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What is Community Capital?

December 14th, 2023

Community capital is investment sourced from a broad spectrum of a community, including both wealthy (accredited) and non-wealthy investors. While typically defined by geography (like a city or neighborhood), it can also be based on a common interest (like education or biodynamics).

Why is Community Capital Better for My Venture?

  • Better terms: Your community invests in you to help you succeed, not only to maximize their profit. Your investors understand that your enterprise provides value by contributing to the vibrancy of their community.
  • Deeper connection with your community: Your investors can be great ambassadors, clients, and customers.

Why is Community Capital Better for My Community?

  • Keep wealth circulating in your community: Through a cycle of investment, growth, returns, and reinvestment, you can help your community build wealth sustainably.
  • Democratize the economy: You can level the playing field for wealthy and non-wealthy investors alike, and help narrow the wealth gap.

How Can I Raise Community Capital?

  • Directly, using a number of available strategies including investment crowdfunding and various direct public offering options. Raising directly offers maximum control over the terms. And engaging your community directly has non-financial benefits too.

Indirectly, from a community investment fund, which raises community capital and invests in community ventures. For entrepreneurs, this approach can be easier and quicker. For investors, it offers diversification and efficiency.

What Are Some Examples of Community Investment Funds?

  • Charitable loan funds: Some (though not all) nonprofit lenders raise community capital via direct public offerings.
  • Diversified community investment funds: This type of fund is supplemental to an enterprise’s primary line of business and usually raises capital to make outgoing investments into ventures related to that primary business. Examples include a real estate revitalization enterprise that, in addition to buying and renovating properties, invests in businesses that lease the commercial space in its properties; a cooperative grocery that also invests in local food producers; or an incubator that invests in its enrolled companies.
  • Real estate funds: Funds focused primarily on real estate development can also raise community capital via crowdfunding or other direct public offerings.

Get a community investment fund handbook on our resources page. Have more questions? Interested in raising community capital? Schedule a free consultation.