Every Community Needs a Neighborhood Exchange

Three years ago, the Maryland Neighborhood Exchange was just a dream. We envisioned creating a website listing great local investment opportunities in Baltimore and mobilizing residents to invest in them.


Here’s what’s happened since: The Exchange has helped 44 Baltimore businesses successfully raise $3.3 million from nearly 6,000 investors. And these numbers will significantly grow in the years ahead. Thanks to the Exchange, the future of Baltimore’s economy lies not just with bankers, hedge fund operators, or VCs, but in the wisdom of its 600,000 residents.

The “we” has been a partnership of Neighborhood Associates Corporation, led by Dr. Bobby Austin, and Community Wealth Builders, led by Stephanie Geller. The partners also have included several dozen community leaders we tapped for advice—fund managers, foundation program officers, incubator coordinators, entrepreneurship specialists, and policymakers.



To understand the importance of the Exchange, it’s useful to go back to the origins of investment crowdfunding. During the 2008 financial crisis, I wrote an article for the Federal Reserve proposing a $100 exemption in securities law to jumpstart struggling small businesses. At a time of economic turmoil, I argued, every American should be able to invest as much as $100 in any local business with no legal paperwork whatsoever. Up until that point, a local business often had to spend $25,000 or more in legal disclosures before it could accept even a penny from grassroots investors. One attorney ran with the idea and submitted a proposed rule change allowing the $100 exemption to the Securities & Exchange Commission (SEC). A petition drive then delivered hundreds of letters to the SEC supporting the change.

The SEC duly ignored our advice, but all was not lost.


Congress picked up the ball and passed the JOBS Act in 2012, creating a framework for investment crowdfunding. Any business could raise up to $1 million, any grassroots investor could invest up to $2,200, but the transaction had to be done on a regulated federally licensed portal. (The SEC recently raised the offering ceiling to $5 million.) My concern then was that moving local investment relationships onto national electronic platforms would weaken the relationship between a small business and its investors. Why not just permit local fans to talk freely with their favorite businesses, face to face, and allow them to invest modestly as they wish without lawyers?