check out http://www.les-entrepreneurs-pour-la-relance.org/). Here in the US, the latest changes with FDIC somewhat removed the incentive for businesses for now to go somewhere else to look for investment opportunities for their cash above the limit: the limit has been removed until the end of the year.

It is probably still worth exploring other options. The best I have seen in terms of investment for small businesses is SBIC http://www.sba.gov/aboutsba/sbaprograms/inv/index.html

Still they require the classic "investment team with proven record" model for psychological comfort but it may be a route.

Otherwise moving to a private equity market place with only businesses or accredited investors would work. One such marketplace currently in beta is this:

http://www.pcmexchange.com

it would be nice to seize the opportunity brought by the current mess, I am interested in keeping this discussion going...

Best,
Marc

--
Marc Dangeard - ma...@dangeard.com
Blog: http://bizcoach.blogspot.com
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