A key question in creating a capital community or any association is ‘how big’. This question must be answered in several ways: (1) what is the scope of the community, (2) how many members should be in the community (3) how large should be the activities or programs of the community.
This question is now being raised as work is underway to establish new capital communities on topics ranging from greenhouses to transportation.
Answering these questions is critical to the success of the community. Too large may make the community unfocused, lacking in member-to-member engagement and incurring costs in operations that push fees too high. Too small may not generate enough interest, result in cliques that inhibit new member participation and incurring costs in operations that push fees too high.
The scope of a capital community refers to which organizations can seek support in raising capital and those that cannot. In the very short time since forming the Space Capital Community (https://www.meetup.com/Space-Capital-Community/), questions have been asked, “Does this include drones, geospatial mapping, technologies that have both a space application and a terrestrial application, only private commercial flights or also government programs, etc.?” The short answer is: all of them.
This is the challenge. Bigger is not always better.
The ultimate goal of a capital community is to help selected organizations successfully raise capital. This goal is best achieved if each member of the community has a sense of camaraderie with most of the other members. This feeling of belonging will be diminished if there is not a high degree of commonality. As an example, investing in drones will not create the same feeling as investing in a Mars habitat. This is not an insurmountable barrier as is demonstrated by political parties with widely divergent views. However, there still must be a core principal, belief or cause that must be shared amongst the members.
Simply raising money is not enough. It is expected that commonality of members will be achieved when a particular organization (business, social enterprise, charity or community project) actually brings their product or service to market as a consequence of raising capital. Members will identify with the outcome, not the process. However, the process of working together is essential to achieve the outcome.
It may be assumed that the more members within the capital community, the more that it can accomplish. This assumption is only true if enough members work together to help an organization successfully complete their campaign. If too small a percentage of the members participate, the goal of the capital community will not be met.
As an activity or program, a capital community may want to establish an investment fund or a financing fund. It may be assumed that the more money in the fund, the more organizations that the capital community can be support. However, large funds typically make large single investments. Small investments become rare. An inability or failure to make small investments may defeat the purpose of the capital community. A capital community may create one or any number of different funds of different sizes to target and support organizations that fall within the scope of the capital community.
The larger the fund, the more that it may benefit from dedicated and professional managers. However, the use of professional management may cause members to feel out of touch in that they are not engaged. In addition, if all a capital community accomplishes is outsourcing of investment decisions, the members are not sharing their knowledge, contacts or other resources.
At this point, there is no right answer. We are in an era of experimentation. As an example, the Space Capital Community may find that the topic of ‘space’ is too large and that it may be necessary to split into two, five or dozens of other capital communities.
It is anticipated that a very large number of capital communities will be formed under hundreds of different topics. Collectively, these capital communities will create a new capital marketplace where local money can be better matched with local businesses. In effect, the capital industry is being decentralized with greater participation and control by average individuals.
The lessons learned from forming these capital communities will be shared at Comcap Colorado (http://www.comcap.us/colorado) to be held on February 1, 2017. Registration is now open for on-site participation and remote viewing.
Karl Dakin, President
Colorado Capital Community PBC