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Weekly Roundup: The SEC Considers Crowdfunded Investing, Impact Investment Is Buzzing, and Solyndra Debate Continues

   /   Oct 7th, 2011News, Weekly Roundup

Every week, we provide a roundup of the latest news in social change and innovation.

Obama Jobs Plan Calls For Less Red-Tape In Crowdfunding

The future of crowdfunding is at stake in President Obama’s jobs plan, which he promoted throughout September, particularly in Silicon Valley. The bill suggest that a lifting of the Securities and Exchange Commission (SEC) ban against crowdfunding as an investment strategy (essentially microinvesting) could lead the way to job creation, GOOD’s Alex Goldmark reported this week.

The first clause of the President’s jobs act states that the phenomenon of online crowdfunding has allowed small-scale entrepreneurs to raise startup funds. But, it goes on, “imagine the possibilities if these small-dollar donors became investors with a stake in the venture.”  The White House’s Startup America initiative will be charged with exploring this possibility.

This buzz about crowdfunding’s potential for investing in small business goes back to September, when the SEC began reviewing its rules governing capital-raising, including crowdfunding as an investment scheme, reported the Wall Street Journal. SEC Corporate Finance Division Director Meredith Cross said in a September House hearing that the key to easing restrictions on crowdfunding would be to create an exemption for it that prevented fraud from occurring. But later, she said that she would no longer testify in the hearings on crowdfunding, due to a potential conflict of interest.

And the idea of fostering a relationship between government and the enterprise sector is popping up in other places. TechCrunch wrote this week about Fuse Corps, a fellowship program that intends to achieve socioeconomic change by pairing entrepreneurial professionals with governors, mayors, and community leaders in community-based social impact projects. Target areas include education, economic development, and health care.

Moving Forward With Impact Investing

This week on Social Edge, Antony Bugg-Levine and Jed Emerson, the authors of the new book Impact Investing: Transforming How We Make Money While Making a Difference, had an online discussion on the important role impact investing can play in reshaping our nation’s broken economy. The power of the  social enterprise sector can only grow when capital investment also addresses concrete challenges related to social, environmental, and economic sustainability, the authors explained. But impact investing is not competing with philanthropy for capital resources, they continued: rather, it is tapping into capital that is currently not engaged in social enterprise at all. Cathy Clark, who moderated the discussion, explained that Duke’s business school has recently launched CASE i3, the first global initiative on impact investing. The program aims to help the impact investment sphere move past its early “pioneer” stages by fostering skilled leadership within the movement.

Impact investment has come in recent years to be seen as an alternative to microfinance and philanthropy in developing countries. An article in BBC News at the end of last week focused on impact investing’s potential to help India’s poor. The article mentioned the efforts of Shiram Group, a company which provides financial services to India’s emerging consumer class. With capital from Leapfrog, a US-based impact investment fund, Shiram Group hopes to reach even more people and design new insurance products.

A study by the United Nations Development Programme (UNDP) in 2007 reported that up to ninety percent of the Indian population (950 million people) were excluded from the insurance market and represented a powerful ”missing market.” But, the article explains, the private sector is wary of the risk associated with insuring this population, due to their lack of financial literacy. Impact investment presents itself as a solution to this and similar kinds of situations.

Of course, in the relatively new field of impact investment, some questions remain, as one attendee to the SOCAP 11 conference noted last week on Social Earth.

People Just Won’t Stop Talking About Solyndra

The scandal surrounding a controversial federal loan to solar-power company Solyndra, which filed bankruptcy only two years after receiving the $535 million loan, resists fading into the backdrop. Instead it has become a proxy for broader partisan debates on environmental regulation and government’s role in capital investment.

On NPR’s All Things Considered this week, solar grantees defended the federal loan program that Solyndra benefited from, in light of news on Monday that some White House officials argued against President Obama’s May 2010 visit to Solyndra. The Energy Department has denied rushing the process of due diligence leading up to issuing the loan.

“Solyndra was just one of the clean energy projects and businesses that got loan guarantees from a Department of Energy program that ended Friday. In all, it financed 28 projects with $16 billion in loan guarantees. The Energy Department says the projects will create about 17,000 construction and permanent jobs,” said the article accompanying the radio show.

Rhone Resch, who heads the Solar Energy Industries Association, said in the radio show that the debate over what happened at Solyndra should not  inform the debate about clean energy investment overall. “It’s improper to view the entire industry through the lens of one failed company,” he said.

The New York Times’ Joe Nocera got to the heart of the debate, referring to an email from Larry Summers, Obama’s former economic advisor, which says that government is “a crappy” venture capitalist. But Nocera pointed out that the government was not, in this case, acting like a VC. Rather, he said that the government is “funding projects that have already attracted private capital,” meaning that the private sector is still determining who wins out.

“What the program is essentially doing is moving alternative energy innovations to full-scale development,” wrote Nocera. “Why is the government doing this? Because this is precisely where the private sector fails.”

Meanwhile, the private sector is, in fact, making advances in renewable energy expansion: Google announced last week that it is making its second investment in residential solar, with a $75 million investment to create an initial fund with Clean Power Finance that aims to help up to 3,000 homeowners go solar.

The debate over what happened with Solyndra is sure to go on because the larger question it alludes to is a highly politicized one: the role of government in pushing society toward sustainable forms of energy.

Worthwhile Weekend Reads

  • Mother Jones published a helpful roundup of news coverage on the ongoing Occupy Wall Street movement in New York City, just before Wednesday’s march brought some fifteen thousand protesters, including various labor unions, to the center of financial capitalism.
  • Republican and former US Representative from South Carolina Bob Inglis explains why conservatives should lend support to climate science that indicates global warming’s occurrence.
  • Patagonia’s buy-less campaign may lead to increased sales. The Harvard Business Review explains why.
  • Science reporter Benedict Carey wrote in the New York Times that compassion and empathy may be limited resources, and furthermore, relief work may be better performed when done in a state of moderate, not passionate, emotion.
  • The New York Times detailed Mashable’s rise from a low-key tech blog to a giant in the world of debates around social media.
  • And founder and former CEO of Apple Steve Jobs passed away of cancer on Wednesday.

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