Colorado Politics

Colorado ‘grassroots capitalism’ a modern commonwealth? | HUDSON

Miller Hudson

Four American states were founded as commonwealths: Massachusetts, Pennsylvania, Virginia and Kentucky. As a practical matter, that choice makes little difference to their standing as equal participants in the American experiment. Most historians dismiss the designation as a mere adoption of then-contemporary English vocabulary. The British government would later denigrate the term during a century of colonial exploitation. The notion of a commonwealth, or the common good, implies a responsibility to share economic and social benefits on behalf of the governed. A faint, proto-socialist whiff permeates the concept. Yet even center-right think-tanks now talk up “common-good capitalism.” Surprisingly, the Colorado Legislature authorized a grassroots capitalism initiative in 2015 – more about that in a moment.

Over the past half-century, America’s economic life abandoned the implicit promise of an equitable distribution of earnings, substituting a funneling of profits to a tiny sliver residing atop our commercial marketplaces. The degree of tilt that distorts our economic system is so astonishing as to beggar belief. Earnings among the top 1% grew 385%. The next 24% of highest earners enjoyed 250% increases, while the remaining 75% of workers received just 18% during those 50 years – less than a half percent annually. Pointing out these discrepancies is frequently criticized on the right as promoting class envy, even class warfare. What should we make of a political economy where the wealth of just five individuals exceeds the holdings of the bottom half of American families? You don’t have to be a socialist to find this disturbing.

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Striking autoworkers are objecting to CEO salaries which exceed those of assembly-line workers by a factor of 362 – they seem to have a complaint worth considering. While line personnel accepted 30% pay cuts to help bail their bosses out of bankruptcy 10 years ago, those bosses recently distributed 40% pay raises in recognition of their record profits. None of this means the American Dream of getting rich has moved out of reach, however. Last week’s 11th annual rite of entrepreneurial elbow rubbing, Denver Startup Week, attracted thousands of would-be tycoons – on their way to launching business proposals, products and companies. This is a gathering of Colorado strivers and innovators who would prefer to support themselves than settle for a corporate paycheck.

That doesn’t change the fact that, like every business, they must seek financing, identify suppliers and recruit vendors – the nuts and bolts of moving from napkin drawing to business plan. Perhaps most interesting and surprising are the food and farm projects that see this event as a genuine opportunity for rural entrepreneurs. Our future isn’t all about hand-held screens and esoteric software. Even basement gamers must eat and there are Coloradans eagerly ready to enrich their dinner plates with organic options and other locavore delights.

As you might guess, venture capitalists rarely search for investment opportunities in the wheat fields of our high plains or the furrows of the San Luis Valley. They were hard to identify sniffing around Startup Week, though a few were there while maintaining low profiles. In one of those legislative victories that receives little notice, the legislature has created a framework for crowdfunding Colorado startups. This is itself an innovative financing solution which opens participation up to tens of thousands of small investors willing to place a bet on a product or business plan that makes sense to them, either because they’ve sampled the product or understand the value of a proposal based on their own consumer experience.

Think of the Colorado Crowd Funding Act as a step up from GoFundMe appeals. The latter are usually simple charity, while the structure of crowd funding requires a level of documented financial transparency and specific performance commitments provided in offering documents – returns will not appear immediately but are likely over time. Unfortunately, this unique financial mechanism has received little attention. Corporate concentration in the food processing industry has shuttered dozens of local processing facilities while reducing the options to competitively market farm crops and livestock. Reopening these closed facilities brings a payoff for everyone – both consumers and producers while providing much needed employment in rural communities. A farmer is currently milling gluten-free millet in northwest Colorado, which is far richer than competing, rice-based alternatives. He can’t keep up with demand relying on a manually operated grinder in his open barn.

CrowdSprout, itself a startup, has appeared to advance the “Crowd Funding Ball.” Focused for now on supporting Colorado’s local crops, wellness and cottage food specialties, together with family farmers they intend to assist clients with security registration and deal structure counseling services for micro-businesses. They also plan to convert current customers and retailers into small-time investors. It’s anyone’s guess whether this approach will succeed but Laura Harris, whose Greens Gone Wild is producing tasty, plant-based protein bars that sell well at farmer’s markets will soon be their test case. Investments of as little as a hundred dollars will be incentivized using discount coupons, early access to new products. As equity owners, her crowd funders will have a stake in spreading the word about Greens Gone Wild. Word-of-mouth endorsements were key to the commercial success of both Chobani yogurts and Larabars.

Kimberly and Nathan Mudd, who founded and operate the Arvada and Westminster farmers markets, are co-owners of CrowdSprout. They report, “We have nearly 50 small food vendors selling to thousands of consumers each week. Many of them are in need of investment capital. Why not raise it from their customers?” CrowdSprout’s motto is “Invest in what you believe In.” Recruiting Colorado’s granola-crunching, latte-sipping progressives as grassroots capitalists is a project well worth watching. Crowd-sourced businesses feel a lot closer to a commonwealth than billionaire oligarchs.

Miller Hudson is a public affairs consultant and a former Colorado legislator.

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