Kyle Chayka’ in Pacific Standard Magazine:“… The San Francisco-based Neighborly launched in 2013 as a kind of community-based Kickstarter, helping users fund projects close to home. But the site recently pivoted toward presenting a better interface for municipal bonds, highlighting investment opportunities with a slick, Silicon Valley-style interface that makes supporting a local infrastructure project as cool as backing a new model of wrist-wearable computer. It’s bringing innovation to a dusty, though increasingly popular, sector. “You’d be shocked to find how much of the [municipal bonds] process is still being done by email and phone calls,” says Rodrigo Davies, Neighborly’s chief product officer. “This market is really not as modern as you would think.”….Neighborly enters into a gray space between crowdfunding and crowd-investing. The former is what we associate with Kickstarter and Indiegogo, which lump together many small donations into totals that can reach into the millions. In crowdfunding, donations are often made for no guaranteed return. Contrary to what it might suggest, Kickstarter isn’t selling any products; it’s just giving users the opportunity to freely give away money for a legally non-binding promise of a reward, often in the form of a theoretical product. …
Crowd-investing, in contrast, exchanges money for equity in a company, or in Neighborly’s case, a city. Shares of stock or debt purchased through crowd-investing ideally result in profit for the holder, though they can hold as much risk as any vaporware crowdfunding project. But crowd-investing remains largely illegal, despite President Obama’s passing of the JOBS Act in early 2012 that was supposed to clear its path to legitimacy.
The obstacle is that the government’s job is to mitigate the financial risks its citizens can take. That’s why Quire, a start-up that allows fans of popular tech businesses to invest in them themselves, is still only open to “accredited investors,” defined by the government as someone “with income exceeding $200,000 in each of the two most recent years” or who has an individual net worth of over $1 million. Legally, a large investment is categorized as too much risk for anyone under that threshold.
That’s exactly the demographic Neighborly is targeting for municipal bonds, which start in minimum denominations of $5,000. “Bond brokers wouldn’t even look at you unless you have $50-100,000 to invest,” Davies says. The new platform, however, doesn’t discriminate. “We’re looking at people who live in the cities where the projects are happening … in their mid-20s to early 40s, who have some money that they want to invest for the future,” he says. “They put it in a bank savings account or invest it in some funds that they don’t necessarily understand. They should be investing to earn better returns, but they’re not necessarily experienced with financial markets. Those people could benefit a ton from investing in their cities.”…(More)