Over the next year Neighborly commits to expanding access to its Community Investment Marketplace so that anyone, anywhere, can directly invest as little as $100 into at least 10 civic and infrastructure projects, drawing from three focus areas: education, resilience, and technology.
Neighborly commits to building the technology required to enable such crowd-first civic financings. The marketplace will allow communities to do nearly turnkey, crowd-first civic finance, without the need for additional intermediaries or derivative products.
Beta launch the first generation of the Community Investment Marketplace to 6,000 registered beta users
Publicly announce platform in national media
Typical minimum investment size: $5,000
Limited Bay Area projects
First trial $500 denominated green bond
Release initial implementation of lower denominated product. Typical minimum investment: $500
Early trials for retail-optimized product
Refine retail-optimized product
Expand to three other major markets (TBD)
Full operation of retail-optimized Community Investment Marketplace.
Municipal bonds built the United States.
For more than two centuries, state and local governments have relied on municipal bonds as a low-cost source of capital to finance public assets. This municipal securities market, or Muniland, once optimized for individual investors and the communities theyre engaged in, has become complicated, opaque, and nearly inaccessible to most individuals. The current Muniland has been optimized around very large buyers in ways that prohibit community members from investing directly in the civic transformation they want, vote, and pay for. A bloated, cumbersome origination process filled with intermediaries, followed by an outmoded capital formation process, adds unnecessarily high fees and prohibits otherwise qualified issuers of municipal securities from accessing this vital market.
The result is a bias towards civic and infrastructure projects that tend to be larger in scale than they need to be, delivered months or years later than they could be, and reduced in value by middlemen fees.
Worse, the financing is extractive in nature: rather than interest accruing locally among local bond buyers, where it has a compounding, regenerative effect, interest is paid out to global banks and institutions, with little to no footprint in the community itself.
The so-called retail order period, if it exists, is designed so that individual orders come ahead of institutional orders. In practice, this period is frequently pro forma with the potential for abuse by professional traders in order to extract greater fees.
The usual minimum denomination of a municipal bond available to a retail investor is $5,000, but ordering a single bond in the current broker-driven system can be nearly impossible, preventing most people from accessing Muniland and investing directly in their community.
For example, in August 2014, the City of Denver issued $12 million worth of bonds in $500 increments for Colorado residents, which sold out before the end of their planned order period as residents were able to directly access investments benefiting their community.
Neighborly seeks partners with expertise and capacity in municipal securities policy to help open up a new era in civic innovation and to help address policy and market structure issues, as required. We seek media partners to help shine a light on communities that want to get back to local crowd-first financing for civic projects.
As a financial technology startup, Neighborly offers to provide technological and entrepreneurial perspective to initiatives that further the democratization of investing in material ways.