Description
This detailed outline around community supported businesses grassroots entrepreneurship.
Rural Research Report
Winter 2015
Volume 25, Issue 1
by William Keyser
The author is Managing Director
of Venture Founders LLC. He
teaches Sustainable Strategy
and New Venture Creation in
the Marlboro College MBA in
Managing for Sustainability.
Note: Words printed in blue refer
to hyperlinks to more information
and sources. To access the links,
refer to the online version of the
Rural Research Report at www.
iira.org/publicationsresearch/
2015-publications.
Published by the Illinois
Institute for Rural Affairs
Stipes Hall 518
Western Illinois University
Macomb, IL 61455-1390
309.298.2237
www.IIRA.org
Community Supported Businesses:
Grassroots Entrepreneurship
Community supported businesses (CSB) are gaining popularity in rural areas for
business startup ventures and expansions. This Rural Research Report describes
CSBs, mainly based on experiences in rural Vermont, where this entrepreneurial
phenomenon is well developed, and discusses issues and opportunities for wider
application elsewhere.
Community Supported Businesses Explained
CSBs are based on a closer relationship with customers than the simple commer-
cial transaction involved in the sales of products or services. As the word supported
implies, CSBs not only have a relational, but also a financial connection with their
communities, either directly on a personal basis, through an intermediary, or some-
times through a public agency. In addition to patronage, finance is typically in the
form of advance payments for goods or services, with or without interest, as well as
through loans, grants, or, less frequently, equity—frequently in place of or in addition
to traditional bank loans.
The word community usually implies people in a specific location, but it can equally
apply to people who share similar interests. Often, these two types of community
overlap. In Vermont villages and small towns, for instance, many people share an
interest in eating locally produced or organic food. There is also likely to be two-
way support such that money recirculates within the community through businesses
buying local products and services. The proximity of financing sources reinforces the
sense of community.
CSBs are frequently modeled on Community Supported Agriculture (CSA)—a widely
known and understood way for farmers to sell their produce to subscribers ahead of
production, thus helping to finance the cash flow for their activities early in the season
when there is little or no revenue. In addition to selling to individuals directly from
the farm, farmers often sell CSA “shares” at farmers’ markets—over 8,000 in 2012,
according to the U.S. Department of Agriculture (USDA). The USDA defines a CSA as
a “community of individuals who pledge support to a farm operation so that the farm-
land becomes, either legally or spiritually, the community’s farm, with the growers and
consumers providing mutual support and sharing the risks and benefits of food pro-
duction” (see the 2014 USDA publication on CSAs). In 2012, the USDA reported that
12,617 farms in the United States marketed products through a CSA. Vermont has 98
farmers’ markets and 143 CSAs, with a population of fewer than 627,000, making it #1
in the U.S. on the 2014 Strolling of the Heifers Locavore Index based on USDA and
Census figures, weighted by population. Illinois, by comparison, ranks 44th.
Very few of the businesses that are community supported actually describe themselves
as CSBs. Paul Bruhn, Executive Director of The Preservation Trust of Vermont, on the
other hand, describes them as CSEs—Community Supported Enterprises. The Business
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Alliance for Local Living Economies (BALLE)—an excellent
source of information and support for CSBs—also refers to
them as CSEs.
The means of financing varies from direct methods within the
community to more arm’s-length schemes akin to crowdfund-
ing. Other funding agencies support CSBs through grants
and loans. Another funding approach uses Direct Public
Offering (DPO), raising equity capital through advertising
directly to customers, employees, suppliers, distributors,
and friends in the community. A DPO requires a legal strat-
egy to make sure everything complies with state and federal
securities laws. DPOs involve fees, though significantly less
than an IPO, but are not suitable for small or microfinance,
especially since trading of the stock is severely limited. As
examples, Real Pickles raised $500,000 from investors living
in Vermont and Massachusetts; and Quimper Mercantile
raised $750,000 to open a community-owned store in Port
Townshend, Washington. There is a useful comparison
table at Cutting Edge Capital that compares DPOs with
JOBS Act Crowdfunding Exemptions (Title III), Rule 506c
from the SEC (Title II), and Donation-Based Crowdfunding,
also known as Reward-Based Crowdfunding.
CSBs are of many different types, including those in tradi-
tional corporate forms, such as limited liability companies
(LLCs), limited liability partnerships (LLPs), or corpora-
tions; foundations; or other 501c3s. Co-ops, especially food
co-ops, are community supported, including by community
members who buy shares to become shareholders.
The various ways to organize CSAs may be useful models
for future CSBs:
• Farmer managed – A farmer sets up and maintains a
CSA, recruits subscribers, and controls management of
the CSA.
• Shareholder/subscriber – Local residents set up a CSA
and hire a farmer to grow crops; shareholders/subscrib-
ers control most management operations.
• Farmer cooperative – Multiple farmers develop a CSA
program.
• Farmer-shareholder cooperative – Farmers and local
residents set up and cooperatively manage a CSA.
Community Supported Business, Social Enterprise & Nonprofits
CSBs are social enterprises in that they place a high pre-
mium on their social role, in addition to their economic
or environmental roles, similar to social enterprises with
a triple bottom line. As with CSBs, social enterprises are
often difficult to categorize. In Vermont, at least, there is
more and more overlap between entrepreneurially run
nonprofits and socially driven businesses.
A social enterprise is an organization that applies commer-
cial strategies to maximize improvements in human and
environmental well-being rather than simply maximizing
profits for shareholders or a business created to further a
social purpose in a financially sustainable way.
On the other hand, a nonprofit usually has an equally
social but different kind of value exchange. Rather than
the individual recovering up-front investment in the future,
the value of an individual’s donation to a nonprofit delivers
a social good to someone else.
The Context for Doing Business in Vermont
Vermont’s population is roughly 626,000 (2013) of whom
nearly 200,000 live in the state’s only metropolitan area,
Burlington, in the north. The remaining 450,000 people live
in small towns and villages or in completely rural surround-
ings, though it is the 30th most densely populated state in
the U.S.
Vermont is the nation’s 45th state by area and 50th in
population and Gross Domestic Product. There is a higher
than national average of people over 65, and its median
age is the 2nd highest in the nation at 40.4 years.
Vermont has the largest share of self-employed jobs of any
state (10.2% of all jobs). In November 2014, Vermont’s
unemployment rate was 4.3%, one of 10 lowest states
in the U.S. (Illinois has 6.2%). According to Vermont’s
Small Business Profile released by the Small Business
Administration in 2010, 96.3% of all its businesses are
considered small (less than 500 employees), and 23% of
the firms have one to 19 employees (compared with 18%
nationally). Most businesses in Vermont are very small:
76.3% are no employee firms, whether they are sole-
proprietorships, LLCs, LLPs, or corporations. Having no
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employees does not preclude them from taking a corpo-
rate legal form. Companies and organizations in the arts
and cultural cluster employ upwards of 4,000 Vermonters
across 3,279 businesses. The creative class is wide-
spread in Vermont among those applying technological,
economic, as well as artistic and cultural creativity.
On the other hand, Vermont outperforms many larger states
in the rate of business creation—its 2012 startup rate was
520 per 100,000 adults, making it 2nd in the country. Vermont
has more than 4,000 nonprofits (#2 state with fewest people
per 501c3) with total annual revenues of $4.1 billion or 18.7
percent of the Gross State Product. Nonprofits are also the
source of 42,000 jobs, or 12 percent, of total employment.
Thus, Vermont may be a useful model for rural entrepre-
neurship when considering “entrepreneurship” in its widest
sense, not simply applied to business startups. Vermont
ranks #1 in the national Opportunity Index (how opportunity
measures up in a community). More than half of Vermont’s
banks (54%) are classified as “community banks” by the
FDIC–10th highest in nation.
Vermont Institutions Assisting Community Businesses
The State of Vermont has several institutions that foster
small business creation and development, several of
which could be models for use in other states and regions:
Community Capital of Vermont – CCVT is a 501c3 (and a
CDFI–see below) that helps small businesses and lower
income entrepreneurs by providing flexible business financ-
ing. CCVT’s micro-loans ($1K to $100K) can be used for
startup or growth and expansion. It specializes in providing
loans to business owners lacking the collateral or credit his-
tory to qualify for traditional bank loans, in helping with the
creation and retention of jobs, in building wealth, and in
enhancing downtowns and the working landscape. CCVT
administers the Vermont Job Start Initiative and attracts both
program funding and community donations. CCVT-funded
entrepreneurs are required to use mentors, giving them a
greater chance of both business survival and loan repayment.
The Preservation Trust of Vermont provided technical assis-
tance or modest financial support to several CSBs, often
playing a pivotal role—for example, Latchis Hotel and
Theatre in Brattleboro, Claire’s Restaurant, Bee’s Knees
Restaurant, and the Putney General Store. As Paul Bruhn,
the executive director, says, “Mixing charitable investment,
charitable contributions, community support through share
or certificate purchases, and entrepreneurship is a way to
provide these essential services and places to a community.”
Brattleboro Development Credit Corporation (BDCC) –
One of 12 Regional Development Corporations in Vermont,
BDCC is a private, nonprofit organization which serves as
a catalyst for industrial and commercial growth in south-
eastern Vermont. BDCC owns an industrial park and two
business parks/incubators, offering low-cost viable rental
space to non-employer and small businesses. BDCC
recently announced the 2015 Windham Regional Business
Planning Competition in collaboration with the Strolling of
the Heifers (see above) and support from the Windham
Foundation (see below) among others, including Marlboro
College. The total award is $68,000. Since 2006, previous
competitions led to the creation of well over 200 jobs, and
80% of winners are still in business. The special Farm/
Food Divisions of the competition cover both existing busi-
nesses and startups.
Vermont Sustainable Jobs Fund – Created in 1995, VSJF (a
CDFI) aims to accelerate the development of Vermont’s green
economy. It provides early stage grant funding, technical
assistance, and loans to entrepreneurs, businesses, farmers,
networks, and others interested in creating jobs and markets
in the green economy. The VSJF Flexible Capital Fund L3C
focuses on clean technology, agriculture, and forestry, and
it makes revenue-based loans to businesses. It is a 501c3,
which is funded partly by the state but also through fees-for-
service, mentoring, grants, and donations from high net worth
individuals in the community and seven other states with simi-
lar values. One investor (of $850K) is Slow Money Vermont.
VSJF is a “high-touch” lender, making loans to businesses
based on the management team above all other factors.
USDA-RD Vermont – The USDA-RD in Vermont, similar to
all states, is a major force in rural development and a sig-
nificant contributor to community businesses in that sector.
Among other ventures, the department has made grants
to the West Townshend Country Store (see below). They
also supported ventures for dairy farm manure digesters to
produce methane to generate electricity, of which there are
more than a dozen in Vermont. USDA-RD also offers Rural
Business Enterprise Grants.
Vermont Council on Rural Development – VCRD is a
501c3 and a member of the National Rural Development
Partnership. Among other activities, it has initiatives on
agricultural viability, value-added forest product develop-
ment, the creative economy (very important in Vermont
and most frequently involving no employee businesses),
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the structure of the planning system, in-state energy devel-
opment, the future of Vermont, and advancing the Vermont
working landscape.
Vermont Land Trust – Since 1977, this 501c3 has perma-
nently conserved more than 1,775 parcels of land covering
more than 535,000 acres or about 8% of the state’s pri-
vate, undeveloped land. It includes more than 775 working
farms, and the Farmland Access Program provides farm-
ers with opportunities to purchase or lease affordable
farmland to start or expand agricultural businesses.
Incubator Without Walls – The Center for Rural
Entrepreneurship at Lyndon State College hosts the
Incubator Without Walls program which offers affordable
technical assistance for small businesses. Startups are
also fostered through Vermont with six maker-spaces,
nine co-working spaces, and three accelerator spaces.
The Vermont Center for Emerging Technologies is one of
eight business incubators in the state.
Vermont Food Center – The Center is a multi-use food pro-
cessing facility in Hardwick. Users of the center include
Vermont Baby, Vermont Cranberry Company, and many
others. It is part of the Center for an Agricultural Economy,
which also has the Vermont Farm Fund for food and ag
businesses.
A similar operation that supports local food producers is
the Mad River Food Hub—a fully equipped, licensed vege-
table and USDA-inspected meat processing facility located
in Waitsfield, Vermont. Their users include Vermont Bean
Crafters and Mad River Distillers.
Community Supported Businesses in Vermont
Vermont has a wide range of CSBs that address unique
opportunities and/or services needed in rural, small town,
and village environments. In some instances, under the
right legal and social environment, as well as with autho-
rization and/or support from the state government, these
business types could be started elsewhere and are worth
exploring in more detail. Each case is special and depends
heavily upon the initiative of individuals or small groups:
Sun Farm Community Solar, Putney – Vermont’s largest util-
ity, Green Mountain Power (GMP), and the Clean Energy
Collective (CEC) have plans for another community-owned,
utility-scale photovoltaic (PV) facility to serve Vermont rate-
payers, following the success of the 1st community-owned
567-panel solar array in Putney (pop. 2,634). Completion of
this facility would make community solar available to nearly
70% of the state’s electricity customers. Any GMP cus-
tomer can participate, including renters, those with shared
property, nonprofits, and households with modest incomes.
Unlike rooftop systems, purchases in an Area Community
Solar Array can involve one panel, costing $1,125 or $3.75
per watt, to as many panels as desired, with the same incen-
tives as rooftop system owners. The state aims to use 90%
renewable energy by 2050. Vermont’s NRG Solar worked
with GMP to enroll customers in a central solar lease pro-
gram in Rutland. This pilot allows customers to sign up with-
out up-front costs and become part of a solar community.
GMP has a goal to transform Rutland into the Solar Capital
of New England.
The Gleanery Restaurant, Putney – This restaurant uses
ingredients from local farmers and producers and is a
community-supported restaurant that pays members
back in monthly credits at the restaurant. The community
supports The Gleanery, The Gleanery supports the local
economy, the local economy benefits from a destination
restaurant, and more money recirculates through Putney.
In Morrisville (pop. 2,030), The Bee’s Knees is a CSA-type
restaurant where, in exchange for a $1,000 loan, investors
receive coupons that they can redeem for meals at the
rate of $90 a quarter over three years. This is a meager
return on investment, but in the first six weeks of launch,
the Bee’s Knees restaurant raised $20,000. The venture
was followed by Claire’s Restaurant in Hardwick (pop.
3,100), a CSB that raised more than $40,000, although it
failed later because of management shortcomings.
The Putney General Store – Severely damaged by fire
in 2008, the owner sold the building housing the general
store to the Putney Historical Society (PHS), whose mem-
bers voted to pursue both ownership and reconstruction.
PHS obtained $67,000 from the Vermont Housing and
Conservation Board that also runs the Vermont Farm &
Forest Viability Program; $200,000 from the Vermont
Community Development Block Grant Program; and
$100,000 from the Office of Senator Patrick Leahy and the
Vermont Preservation Trust through a Village Revitalization
Grant. In addition, it collected $10,000 from the Windham
Foundation (see below) and $100,000+ in community
donations. In spite of a second fire, the PHS continued
raising funds in the community, and the new store is now
leased to an operator who has added a pharmacy. This is
an example of a tiny community that was able to marshal
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resources from a variety of sources to provide essential
services locally.
West Townshend Country Store, another community store,
is part of the West River Community Project and has a café
and deli. It provides space for the local Farmers’ Market in
a village with only 418 residents.
The Bee’s Knees, Green Mountain Spinnery (Putney-
based worker co-operative), and Vermont Islands (manu-
facturer of food service stations) in Brattleboro are among
150 CSBs that have received loans from the Vermont
Community Loan Fund over the past 25 years.
Brattleboro Food Co-op (BFC) – Vermont has 15 food
co-ops. By comparison, Texas has five food co-ops with
43 times the population. A proportionate number of co-ops
in Texas would be 645. The U.S. has about 30,000 co-ops
and, by definition, most are locally owned. Personal expe-
riences on the Board of the BFC demonstrated huge
community support with about $1.2 million in shareholder
loans for a new store. Today, the co-op is a 14,580 square
foot natural foods market and deli, above which are co-op
offices, a commissary kitchen, a cooking classroom, and
24 apartments. The building was co-developed with the
Windham Housing Trust, and BFC partnered with Co-op
Power, a consumer-owned sustainable energy coopera-
tive, to install a solar roof.
Another Vermont co-op is Cabot Creamery with 1,200 farmer
members. Credit unions are community cooperative, not-
for-profit financial institutions, and Vermont has 22 of them.
One, the Opportunities Credit Union, is a community devel-
opment credit union, uniquely committed to Vermonters of
low wealth with a mission to build wealth, community, and
opportunity through a fair and affordable financial system.
The Commons – Brattleboro has an interesting hybrid
called The Commons, run by Vermont Independent Media
(a nonprofit) that promotes local, independent journalism.
It provides a forum for community participation by publish-
ing a weekly free newspaper, run on commercial lines,
which promotes civic engagement by building local skills
through a media mentoring project.
Latchis Hotel and Theatre – In 2003, Latchis Arts acquired
the Brattleboro property that currently houses a 30-room
boutique hotel and four theatres. Funds were raised in
the community, from grant-making bodies as well as from
operations. The executive director of the Latchis describes
his back-to-back 501c3 and LLC as a hybrid organization.
Hybrid organizations will proliferate, not on account of the
Internal Revenue Service or another government man-
date, but in response to the needs of communities, both
physical and virtual.
Windham Foundation – This foundation, another hybrid,
promotes the vitality of the Village of Grafton (pop. 650)
and other Vermont rural communities through its philan-
thropic and educational programs. Its subsidiary operations
also contribute to them. Windham is a Private Operating
Foundation, a not widely represented IRS category of 501c3,
and has operating (for-profit) subsidiaries: The Grafton Inn,
a traditional Vermont inn; Grafton Village Cheese, with two
production plants, each with a retail store; Grafton Ponds, an
outdoor activities center; and the Retreat Farm, 475 acres
with a petting farm, where early discussions are underway
about creating a retail and manufacturing cluster in under-
utilized farm buildings. Grafton Village Cheese is a member
of the Vermont Cheese Council—a dispersed rural cluster.
Vermont also has about 40 ESOP (Employee Share
Ownership Plan) companies. Many Vermont entrepreneurs
are approaching retirement age and exploring options to
exit their businesses—by selling to another Vermont owner,
employee ownership, or passing it on to a family member.
The Vermont Employee Ownership Center (VEOC) helps
Vermont companies move into employee ownership and
administers the Vermont Employee Ownership Loan Fund.
ESOP companies are yet another way that communities can
give expression to the notion of CSBs without formal status
since most, if not all, employees are “invested” in their places
of work (through buying shares) and live in the community.
Community Supported Businesses in Other States
There are an increasing number of CSBs in different forms
in other states. Local circumstances mean that Vermont’s
approaches are not necessarily adopted wholesale in
other states, but the following are examples of several
approaches used across the U.S., and readers can pursue
more information by contacting them directly:
Art – CSB approaches have been used to promote the
arts and to attract creative people. Minnesota Artists and
Springboard for the Arts were created to support local
art, artists, and collectors. Handmade in America is a
North Carolina CSB that trains local craft entrepreneurs to
develop the skills needed to be innovative small business
6
owners, and it helps rural communities spark economic
renewal through asset-based creative place-making.
Bakery – Greyston Bakery is one of the country’s lead-
ing social enterprises. It provides individuals in Yonkers,
New York, with employment, skills, and resources to lift them
out of poverty, and it is owned by the Greyston Foundation,
a 501c3. There are a growing number of “community bak-
eries.” One is Barrio Bread (Tucson, Arizona), whose busi-
ness model is a CSB. It has no retail store; instead, the
bread is offered at different locations in the community.
Production is driven by a pre-order system at the Farmers’
Market and Thursday School Bread or a Bread Share at
the Tucson Community Supported Agriculture events. In
Albany, New York, All Good Bakers shareholders receive
freshly baked loaves and baked goods made with local
flours on a weekly basis. They also call themselves a CSB
(bakery).
Banking – Urban Partnership Bank in Chicago is not
strictly a CSB, although it does raise funds on the South
Side and re-lends them locally. The bank is a community
development financial institution (CDFI), providing finan-
cial products and services to underserved communities. It
partners with community organizations to increase com-
mercial activities, grow small and mid-size businesses and
new jobs, and support nonprofits. CDFIs were established
by the Community Reinvestment Act (1977).
Books and Broadcasting – An example of community-sup-
ported publishing operations is The Head & Hand Press in
Philadelphia. 88.7 The Bridge is a community-supported,
non-commercial radio station in Delaware.
Dining – Portland, Maine, has a community-supported
kitchen (CSK) run by Local Sprouts, a cooperative that pro-
vides local and organic prepared food year-round to mem-
bers, similar to a CSA system. Awaken Café is a live music
venue, espresso bar, craft beer & wine bar, and organic
restaurant in downtown Oakland, California, with the mis-
sion to bring people together and launch movements. The
owners pre-sold gift cards, which, priced at $1,000, could
be redeemed for $1,250 once the café opened. Three
Stone Hearth in Berkeley, California, is also a CSK.
Energy – Project Resources Corp (PRC) develops wind
and solar projects in the upper Midwest with a goal of
expanding the Minnesota WindShare program. Minnesota
WindShare was created by PRC to enhance economic
value for communities, landowners, and small businesses.
Fisheries – Sitka Salmon is a community-supported fishery
(CSF) in Alaska that has opened CSFs in Illinois (Galesburg),
Iowa, Minnesota, Indiana, Michigan, and Wisconsin. Port
Clyde Fresh Catch is a CSF in Maine, where investors sign
up for a weekly share of wild-caught shrimp. Fourteen-week
shares at $210 offer 10 pounds of shrimp a week or half
shares ($105). Conservation International Hawai‘i partners
with more than 50 community groups, local nonprofits, gov-
ernment agencies, and other groups. It has also funded
over 36 grants across the state, totaling $1.8 million, to
increase access to sustainable and locally caught seafood.
Yet another example is CS Fishery in Oregon.
Food & Drink – House of Brews in Madison, Wisconsin, is
a CSB (brewery), and MobCraft Beer has launched a new
business model for making beer based on crowd-sourc-
ing opinions of its online supporters to determine what
is brewed and when. Boise Brewing is another CSB that
makes a unique beer for their owners monthly and allows
members to fill their growlers. Illinois now has two CSB
breweries: the Beygyle Brewery in Chicago has 6-month
and 12-month memberships; and Sketchbook Brewing Co
in Evanston raised $25,000 on Kickstarter.
Health & Fitness – The Yoga Matrika Studio in Pittsburgh
offers the ability to invest in the studio by purchasing
shares, and it gives students an opportunity to invest in
an economical way in both their personal practice and the
studio. Third Root Community Health Center in Brooklyn,
New York, is another example of a CSB that offers yoga,
acupuncture, massage, and herbal medicine.
Opportunities for the Future
The growth of CSBs and other forms of community engage-
ment in supporting and financing businesses clearly indi-
cates the growing interest in alternative ways to stimulate
business activity and commerce in rural areas. While local
initiatives and conditions may be the main driving forces,
equally important is that state regulations and programs
allow and support these types of efforts. Also, many differ-
ent alternative creative solutions are being established by
diverse organizations. This section describes several key
opportunities for the future, especially those concerned
with funding the development of CSBs.
Local Investing Networks. Michael Schuman’s book,
Local Dollars, Local Sense: How to Shift Your Money from
Wall Street to Main Street and Achieve Real Prosperity, is
a useful place to start in considering the future of CSBs.
7
Americans’ long-term savings in stocks, bonds, mutual
funds, pension funds, and life insurance funds total about
$30 trillion. But not even 1% of these savings touch local
small business—even though they generate about half the
jobs and output in the private economy.
Another useful reference is Locavesting: The Revolution
in Local Investing and How to Profit from It by Amy
Cortese who introduces readers to the pioneers of the
local investing movement and explains the process. She
defends the case that, by investing in local businesses,
rather than faceless conglomerates, investors can earn
profits while building healthy, self-reliant communities.
In East Jefferson County, Washington, LION (the Local
Investing Opportunities Network) creates opportunities
for local businesses, nonprofits, and citizens to network.
Membership includes residents who support local busi-
nesses and invest their money to work within the commu-
nity. Individuals are able to make such investments directly,
where there are so-called pre-existing relationships, strik-
ing their own deals with the businesses they know. Another
example is Whatcom Investing Network in Washington State.
Investing networks are likely to proliferate in the future.
Crowdfunding and the JOBS Act. Crowdfunding is dis-
cussed extensively in relation to CSBs. The JOBS Act was
supposed to usher in a new era of equity-based crowdfund-
ing. However, Title III rules that would make that possible
are bogged down in the Securities Exchange Council (SEC)
rule-making process. Title II rules are established, and sev-
eral crowdfunding sites are open for equity-based invest-
ment but only for Accredited Investors—high net worth
individuals. There are only about 5 million such people in
the U.S., so only reward-based crowdfunding is currently
open to most people. Some CSBs are beginning to use
this opportunity. When the SEC publishes its crowdfunding
rules, the CSB culture and practice will grow exponentially.
The Kickstarter and Indiegogo crowdfunding platforms, and
many others, currently only offer rewards. Two examples of
Kickstarter-funded businesses are Driftless Café, a locally
focused, farm-to-table restaurant in rural Wisconsin, and the
Creative Arts for Rural Development Project, which features
notecards designed around the works of aspiring artists in
rural, remote areas. Community Sourced Capital exists to
help small businesses and local economies thrive. As a reg-
istered Social Purpose Corporation in Washington State,
the people who run Community Sourced Capital, by helping
businesses raise capital from their local communities, are
able to make decisions in the interest of fulfilling this purpose
instead of serving only in the interest of maximizing profit.
In several places, people are not waiting for the SEC. In
January 2014, Oregon joined 15 other states, including
Texas, in implementing new rules that allow startup busi-
nesses to raise money through intrastate crowdfunding
investments in ways similar to Vermont’s VSBOE men-
tioned above. Other countries have gone beyond this, lib-
eralizing controls that give power to stock exchanges and
lawyers, allowing individuals to make their own investment
decisions, using equity-based crowdfunding.
Microfinance. Microfinance is generally seen as funding
micro-enterprises in the developing world. However, it is
also a growing field in the U.S. There is a special division
of Kiva, called Kiva Zip, where one can post local finance
needs. Kiva Zip has already loaned more than $5 million
to ventures, usually between $5,000 to $10,000. There
are many examples in the food and agriculture sector: an
urban farm, a café/bakery, produce for at-risk families, a
nonprofit community coffee house, and others.
Accion US Network connects small business owners with
the financing and advice needed to create or grow healthy
enterprises. Since 1991, the five network members have
given loans to over 45,000 people, Accion US brings
affordable loans to micro-entrepreneurs, helping to grow
small businesses and strengthen the communities they
serve. Accion Chicago is also a CDFI. The Opportunity
Fund in California offers, “Working Capital for Working
People.” Grameen America is dedicated to helping women
who live in poverty build small businesses to create better
lives for their families. They offer micro-loans, training, and
support to transform communities and fight poverty in the
U.S. Delivered via a financial institution, the SBA Microloan
program is another opportunity for CSBs.
Private Sector Grants to Entrepreneurs. An “unseen”
form of local startup support is through large corporations
providing funds for new ventures in their sphere of interest.
Many sources exist in the U.S. Here are a few examples,
focusing on women and on food:
• The Eileen Fisher Women-Owned Business Grant
Program – Seeks applicants from 100% women-owned
businesses that are founded on the principles of social
consciousness, sustainability, and innovation, and that
are ready to move on to the next phase of development.
• Cartier Womens’ Initiative Awards – Aim to identify and
support initial-phase female entrepreneurs through fund-
ing and coaching; foster the spirit of enterprise by cel-
ebrating role models in entrepreneurship; create an inter-
national network of female entrepreneurs; and encourage
peer networking.
8
• Whole Foods Local Producer Loan Program – Provides
up to $25 million in low-interest loans to independent
local farms and food artisans.
• Huggies Mominspired Grant Program – Provides
inspired moms with $15,000 in seed money as well as
business resources to further develop original product
ideas and startup businesses.
Increasing Variety in Means of Financing. There are
more and more ways to finance startup businesses, espe-
cially in rural settings. Traditionally, the kinds of options
open to a small rural startup involved using one’s own
resources (e.g., savings, credit cards, and other acces-
sible money); resorting to family and friends—either for
gifts, equity, or loans; applying to main street banks for
mortgages, home equity, and commercial loans; and using
trade credit, either pre-arranged or through late payment
of payables (see Appendix 1).
But there are now many newer forms of finance available,
including the CSB payment up-front financing. So-called
bootstrapped finance has become a much more sophis-
ticated process, typically using OPM (Other People’s
Money) in some form or another. In this report, we have
shown several kinds of organizations offering differently
structured forms of finance and several types of funding
with differing levels of risk. Appendix 2 places them on a
continuum, from debt at the low-risk/low-reward end to
equity at the high-risk/high-reward end.
Changing Forms of Corporate Governance. Since the
CSB field defies an easy definition, there are many routes
to helping local businesses become better connected to
the community in which they are located. Some of this
connectivity involves corporate governance.
A new corporate form called the Benefit Corporation was
created in Vermont, the second state to pass such legisla-
tion, which is now in 27 states (including Illinois) and pro-
jected for 14 other states and likely will be followed across
the nation. The initiative springs largely from the efforts of B
Lab, the initiator of the B Corporation. There are over 1,000
such companies certified as BCorps, which should not
be confused with a state-registered Benefit Corporation.
Several Vermont businesses are both BCorps and regis-
tered Benefit Corporations; examples include King Arthur
Flour (which is also an ESOP company) and Sun Common.
In Vermont, a Benefit Corporation means a corporation
defined as
• providing low-income or underserved individuals or
communities with beneficial products or services.
• promoting economic opportunity for individuals or com-
munities beyond the creation of jobs in the normal
course of business.
• preserving or improving the environment.
• improving human health.
• promoting the arts or sciences or the advancement of
knowledge.
• increasing the flow of capital to entities with a public
benefit purpose.
• accomplishing any other identifiable benefit for society
or the environment.
Another corporate form in Vermont and seven other states,
including Illinois, is the L3C (low-profit limited liability com-
pany). This is a legal form of business entity created to
bridge the gap between nonprofit and for-profit investing by
providing a structure that facilitates investments in socially
beneficial, for-profit ventures. It simplifies compliance
with IRS rules for program-related investments (PRIs), a
type of investment that private foundations are allowed to
make. Michigan had the largest number (265), followed
by Louisiana (207), Illinois (177), and Vermont (168) as of
November 2014.
Fostering Local Investment. The SEC rules for any public
offerings are complex and onerous, even though there is
an Intrastate Offering Exemption that facilitates financing
local business operations. To qualify, a company must be
organized in the state where it offers the securities, must
carry out a significant amount of its business in that state,
and must make offers and sales only to residents of that
state. As this report describes, Direct Public Offerings are
usually restricted to specific geographic areas, but in addi-
tion, several individual states have introduced special pro-
visions to foster local investment. Vermont, as an example,
has a Small Business Offering Exemption (VSBOE) that
allows raising up to $500,000 in an offering to 50 or fewer
share purchasers. Requirements of this exemption include
the seller’s principal place of business, and a majority of
its employees must be in Vermont; general solicitation is
permitted, but the advertising material must be submitted
to the Securities Division. Each prospective investor must
receive an investment brochure containing specified mate-
rial, and a notice must be filed with the state Securities
Division. However, this has not been a widely used provi-
sion, with only one or two offerings a year during the 15 or
more years that it has been available.
Additional Sources of CSB Funding and Information.
Given the perennial problem rural startups have in finding
funding via traditional bank sources, there is a growing list
of organizations, some of which are nonprofit, from which
they can find financial support (see Appendix 3). Many
of these mission-driven organizations offer an especially
9
receptive and less cumbersome means of raising equity
and/or loan finance. They may also be better listeners for
rural businesses, which tend to be small and fragile.
Since a high proportion of rural enterprises are based in
food and agricultural industries, a predominance of these
organizations are in that sector. The USDA is often a
jumping off place for farming and food production busi-
nesses, and their staff members offer considerable sup-
port and creative ways to fund rural startups.
Community Development Financial Institutions (CDFI)
target early-stage firms and other companies not deemed
so “bankable” by traditional funding sources. CDFIs exist
in every state. Vermont, for example, has the Community
Capital of Vermont, mentioned above, and four other
CDFIs. The CDFI Locator is a searchable listing by state
from the Opportunities Finance Network.
Hybrid Organizations. In western Massachusetts,
BerkShares, Inc. is the place-based, democratically struc-
tured nonprofit organization that issues BerkShares, a
local currency for the Berkshire Region, which is one of
the more successful local currencies. BerkShares has now
set up Community Supported Industry, an initiative aimed
at creating a culture of support for entrepreneurs inter-
ested in more labor-intensive, small-batch local produc-
tion. A BerkShares loan program will provide a flexible and
community-directed financing tool for import-replacement
businesses that are the goal of their community-supported
industry initiative.
Prosperity Candle, founded by Ted Barber, also located
in Massachusetts, works at the intersection of business
and philanthropy. It is organized in three overlapping but
not formally linked forms. Prosperity Catalyst, the non-
profit, trains women in war-ravaged communities over-
seas to make candles and develop entrepreneurial skills.
The Prosperity Candle LLC, registered in Massachusetts,
runs the sales operation for the candles, and a Vermont-
registered L3C enables Prosperity Candle to attract pro-
gram (PRI) money. This is perhaps the most complex kind
of hybrid since the operations of the three elements must
be kept at arms’ length so as not to break IRS rules. It is
interesting that Eileen Fisher, the fashion house, makes
grants of up to $12,500 to businesses that operate as a
traditional for-profit business or as a social enterprise for-
profit/nonprofit hybrid.
Opportunities for Rural Community and Economic
Development. Opportunities are many—for state agencies,
nonprofits, microfinance providers, investment networks,
and community businesses themselves. Creativity and
innovation are the only limiting factors. When the JOBS Act
Title III rules are finally published, the floodgates of equity-
based crowdfunding will open, and the opportunities will be
almost limitless. The Vermont experience shows that the
entrepreneurial spirit pervades ventures in both the for- and
nonprofit fields as well as in the public sector. New venture
creation is seen as a positive contributor to flourishing com-
munities by all economic and social partners.
Rural Clusters. There are rural clusters of CSBs that
occur serendipitously as in the Vermont village of Putney,
which has several CSBs. However, the rural cluster move-
ment is growing. CSBs could also be planned at the com-
munity level (see Sustainable Food Systems Cluster,
Vermont Style and Generating Local Wealth, Opportunity,
and Sustainability Through Rural Clusters).
The Village of Hardwick in Vermont is an intentional rural
food cluster with several businesses interlinked, like
Vermont Natural Coatings, making wood finishes using
whey protein, a cheese making byproduct, and The Center
for an Agricultural Economy and its Vermont Food Venture
Center. The book by Ben Hewitt, The Town that Food
Saved: How One Community Found Vitality in Local Food,
is an excellent resource. The collective power of “small”
and “networking” provides the basis of why business
clusters can be so effective. In a rural state like Vermont,
inter-related clusters can develop. For example, dairy pro-
duction, small-scale dairy manufacturing, and renewable
energy sources can be natural partners.
However, CSBs Are Nonetheless Businesses. In the
case of all these initiatives, the CSB still must be run as
a business. Hence, in raising funds, the promoters must
develop a business plan. The business plan may not nec-
essarily be a 50-page document with dozens of appendi-
ces. It may not even be the type of document expected by
a traditional bank lender. However, it must be a plan and
built on a sound business model to demonstrate how the
product or service will generate sustainable revenues. This
approach means defining a very clear value proposition
that describes the benefits customers or users will receive.
Chances are high, though, that financial data will not be
the only factor needed to convince funders—either orga-
nizations or individuals. High importance will be placed
on ensuring that the values of the offering business and
the potential lenders or investors are in sync. The whole
reason for CSBs is that they can deliver something wanted
by consumers in the community, plus added social, and
sometimes intangible, benefits.
10
References
Cortese, A. 2011. Locavesting: The Revolution in Local Investing and How to Profit from It. New York: John Wiley & Sons.
Hewitt, B. 2011. The Town that Food Saved: How One Community Found Vitality in Local Food. Emmaus, PA: Rodale
Books.
Schuman, M. H. 2012. Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve
Real Prosperity. White River Junction, VT: Chelsea Green Publishing.
Appendix 1: CSB Financing Definitions
Bank Loans – Term loans, commercial mortgages, and
lines of credit made with conditions by banks, credit
unions, and others.
Convertible Debt – Asset-backed loans that can require
the owner to give up equity at some future date.
CSA Model – A business raises subscriptions to be repaid
with or without interest at a later date in the form of goods
or services.
Direct Public Offering (DPO) – A company raises capi-
tal by marketing its shares directly to its own custom-
ers, employees, suppliers, distributors, and friends in the
community.
Family & Friends – Can be either loan or equity money
and should always be contracted using a promissory note
that defines repayment terms and consequences in the
case of default.
Grants – Contribution, gift, or subsidy bestowed by a gov-
ernment or other body for a particular purpose.
Investment Networks – Way to connect entrepreneurs
looking for funding with investors looking to invest.
Microfinance – Banking service provided to unemployed
or low-income individuals or groups who would otherwise
have no other means of gaining financial services.
Micro Loan (SBA) – Small short-term loans for working
capital or the purchase of inventory, supplies, furniture,
fixtures, machinery, and/or equipment available to desig-
nated intermediary nonprofit lenders.
Program-Related Investments (PRI) – Investments by
foundations to support charitable activities that involve the
potential return of capital within an established time line.
Peer-2-Peer Lending – Small loans (generally $2K to
$35K) at Lending Club and Prosper, for example.
SBA 7(a) Loans – SBA’s most common loan program;
includes financial help for businesses with special
requirements.
Soft Loan – A loan with no interest or a below-market rate
of interest.
11
Appendix 2: CSB Financing Continuum
23
Rural Clusters: Generating Local Wealth, Opportunity, and Sustainability through Rural Clusters, a
research project initiated in Burlington, Vermont in 2008. The report has valuable information for CSBs.
Slow Money members have invested more than $38 million in over 350 small food enterprises around
the United States since mid-2010. Twenty local networks and 13 investment clubs have formed.
WealthWorks is a 21st-century approach to local and regional economic development that belongs in
every community and economic development toolkit. WealthWorks brings together and connects a
community’s assets to meet market demand in ways that build livelihoods that continue.
Appendix 2: CSB Financing Continuum
___________
Source: Will Keyser, Marlboro College Graduate and Professional Studies, MBA in Managing for
Sustainability; [email protected] Founders LLC; http:startupowl.com
Bank Loans
Risk averse,
collateral needed
Community Development Loans
Local/state agencies
Peer 2 Peer Lending
Prosper, Lending Club
Family & Friends
Promissory note
CSA Model–CSB
Must deliver on promise
Microfinance in USA
Kiva Zip, Accion USA,
Opportunity Fund, Grameen America
Soft Loans
USDA, SBA, including
Micro Loan & 7(a)
Bootstrapping
Vendors/suppliers,
sales + conserve cash
Program Related Investment
Foundations ? nonprofits & L3Cs only
Crowdfunding
In-kind reward only at present
Grants
Repayment not required
Investment Networks
Few available
Convertible Debt
Becomes equity
Direct Public Offering
Accredited investors only
Angels
Equity dilution
VCs
Big sums + high growth
Low risk & reward (debt) High risk & reward (equity)
Source: Will Keyser, Marlboro College Graduate and Professional Studies, MBA in Managing for Sustainability, will@
gradschool.marlboro.edu., Venture Founders LLC, http:startupowl.com
Appendix 3: Additional Sources of CSB Funding and Information
AgFunder is a marketplace for ag startups seeking to raise
investment capital from accredited investors.
AngelList is a platform for startups to find Angel Investors.
It is well worth putting a profile up, especially if it concerns
a tech startup. The traditional route to business angels
requires the entrepreneur to find personal connections,
whereas this platform provides the young business with
exposure to investors.
Advantage Capital Partners invests in entrepreneurial
small businesses in communities that are underserved by
traditional sources of capital, partnering with state and fed-
eral economic development programs. It also administers
the USDA’s $150 million Investment Funds to Grow Small
Businesses.
Association for Enterprise Opportunity is a national mem-
bership organization and voice of microbusiness develop-
ment in the U.S. For more than two decades, AEO and
its hundreds of member organizations have helped more
than two million entrepreneurs support themselves and
their families, and contribute to their communities through
business ownership.
The Center for Rural Entrepreneurship’s mission is to help
community leaders build a prosperous future by supporting
and empowering business, social, and civic entrepreneurs.
Community Foundations are grant-making public chari-
ties that are dedicated to improving the lives of people
in a defined local geographic area. They bring together
the financial resources of individuals, families, and busi-
nesses to support effective nonprofits in their communi-
ties. Community foundations vary widely in asset size,
ranging from less than $100,000 to more than $1.7 bil-
lion. The Vermont Community Foundation spends about
$12 million a year on loans and programs.
Community Sourced Capital is a new platform that provides
loans to small businesses using capital sourced directly
from people in their community. Businesses run cam-
paigns on their website to raise capital for their loans, and
CSC manages the behind-the-scenes magic that makes
small business lending simple for everyone involved.
Community-Wealth.org has a list of community-based
economic development strategies and models.
Kauffman Foundation helps individuals attain economic
independence by advancing educational achievement and
entrepreneurial success.
The Local Investing Resource Center was founded in
2012 by James Frazier with the mission of expanding local
investment into small businesses and nonprofits nation-
wide. It supports investors, for- and nonprofit entrepre-
neurs, and community leaders. It has a directory of local
investing groups.
RSF Social Finance has three focus areas: (1) food & agri-
culture, (2) education & arts, and (3) ecological steward-
ship. It invests and lends to individuals and enterprises
committed to improving society and the environment.
Rural Business Incubators can be a way to focus busi-
ness development in small communities, often operating
as nonprofit networks.
Rural Clusters: Generating Local Wealth, Opportunity, and
Sustainability Through Rural Clusters is a research project
which was initiated in Burlington, Vermont, in 2008. The
report has valuable information for CSBs.
Slow Money members have invested more than $38 mil-
lion in over 350 small food enterprises around the U.S.
since mid-2010. Twenty local networks and 13 investment
clubs have been formed.
WealthWorks is a 21st-century approach to local and
regional economic development that belongs in every com-
munity and economic development toolkit. WealthWorks
brings together and connects a community’s assets to
meet market demand in ways that build livelihoods that
continue.
The Rural Research Report is a series published by the Illinois Institute for Rural Affairs to provide brief updates
on innovative best practices on rural issues. Rural Research Reports are peer-reviewed and distributed to
public officials, libraries, and professional associations involved with specific policy issues.
Printed on recycled paper
doc_559908316.pdf
This detailed outline around community supported businesses grassroots entrepreneurship.
Rural Research Report
Winter 2015
Volume 25, Issue 1
by William Keyser
The author is Managing Director
of Venture Founders LLC. He
teaches Sustainable Strategy
and New Venture Creation in
the Marlboro College MBA in
Managing for Sustainability.
Note: Words printed in blue refer
to hyperlinks to more information
and sources. To access the links,
refer to the online version of the
Rural Research Report at www.
iira.org/publicationsresearch/
2015-publications.
Published by the Illinois
Institute for Rural Affairs
Stipes Hall 518
Western Illinois University
Macomb, IL 61455-1390
309.298.2237
www.IIRA.org
Community Supported Businesses:
Grassroots Entrepreneurship
Community supported businesses (CSB) are gaining popularity in rural areas for
business startup ventures and expansions. This Rural Research Report describes
CSBs, mainly based on experiences in rural Vermont, where this entrepreneurial
phenomenon is well developed, and discusses issues and opportunities for wider
application elsewhere.
Community Supported Businesses Explained
CSBs are based on a closer relationship with customers than the simple commer-
cial transaction involved in the sales of products or services. As the word supported
implies, CSBs not only have a relational, but also a financial connection with their
communities, either directly on a personal basis, through an intermediary, or some-
times through a public agency. In addition to patronage, finance is typically in the
form of advance payments for goods or services, with or without interest, as well as
through loans, grants, or, less frequently, equity—frequently in place of or in addition
to traditional bank loans.
The word community usually implies people in a specific location, but it can equally
apply to people who share similar interests. Often, these two types of community
overlap. In Vermont villages and small towns, for instance, many people share an
interest in eating locally produced or organic food. There is also likely to be two-
way support such that money recirculates within the community through businesses
buying local products and services. The proximity of financing sources reinforces the
sense of community.
CSBs are frequently modeled on Community Supported Agriculture (CSA)—a widely
known and understood way for farmers to sell their produce to subscribers ahead of
production, thus helping to finance the cash flow for their activities early in the season
when there is little or no revenue. In addition to selling to individuals directly from
the farm, farmers often sell CSA “shares” at farmers’ markets—over 8,000 in 2012,
according to the U.S. Department of Agriculture (USDA). The USDA defines a CSA as
a “community of individuals who pledge support to a farm operation so that the farm-
land becomes, either legally or spiritually, the community’s farm, with the growers and
consumers providing mutual support and sharing the risks and benefits of food pro-
duction” (see the 2014 USDA publication on CSAs). In 2012, the USDA reported that
12,617 farms in the United States marketed products through a CSA. Vermont has 98
farmers’ markets and 143 CSAs, with a population of fewer than 627,000, making it #1
in the U.S. on the 2014 Strolling of the Heifers Locavore Index based on USDA and
Census figures, weighted by population. Illinois, by comparison, ranks 44th.
Very few of the businesses that are community supported actually describe themselves
as CSBs. Paul Bruhn, Executive Director of The Preservation Trust of Vermont, on the
other hand, describes them as CSEs—Community Supported Enterprises. The Business
2
Alliance for Local Living Economies (BALLE)—an excellent
source of information and support for CSBs—also refers to
them as CSEs.
The means of financing varies from direct methods within the
community to more arm’s-length schemes akin to crowdfund-
ing. Other funding agencies support CSBs through grants
and loans. Another funding approach uses Direct Public
Offering (DPO), raising equity capital through advertising
directly to customers, employees, suppliers, distributors,
and friends in the community. A DPO requires a legal strat-
egy to make sure everything complies with state and federal
securities laws. DPOs involve fees, though significantly less
than an IPO, but are not suitable for small or microfinance,
especially since trading of the stock is severely limited. As
examples, Real Pickles raised $500,000 from investors living
in Vermont and Massachusetts; and Quimper Mercantile
raised $750,000 to open a community-owned store in Port
Townshend, Washington. There is a useful comparison
table at Cutting Edge Capital that compares DPOs with
JOBS Act Crowdfunding Exemptions (Title III), Rule 506c
from the SEC (Title II), and Donation-Based Crowdfunding,
also known as Reward-Based Crowdfunding.
CSBs are of many different types, including those in tradi-
tional corporate forms, such as limited liability companies
(LLCs), limited liability partnerships (LLPs), or corpora-
tions; foundations; or other 501c3s. Co-ops, especially food
co-ops, are community supported, including by community
members who buy shares to become shareholders.
The various ways to organize CSAs may be useful models
for future CSBs:
• Farmer managed – A farmer sets up and maintains a
CSA, recruits subscribers, and controls management of
the CSA.
• Shareholder/subscriber – Local residents set up a CSA
and hire a farmer to grow crops; shareholders/subscrib-
ers control most management operations.
• Farmer cooperative – Multiple farmers develop a CSA
program.
• Farmer-shareholder cooperative – Farmers and local
residents set up and cooperatively manage a CSA.
Community Supported Business, Social Enterprise & Nonprofits
CSBs are social enterprises in that they place a high pre-
mium on their social role, in addition to their economic
or environmental roles, similar to social enterprises with
a triple bottom line. As with CSBs, social enterprises are
often difficult to categorize. In Vermont, at least, there is
more and more overlap between entrepreneurially run
nonprofits and socially driven businesses.
A social enterprise is an organization that applies commer-
cial strategies to maximize improvements in human and
environmental well-being rather than simply maximizing
profits for shareholders or a business created to further a
social purpose in a financially sustainable way.
On the other hand, a nonprofit usually has an equally
social but different kind of value exchange. Rather than
the individual recovering up-front investment in the future,
the value of an individual’s donation to a nonprofit delivers
a social good to someone else.
The Context for Doing Business in Vermont
Vermont’s population is roughly 626,000 (2013) of whom
nearly 200,000 live in the state’s only metropolitan area,
Burlington, in the north. The remaining 450,000 people live
in small towns and villages or in completely rural surround-
ings, though it is the 30th most densely populated state in
the U.S.
Vermont is the nation’s 45th state by area and 50th in
population and Gross Domestic Product. There is a higher
than national average of people over 65, and its median
age is the 2nd highest in the nation at 40.4 years.
Vermont has the largest share of self-employed jobs of any
state (10.2% of all jobs). In November 2014, Vermont’s
unemployment rate was 4.3%, one of 10 lowest states
in the U.S. (Illinois has 6.2%). According to Vermont’s
Small Business Profile released by the Small Business
Administration in 2010, 96.3% of all its businesses are
considered small (less than 500 employees), and 23% of
the firms have one to 19 employees (compared with 18%
nationally). Most businesses in Vermont are very small:
76.3% are no employee firms, whether they are sole-
proprietorships, LLCs, LLPs, or corporations. Having no
3
employees does not preclude them from taking a corpo-
rate legal form. Companies and organizations in the arts
and cultural cluster employ upwards of 4,000 Vermonters
across 3,279 businesses. The creative class is wide-
spread in Vermont among those applying technological,
economic, as well as artistic and cultural creativity.
On the other hand, Vermont outperforms many larger states
in the rate of business creation—its 2012 startup rate was
520 per 100,000 adults, making it 2nd in the country. Vermont
has more than 4,000 nonprofits (#2 state with fewest people
per 501c3) with total annual revenues of $4.1 billion or 18.7
percent of the Gross State Product. Nonprofits are also the
source of 42,000 jobs, or 12 percent, of total employment.
Thus, Vermont may be a useful model for rural entrepre-
neurship when considering “entrepreneurship” in its widest
sense, not simply applied to business startups. Vermont
ranks #1 in the national Opportunity Index (how opportunity
measures up in a community). More than half of Vermont’s
banks (54%) are classified as “community banks” by the
FDIC–10th highest in nation.
Vermont Institutions Assisting Community Businesses
The State of Vermont has several institutions that foster
small business creation and development, several of
which could be models for use in other states and regions:
Community Capital of Vermont – CCVT is a 501c3 (and a
CDFI–see below) that helps small businesses and lower
income entrepreneurs by providing flexible business financ-
ing. CCVT’s micro-loans ($1K to $100K) can be used for
startup or growth and expansion. It specializes in providing
loans to business owners lacking the collateral or credit his-
tory to qualify for traditional bank loans, in helping with the
creation and retention of jobs, in building wealth, and in
enhancing downtowns and the working landscape. CCVT
administers the Vermont Job Start Initiative and attracts both
program funding and community donations. CCVT-funded
entrepreneurs are required to use mentors, giving them a
greater chance of both business survival and loan repayment.
The Preservation Trust of Vermont provided technical assis-
tance or modest financial support to several CSBs, often
playing a pivotal role—for example, Latchis Hotel and
Theatre in Brattleboro, Claire’s Restaurant, Bee’s Knees
Restaurant, and the Putney General Store. As Paul Bruhn,
the executive director, says, “Mixing charitable investment,
charitable contributions, community support through share
or certificate purchases, and entrepreneurship is a way to
provide these essential services and places to a community.”
Brattleboro Development Credit Corporation (BDCC) –
One of 12 Regional Development Corporations in Vermont,
BDCC is a private, nonprofit organization which serves as
a catalyst for industrial and commercial growth in south-
eastern Vermont. BDCC owns an industrial park and two
business parks/incubators, offering low-cost viable rental
space to non-employer and small businesses. BDCC
recently announced the 2015 Windham Regional Business
Planning Competition in collaboration with the Strolling of
the Heifers (see above) and support from the Windham
Foundation (see below) among others, including Marlboro
College. The total award is $68,000. Since 2006, previous
competitions led to the creation of well over 200 jobs, and
80% of winners are still in business. The special Farm/
Food Divisions of the competition cover both existing busi-
nesses and startups.
Vermont Sustainable Jobs Fund – Created in 1995, VSJF (a
CDFI) aims to accelerate the development of Vermont’s green
economy. It provides early stage grant funding, technical
assistance, and loans to entrepreneurs, businesses, farmers,
networks, and others interested in creating jobs and markets
in the green economy. The VSJF Flexible Capital Fund L3C
focuses on clean technology, agriculture, and forestry, and
it makes revenue-based loans to businesses. It is a 501c3,
which is funded partly by the state but also through fees-for-
service, mentoring, grants, and donations from high net worth
individuals in the community and seven other states with simi-
lar values. One investor (of $850K) is Slow Money Vermont.
VSJF is a “high-touch” lender, making loans to businesses
based on the management team above all other factors.
USDA-RD Vermont – The USDA-RD in Vermont, similar to
all states, is a major force in rural development and a sig-
nificant contributor to community businesses in that sector.
Among other ventures, the department has made grants
to the West Townshend Country Store (see below). They
also supported ventures for dairy farm manure digesters to
produce methane to generate electricity, of which there are
more than a dozen in Vermont. USDA-RD also offers Rural
Business Enterprise Grants.
Vermont Council on Rural Development – VCRD is a
501c3 and a member of the National Rural Development
Partnership. Among other activities, it has initiatives on
agricultural viability, value-added forest product develop-
ment, the creative economy (very important in Vermont
and most frequently involving no employee businesses),
4
the structure of the planning system, in-state energy devel-
opment, the future of Vermont, and advancing the Vermont
working landscape.
Vermont Land Trust – Since 1977, this 501c3 has perma-
nently conserved more than 1,775 parcels of land covering
more than 535,000 acres or about 8% of the state’s pri-
vate, undeveloped land. It includes more than 775 working
farms, and the Farmland Access Program provides farm-
ers with opportunities to purchase or lease affordable
farmland to start or expand agricultural businesses.
Incubator Without Walls – The Center for Rural
Entrepreneurship at Lyndon State College hosts the
Incubator Without Walls program which offers affordable
technical assistance for small businesses. Startups are
also fostered through Vermont with six maker-spaces,
nine co-working spaces, and three accelerator spaces.
The Vermont Center for Emerging Technologies is one of
eight business incubators in the state.
Vermont Food Center – The Center is a multi-use food pro-
cessing facility in Hardwick. Users of the center include
Vermont Baby, Vermont Cranberry Company, and many
others. It is part of the Center for an Agricultural Economy,
which also has the Vermont Farm Fund for food and ag
businesses.
A similar operation that supports local food producers is
the Mad River Food Hub—a fully equipped, licensed vege-
table and USDA-inspected meat processing facility located
in Waitsfield, Vermont. Their users include Vermont Bean
Crafters and Mad River Distillers.
Community Supported Businesses in Vermont
Vermont has a wide range of CSBs that address unique
opportunities and/or services needed in rural, small town,
and village environments. In some instances, under the
right legal and social environment, as well as with autho-
rization and/or support from the state government, these
business types could be started elsewhere and are worth
exploring in more detail. Each case is special and depends
heavily upon the initiative of individuals or small groups:
Sun Farm Community Solar, Putney – Vermont’s largest util-
ity, Green Mountain Power (GMP), and the Clean Energy
Collective (CEC) have plans for another community-owned,
utility-scale photovoltaic (PV) facility to serve Vermont rate-
payers, following the success of the 1st community-owned
567-panel solar array in Putney (pop. 2,634). Completion of
this facility would make community solar available to nearly
70% of the state’s electricity customers. Any GMP cus-
tomer can participate, including renters, those with shared
property, nonprofits, and households with modest incomes.
Unlike rooftop systems, purchases in an Area Community
Solar Array can involve one panel, costing $1,125 or $3.75
per watt, to as many panels as desired, with the same incen-
tives as rooftop system owners. The state aims to use 90%
renewable energy by 2050. Vermont’s NRG Solar worked
with GMP to enroll customers in a central solar lease pro-
gram in Rutland. This pilot allows customers to sign up with-
out up-front costs and become part of a solar community.
GMP has a goal to transform Rutland into the Solar Capital
of New England.
The Gleanery Restaurant, Putney – This restaurant uses
ingredients from local farmers and producers and is a
community-supported restaurant that pays members
back in monthly credits at the restaurant. The community
supports The Gleanery, The Gleanery supports the local
economy, the local economy benefits from a destination
restaurant, and more money recirculates through Putney.
In Morrisville (pop. 2,030), The Bee’s Knees is a CSA-type
restaurant where, in exchange for a $1,000 loan, investors
receive coupons that they can redeem for meals at the
rate of $90 a quarter over three years. This is a meager
return on investment, but in the first six weeks of launch,
the Bee’s Knees restaurant raised $20,000. The venture
was followed by Claire’s Restaurant in Hardwick (pop.
3,100), a CSB that raised more than $40,000, although it
failed later because of management shortcomings.
The Putney General Store – Severely damaged by fire
in 2008, the owner sold the building housing the general
store to the Putney Historical Society (PHS), whose mem-
bers voted to pursue both ownership and reconstruction.
PHS obtained $67,000 from the Vermont Housing and
Conservation Board that also runs the Vermont Farm &
Forest Viability Program; $200,000 from the Vermont
Community Development Block Grant Program; and
$100,000 from the Office of Senator Patrick Leahy and the
Vermont Preservation Trust through a Village Revitalization
Grant. In addition, it collected $10,000 from the Windham
Foundation (see below) and $100,000+ in community
donations. In spite of a second fire, the PHS continued
raising funds in the community, and the new store is now
leased to an operator who has added a pharmacy. This is
an example of a tiny community that was able to marshal
5
resources from a variety of sources to provide essential
services locally.
West Townshend Country Store, another community store,
is part of the West River Community Project and has a café
and deli. It provides space for the local Farmers’ Market in
a village with only 418 residents.
The Bee’s Knees, Green Mountain Spinnery (Putney-
based worker co-operative), and Vermont Islands (manu-
facturer of food service stations) in Brattleboro are among
150 CSBs that have received loans from the Vermont
Community Loan Fund over the past 25 years.
Brattleboro Food Co-op (BFC) – Vermont has 15 food
co-ops. By comparison, Texas has five food co-ops with
43 times the population. A proportionate number of co-ops
in Texas would be 645. The U.S. has about 30,000 co-ops
and, by definition, most are locally owned. Personal expe-
riences on the Board of the BFC demonstrated huge
community support with about $1.2 million in shareholder
loans for a new store. Today, the co-op is a 14,580 square
foot natural foods market and deli, above which are co-op
offices, a commissary kitchen, a cooking classroom, and
24 apartments. The building was co-developed with the
Windham Housing Trust, and BFC partnered with Co-op
Power, a consumer-owned sustainable energy coopera-
tive, to install a solar roof.
Another Vermont co-op is Cabot Creamery with 1,200 farmer
members. Credit unions are community cooperative, not-
for-profit financial institutions, and Vermont has 22 of them.
One, the Opportunities Credit Union, is a community devel-
opment credit union, uniquely committed to Vermonters of
low wealth with a mission to build wealth, community, and
opportunity through a fair and affordable financial system.
The Commons – Brattleboro has an interesting hybrid
called The Commons, run by Vermont Independent Media
(a nonprofit) that promotes local, independent journalism.
It provides a forum for community participation by publish-
ing a weekly free newspaper, run on commercial lines,
which promotes civic engagement by building local skills
through a media mentoring project.
Latchis Hotel and Theatre – In 2003, Latchis Arts acquired
the Brattleboro property that currently houses a 30-room
boutique hotel and four theatres. Funds were raised in
the community, from grant-making bodies as well as from
operations. The executive director of the Latchis describes
his back-to-back 501c3 and LLC as a hybrid organization.
Hybrid organizations will proliferate, not on account of the
Internal Revenue Service or another government man-
date, but in response to the needs of communities, both
physical and virtual.
Windham Foundation – This foundation, another hybrid,
promotes the vitality of the Village of Grafton (pop. 650)
and other Vermont rural communities through its philan-
thropic and educational programs. Its subsidiary operations
also contribute to them. Windham is a Private Operating
Foundation, a not widely represented IRS category of 501c3,
and has operating (for-profit) subsidiaries: The Grafton Inn,
a traditional Vermont inn; Grafton Village Cheese, with two
production plants, each with a retail store; Grafton Ponds, an
outdoor activities center; and the Retreat Farm, 475 acres
with a petting farm, where early discussions are underway
about creating a retail and manufacturing cluster in under-
utilized farm buildings. Grafton Village Cheese is a member
of the Vermont Cheese Council—a dispersed rural cluster.
Vermont also has about 40 ESOP (Employee Share
Ownership Plan) companies. Many Vermont entrepreneurs
are approaching retirement age and exploring options to
exit their businesses—by selling to another Vermont owner,
employee ownership, or passing it on to a family member.
The Vermont Employee Ownership Center (VEOC) helps
Vermont companies move into employee ownership and
administers the Vermont Employee Ownership Loan Fund.
ESOP companies are yet another way that communities can
give expression to the notion of CSBs without formal status
since most, if not all, employees are “invested” in their places
of work (through buying shares) and live in the community.
Community Supported Businesses in Other States
There are an increasing number of CSBs in different forms
in other states. Local circumstances mean that Vermont’s
approaches are not necessarily adopted wholesale in
other states, but the following are examples of several
approaches used across the U.S., and readers can pursue
more information by contacting them directly:
Art – CSB approaches have been used to promote the
arts and to attract creative people. Minnesota Artists and
Springboard for the Arts were created to support local
art, artists, and collectors. Handmade in America is a
North Carolina CSB that trains local craft entrepreneurs to
develop the skills needed to be innovative small business
6
owners, and it helps rural communities spark economic
renewal through asset-based creative place-making.
Bakery – Greyston Bakery is one of the country’s lead-
ing social enterprises. It provides individuals in Yonkers,
New York, with employment, skills, and resources to lift them
out of poverty, and it is owned by the Greyston Foundation,
a 501c3. There are a growing number of “community bak-
eries.” One is Barrio Bread (Tucson, Arizona), whose busi-
ness model is a CSB. It has no retail store; instead, the
bread is offered at different locations in the community.
Production is driven by a pre-order system at the Farmers’
Market and Thursday School Bread or a Bread Share at
the Tucson Community Supported Agriculture events. In
Albany, New York, All Good Bakers shareholders receive
freshly baked loaves and baked goods made with local
flours on a weekly basis. They also call themselves a CSB
(bakery).
Banking – Urban Partnership Bank in Chicago is not
strictly a CSB, although it does raise funds on the South
Side and re-lends them locally. The bank is a community
development financial institution (CDFI), providing finan-
cial products and services to underserved communities. It
partners with community organizations to increase com-
mercial activities, grow small and mid-size businesses and
new jobs, and support nonprofits. CDFIs were established
by the Community Reinvestment Act (1977).
Books and Broadcasting – An example of community-sup-
ported publishing operations is The Head & Hand Press in
Philadelphia. 88.7 The Bridge is a community-supported,
non-commercial radio station in Delaware.
Dining – Portland, Maine, has a community-supported
kitchen (CSK) run by Local Sprouts, a cooperative that pro-
vides local and organic prepared food year-round to mem-
bers, similar to a CSA system. Awaken Café is a live music
venue, espresso bar, craft beer & wine bar, and organic
restaurant in downtown Oakland, California, with the mis-
sion to bring people together and launch movements. The
owners pre-sold gift cards, which, priced at $1,000, could
be redeemed for $1,250 once the café opened. Three
Stone Hearth in Berkeley, California, is also a CSK.
Energy – Project Resources Corp (PRC) develops wind
and solar projects in the upper Midwest with a goal of
expanding the Minnesota WindShare program. Minnesota
WindShare was created by PRC to enhance economic
value for communities, landowners, and small businesses.
Fisheries – Sitka Salmon is a community-supported fishery
(CSF) in Alaska that has opened CSFs in Illinois (Galesburg),
Iowa, Minnesota, Indiana, Michigan, and Wisconsin. Port
Clyde Fresh Catch is a CSF in Maine, where investors sign
up for a weekly share of wild-caught shrimp. Fourteen-week
shares at $210 offer 10 pounds of shrimp a week or half
shares ($105). Conservation International Hawai‘i partners
with more than 50 community groups, local nonprofits, gov-
ernment agencies, and other groups. It has also funded
over 36 grants across the state, totaling $1.8 million, to
increase access to sustainable and locally caught seafood.
Yet another example is CS Fishery in Oregon.
Food & Drink – House of Brews in Madison, Wisconsin, is
a CSB (brewery), and MobCraft Beer has launched a new
business model for making beer based on crowd-sourc-
ing opinions of its online supporters to determine what
is brewed and when. Boise Brewing is another CSB that
makes a unique beer for their owners monthly and allows
members to fill their growlers. Illinois now has two CSB
breweries: the Beygyle Brewery in Chicago has 6-month
and 12-month memberships; and Sketchbook Brewing Co
in Evanston raised $25,000 on Kickstarter.
Health & Fitness – The Yoga Matrika Studio in Pittsburgh
offers the ability to invest in the studio by purchasing
shares, and it gives students an opportunity to invest in
an economical way in both their personal practice and the
studio. Third Root Community Health Center in Brooklyn,
New York, is another example of a CSB that offers yoga,
acupuncture, massage, and herbal medicine.
Opportunities for the Future
The growth of CSBs and other forms of community engage-
ment in supporting and financing businesses clearly indi-
cates the growing interest in alternative ways to stimulate
business activity and commerce in rural areas. While local
initiatives and conditions may be the main driving forces,
equally important is that state regulations and programs
allow and support these types of efforts. Also, many differ-
ent alternative creative solutions are being established by
diverse organizations. This section describes several key
opportunities for the future, especially those concerned
with funding the development of CSBs.
Local Investing Networks. Michael Schuman’s book,
Local Dollars, Local Sense: How to Shift Your Money from
Wall Street to Main Street and Achieve Real Prosperity, is
a useful place to start in considering the future of CSBs.
7
Americans’ long-term savings in stocks, bonds, mutual
funds, pension funds, and life insurance funds total about
$30 trillion. But not even 1% of these savings touch local
small business—even though they generate about half the
jobs and output in the private economy.
Another useful reference is Locavesting: The Revolution
in Local Investing and How to Profit from It by Amy
Cortese who introduces readers to the pioneers of the
local investing movement and explains the process. She
defends the case that, by investing in local businesses,
rather than faceless conglomerates, investors can earn
profits while building healthy, self-reliant communities.
In East Jefferson County, Washington, LION (the Local
Investing Opportunities Network) creates opportunities
for local businesses, nonprofits, and citizens to network.
Membership includes residents who support local busi-
nesses and invest their money to work within the commu-
nity. Individuals are able to make such investments directly,
where there are so-called pre-existing relationships, strik-
ing their own deals with the businesses they know. Another
example is Whatcom Investing Network in Washington State.
Investing networks are likely to proliferate in the future.
Crowdfunding and the JOBS Act. Crowdfunding is dis-
cussed extensively in relation to CSBs. The JOBS Act was
supposed to usher in a new era of equity-based crowdfund-
ing. However, Title III rules that would make that possible
are bogged down in the Securities Exchange Council (SEC)
rule-making process. Title II rules are established, and sev-
eral crowdfunding sites are open for equity-based invest-
ment but only for Accredited Investors—high net worth
individuals. There are only about 5 million such people in
the U.S., so only reward-based crowdfunding is currently
open to most people. Some CSBs are beginning to use
this opportunity. When the SEC publishes its crowdfunding
rules, the CSB culture and practice will grow exponentially.
The Kickstarter and Indiegogo crowdfunding platforms, and
many others, currently only offer rewards. Two examples of
Kickstarter-funded businesses are Driftless Café, a locally
focused, farm-to-table restaurant in rural Wisconsin, and the
Creative Arts for Rural Development Project, which features
notecards designed around the works of aspiring artists in
rural, remote areas. Community Sourced Capital exists to
help small businesses and local economies thrive. As a reg-
istered Social Purpose Corporation in Washington State,
the people who run Community Sourced Capital, by helping
businesses raise capital from their local communities, are
able to make decisions in the interest of fulfilling this purpose
instead of serving only in the interest of maximizing profit.
In several places, people are not waiting for the SEC. In
January 2014, Oregon joined 15 other states, including
Texas, in implementing new rules that allow startup busi-
nesses to raise money through intrastate crowdfunding
investments in ways similar to Vermont’s VSBOE men-
tioned above. Other countries have gone beyond this, lib-
eralizing controls that give power to stock exchanges and
lawyers, allowing individuals to make their own investment
decisions, using equity-based crowdfunding.
Microfinance. Microfinance is generally seen as funding
micro-enterprises in the developing world. However, it is
also a growing field in the U.S. There is a special division
of Kiva, called Kiva Zip, where one can post local finance
needs. Kiva Zip has already loaned more than $5 million
to ventures, usually between $5,000 to $10,000. There
are many examples in the food and agriculture sector: an
urban farm, a café/bakery, produce for at-risk families, a
nonprofit community coffee house, and others.
Accion US Network connects small business owners with
the financing and advice needed to create or grow healthy
enterprises. Since 1991, the five network members have
given loans to over 45,000 people, Accion US brings
affordable loans to micro-entrepreneurs, helping to grow
small businesses and strengthen the communities they
serve. Accion Chicago is also a CDFI. The Opportunity
Fund in California offers, “Working Capital for Working
People.” Grameen America is dedicated to helping women
who live in poverty build small businesses to create better
lives for their families. They offer micro-loans, training, and
support to transform communities and fight poverty in the
U.S. Delivered via a financial institution, the SBA Microloan
program is another opportunity for CSBs.
Private Sector Grants to Entrepreneurs. An “unseen”
form of local startup support is through large corporations
providing funds for new ventures in their sphere of interest.
Many sources exist in the U.S. Here are a few examples,
focusing on women and on food:
• The Eileen Fisher Women-Owned Business Grant
Program – Seeks applicants from 100% women-owned
businesses that are founded on the principles of social
consciousness, sustainability, and innovation, and that
are ready to move on to the next phase of development.
• Cartier Womens’ Initiative Awards – Aim to identify and
support initial-phase female entrepreneurs through fund-
ing and coaching; foster the spirit of enterprise by cel-
ebrating role models in entrepreneurship; create an inter-
national network of female entrepreneurs; and encourage
peer networking.
8
• Whole Foods Local Producer Loan Program – Provides
up to $25 million in low-interest loans to independent
local farms and food artisans.
• Huggies Mominspired Grant Program – Provides
inspired moms with $15,000 in seed money as well as
business resources to further develop original product
ideas and startup businesses.
Increasing Variety in Means of Financing. There are
more and more ways to finance startup businesses, espe-
cially in rural settings. Traditionally, the kinds of options
open to a small rural startup involved using one’s own
resources (e.g., savings, credit cards, and other acces-
sible money); resorting to family and friends—either for
gifts, equity, or loans; applying to main street banks for
mortgages, home equity, and commercial loans; and using
trade credit, either pre-arranged or through late payment
of payables (see Appendix 1).
But there are now many newer forms of finance available,
including the CSB payment up-front financing. So-called
bootstrapped finance has become a much more sophis-
ticated process, typically using OPM (Other People’s
Money) in some form or another. In this report, we have
shown several kinds of organizations offering differently
structured forms of finance and several types of funding
with differing levels of risk. Appendix 2 places them on a
continuum, from debt at the low-risk/low-reward end to
equity at the high-risk/high-reward end.
Changing Forms of Corporate Governance. Since the
CSB field defies an easy definition, there are many routes
to helping local businesses become better connected to
the community in which they are located. Some of this
connectivity involves corporate governance.
A new corporate form called the Benefit Corporation was
created in Vermont, the second state to pass such legisla-
tion, which is now in 27 states (including Illinois) and pro-
jected for 14 other states and likely will be followed across
the nation. The initiative springs largely from the efforts of B
Lab, the initiator of the B Corporation. There are over 1,000
such companies certified as BCorps, which should not
be confused with a state-registered Benefit Corporation.
Several Vermont businesses are both BCorps and regis-
tered Benefit Corporations; examples include King Arthur
Flour (which is also an ESOP company) and Sun Common.
In Vermont, a Benefit Corporation means a corporation
defined as
• providing low-income or underserved individuals or
communities with beneficial products or services.
• promoting economic opportunity for individuals or com-
munities beyond the creation of jobs in the normal
course of business.
• preserving or improving the environment.
• improving human health.
• promoting the arts or sciences or the advancement of
knowledge.
• increasing the flow of capital to entities with a public
benefit purpose.
• accomplishing any other identifiable benefit for society
or the environment.
Another corporate form in Vermont and seven other states,
including Illinois, is the L3C (low-profit limited liability com-
pany). This is a legal form of business entity created to
bridge the gap between nonprofit and for-profit investing by
providing a structure that facilitates investments in socially
beneficial, for-profit ventures. It simplifies compliance
with IRS rules for program-related investments (PRIs), a
type of investment that private foundations are allowed to
make. Michigan had the largest number (265), followed
by Louisiana (207), Illinois (177), and Vermont (168) as of
November 2014.
Fostering Local Investment. The SEC rules for any public
offerings are complex and onerous, even though there is
an Intrastate Offering Exemption that facilitates financing
local business operations. To qualify, a company must be
organized in the state where it offers the securities, must
carry out a significant amount of its business in that state,
and must make offers and sales only to residents of that
state. As this report describes, Direct Public Offerings are
usually restricted to specific geographic areas, but in addi-
tion, several individual states have introduced special pro-
visions to foster local investment. Vermont, as an example,
has a Small Business Offering Exemption (VSBOE) that
allows raising up to $500,000 in an offering to 50 or fewer
share purchasers. Requirements of this exemption include
the seller’s principal place of business, and a majority of
its employees must be in Vermont; general solicitation is
permitted, but the advertising material must be submitted
to the Securities Division. Each prospective investor must
receive an investment brochure containing specified mate-
rial, and a notice must be filed with the state Securities
Division. However, this has not been a widely used provi-
sion, with only one or two offerings a year during the 15 or
more years that it has been available.
Additional Sources of CSB Funding and Information.
Given the perennial problem rural startups have in finding
funding via traditional bank sources, there is a growing list
of organizations, some of which are nonprofit, from which
they can find financial support (see Appendix 3). Many
of these mission-driven organizations offer an especially
9
receptive and less cumbersome means of raising equity
and/or loan finance. They may also be better listeners for
rural businesses, which tend to be small and fragile.
Since a high proportion of rural enterprises are based in
food and agricultural industries, a predominance of these
organizations are in that sector. The USDA is often a
jumping off place for farming and food production busi-
nesses, and their staff members offer considerable sup-
port and creative ways to fund rural startups.
Community Development Financial Institutions (CDFI)
target early-stage firms and other companies not deemed
so “bankable” by traditional funding sources. CDFIs exist
in every state. Vermont, for example, has the Community
Capital of Vermont, mentioned above, and four other
CDFIs. The CDFI Locator is a searchable listing by state
from the Opportunities Finance Network.
Hybrid Organizations. In western Massachusetts,
BerkShares, Inc. is the place-based, democratically struc-
tured nonprofit organization that issues BerkShares, a
local currency for the Berkshire Region, which is one of
the more successful local currencies. BerkShares has now
set up Community Supported Industry, an initiative aimed
at creating a culture of support for entrepreneurs inter-
ested in more labor-intensive, small-batch local produc-
tion. A BerkShares loan program will provide a flexible and
community-directed financing tool for import-replacement
businesses that are the goal of their community-supported
industry initiative.
Prosperity Candle, founded by Ted Barber, also located
in Massachusetts, works at the intersection of business
and philanthropy. It is organized in three overlapping but
not formally linked forms. Prosperity Catalyst, the non-
profit, trains women in war-ravaged communities over-
seas to make candles and develop entrepreneurial skills.
The Prosperity Candle LLC, registered in Massachusetts,
runs the sales operation for the candles, and a Vermont-
registered L3C enables Prosperity Candle to attract pro-
gram (PRI) money. This is perhaps the most complex kind
of hybrid since the operations of the three elements must
be kept at arms’ length so as not to break IRS rules. It is
interesting that Eileen Fisher, the fashion house, makes
grants of up to $12,500 to businesses that operate as a
traditional for-profit business or as a social enterprise for-
profit/nonprofit hybrid.
Opportunities for Rural Community and Economic
Development. Opportunities are many—for state agencies,
nonprofits, microfinance providers, investment networks,
and community businesses themselves. Creativity and
innovation are the only limiting factors. When the JOBS Act
Title III rules are finally published, the floodgates of equity-
based crowdfunding will open, and the opportunities will be
almost limitless. The Vermont experience shows that the
entrepreneurial spirit pervades ventures in both the for- and
nonprofit fields as well as in the public sector. New venture
creation is seen as a positive contributor to flourishing com-
munities by all economic and social partners.
Rural Clusters. There are rural clusters of CSBs that
occur serendipitously as in the Vermont village of Putney,
which has several CSBs. However, the rural cluster move-
ment is growing. CSBs could also be planned at the com-
munity level (see Sustainable Food Systems Cluster,
Vermont Style and Generating Local Wealth, Opportunity,
and Sustainability Through Rural Clusters).
The Village of Hardwick in Vermont is an intentional rural
food cluster with several businesses interlinked, like
Vermont Natural Coatings, making wood finishes using
whey protein, a cheese making byproduct, and The Center
for an Agricultural Economy and its Vermont Food Venture
Center. The book by Ben Hewitt, The Town that Food
Saved: How One Community Found Vitality in Local Food,
is an excellent resource. The collective power of “small”
and “networking” provides the basis of why business
clusters can be so effective. In a rural state like Vermont,
inter-related clusters can develop. For example, dairy pro-
duction, small-scale dairy manufacturing, and renewable
energy sources can be natural partners.
However, CSBs Are Nonetheless Businesses. In the
case of all these initiatives, the CSB still must be run as
a business. Hence, in raising funds, the promoters must
develop a business plan. The business plan may not nec-
essarily be a 50-page document with dozens of appendi-
ces. It may not even be the type of document expected by
a traditional bank lender. However, it must be a plan and
built on a sound business model to demonstrate how the
product or service will generate sustainable revenues. This
approach means defining a very clear value proposition
that describes the benefits customers or users will receive.
Chances are high, though, that financial data will not be
the only factor needed to convince funders—either orga-
nizations or individuals. High importance will be placed
on ensuring that the values of the offering business and
the potential lenders or investors are in sync. The whole
reason for CSBs is that they can deliver something wanted
by consumers in the community, plus added social, and
sometimes intangible, benefits.
10
References
Cortese, A. 2011. Locavesting: The Revolution in Local Investing and How to Profit from It. New York: John Wiley & Sons.
Hewitt, B. 2011. The Town that Food Saved: How One Community Found Vitality in Local Food. Emmaus, PA: Rodale
Books.
Schuman, M. H. 2012. Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve
Real Prosperity. White River Junction, VT: Chelsea Green Publishing.
Appendix 1: CSB Financing Definitions
Bank Loans – Term loans, commercial mortgages, and
lines of credit made with conditions by banks, credit
unions, and others.
Convertible Debt – Asset-backed loans that can require
the owner to give up equity at some future date.
CSA Model – A business raises subscriptions to be repaid
with or without interest at a later date in the form of goods
or services.
Direct Public Offering (DPO) – A company raises capi-
tal by marketing its shares directly to its own custom-
ers, employees, suppliers, distributors, and friends in the
community.
Family & Friends – Can be either loan or equity money
and should always be contracted using a promissory note
that defines repayment terms and consequences in the
case of default.
Grants – Contribution, gift, or subsidy bestowed by a gov-
ernment or other body for a particular purpose.
Investment Networks – Way to connect entrepreneurs
looking for funding with investors looking to invest.
Microfinance – Banking service provided to unemployed
or low-income individuals or groups who would otherwise
have no other means of gaining financial services.
Micro Loan (SBA) – Small short-term loans for working
capital or the purchase of inventory, supplies, furniture,
fixtures, machinery, and/or equipment available to desig-
nated intermediary nonprofit lenders.
Program-Related Investments (PRI) – Investments by
foundations to support charitable activities that involve the
potential return of capital within an established time line.
Peer-2-Peer Lending – Small loans (generally $2K to
$35K) at Lending Club and Prosper, for example.
SBA 7(a) Loans – SBA’s most common loan program;
includes financial help for businesses with special
requirements.
Soft Loan – A loan with no interest or a below-market rate
of interest.
11
Appendix 2: CSB Financing Continuum
23
Rural Clusters: Generating Local Wealth, Opportunity, and Sustainability through Rural Clusters, a
research project initiated in Burlington, Vermont in 2008. The report has valuable information for CSBs.
Slow Money members have invested more than $38 million in over 350 small food enterprises around
the United States since mid-2010. Twenty local networks and 13 investment clubs have formed.
WealthWorks is a 21st-century approach to local and regional economic development that belongs in
every community and economic development toolkit. WealthWorks brings together and connects a
community’s assets to meet market demand in ways that build livelihoods that continue.
Appendix 2: CSB Financing Continuum
___________
Source: Will Keyser, Marlboro College Graduate and Professional Studies, MBA in Managing for
Sustainability; [email protected] Founders LLC; http:startupowl.com
Bank Loans
Risk averse,
collateral needed
Community Development Loans
Local/state agencies
Peer 2 Peer Lending
Prosper, Lending Club
Family & Friends
Promissory note
CSA Model–CSB
Must deliver on promise
Microfinance in USA
Kiva Zip, Accion USA,
Opportunity Fund, Grameen America
Soft Loans
USDA, SBA, including
Micro Loan & 7(a)
Bootstrapping
Vendors/suppliers,
sales + conserve cash
Program Related Investment
Foundations ? nonprofits & L3Cs only
Crowdfunding
In-kind reward only at present
Grants
Repayment not required
Investment Networks
Few available
Convertible Debt
Becomes equity
Direct Public Offering
Accredited investors only
Angels
Equity dilution
VCs
Big sums + high growth
Low risk & reward (debt) High risk & reward (equity)
Source: Will Keyser, Marlboro College Graduate and Professional Studies, MBA in Managing for Sustainability, will@
gradschool.marlboro.edu., Venture Founders LLC, http:startupowl.com
Appendix 3: Additional Sources of CSB Funding and Information
AgFunder is a marketplace for ag startups seeking to raise
investment capital from accredited investors.
AngelList is a platform for startups to find Angel Investors.
It is well worth putting a profile up, especially if it concerns
a tech startup. The traditional route to business angels
requires the entrepreneur to find personal connections,
whereas this platform provides the young business with
exposure to investors.
Advantage Capital Partners invests in entrepreneurial
small businesses in communities that are underserved by
traditional sources of capital, partnering with state and fed-
eral economic development programs. It also administers
the USDA’s $150 million Investment Funds to Grow Small
Businesses.
Association for Enterprise Opportunity is a national mem-
bership organization and voice of microbusiness develop-
ment in the U.S. For more than two decades, AEO and
its hundreds of member organizations have helped more
than two million entrepreneurs support themselves and
their families, and contribute to their communities through
business ownership.
The Center for Rural Entrepreneurship’s mission is to help
community leaders build a prosperous future by supporting
and empowering business, social, and civic entrepreneurs.
Community Foundations are grant-making public chari-
ties that are dedicated to improving the lives of people
in a defined local geographic area. They bring together
the financial resources of individuals, families, and busi-
nesses to support effective nonprofits in their communi-
ties. Community foundations vary widely in asset size,
ranging from less than $100,000 to more than $1.7 bil-
lion. The Vermont Community Foundation spends about
$12 million a year on loans and programs.
Community Sourced Capital is a new platform that provides
loans to small businesses using capital sourced directly
from people in their community. Businesses run cam-
paigns on their website to raise capital for their loans, and
CSC manages the behind-the-scenes magic that makes
small business lending simple for everyone involved.
Community-Wealth.org has a list of community-based
economic development strategies and models.
Kauffman Foundation helps individuals attain economic
independence by advancing educational achievement and
entrepreneurial success.
The Local Investing Resource Center was founded in
2012 by James Frazier with the mission of expanding local
investment into small businesses and nonprofits nation-
wide. It supports investors, for- and nonprofit entrepre-
neurs, and community leaders. It has a directory of local
investing groups.
RSF Social Finance has three focus areas: (1) food & agri-
culture, (2) education & arts, and (3) ecological steward-
ship. It invests and lends to individuals and enterprises
committed to improving society and the environment.
Rural Business Incubators can be a way to focus busi-
ness development in small communities, often operating
as nonprofit networks.
Rural Clusters: Generating Local Wealth, Opportunity, and
Sustainability Through Rural Clusters is a research project
which was initiated in Burlington, Vermont, in 2008. The
report has valuable information for CSBs.
Slow Money members have invested more than $38 mil-
lion in over 350 small food enterprises around the U.S.
since mid-2010. Twenty local networks and 13 investment
clubs have been formed.
WealthWorks is a 21st-century approach to local and
regional economic development that belongs in every com-
munity and economic development toolkit. WealthWorks
brings together and connects a community’s assets to
meet market demand in ways that build livelihoods that
continue.
The Rural Research Report is a series published by the Illinois Institute for Rural Affairs to provide brief updates
on innovative best practices on rural issues. Rural Research Reports are peer-reviewed and distributed to
public officials, libraries, and professional associations involved with specific policy issues.
Printed on recycled paper
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