How do I invest my money in small businesses for social impact?
/Let’s say you’ve made it to the point where you have more cash than you need for monthly living. As an artist you are sensitive to investing money in a socially responsible manner. You don’t want to just stick your money into an index fund which will then invest in corporate banking, oil, tobacco, and fast food. What are you options?
One of the ways you can invest is through crowdfunding which you will be familiar with due to sites like Indiegogo or Kickstarter. This is similar but a bit different because with crowdfunding investing you are actually purchasing a piece of the company. This might sound unusual because it is fairly new. This has only been possible since 2016.
The JOBS Act (Jumpstart Our Business Startups Act) passed in 2012, but the new law had to get worked through the SEC rule book first and it finally went into effect in 2016. What does it do?
Prior to the JOBS Act if you wanted to invest in private companies through a public solicitation you would need to be an Accredited Investor meaning you make $200k+ per year for at least two years or have over $1M in assets.
With the JOBS Act, Title III, Non-Accredited Investors (people under the limits mentioned above - which is more than 90% of the US population) can now invest in securities within certain rules. One of the rules is about income levels which limit how much you can invest. The other rule is that these securities can only be transacted through an SEC registered portal.
For More Reading:
This article talks about rules of investing in private companies before JOBS Act and changes since: https://www.bio.org/articles/jobs-act-regulation-d-and-rule-506c
This whole article is good and worth reading: https://aaplonline.com/how-the-job-act-opens-deal-flow-for-non-accredited-investors/
Now, the question is, are there any portal companies out there with SEC registration that are focused on Socially Responsible Investing? Possibly! There are so many and I haven’t gotten to read through them all yet. Here is the list of all regulated portal sites and I assume there is at least one in here with social impact at its core: https://www.finra.org/about/funding-portals-we-regulate
Even if one doesn’t exist yet in this list, there will surely be one soon so keep looking and I will continue to post extensions on this blog as I learn more.
On a related note, crowdfunding real estate is another option. Though it may not be as impactful as a company with a social mission, it is still a way to invest in small business. Read here for more info on some of the Real Estate crowdfunding sites: