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98 Locavesting<br />
private electric company by creating the fi rst new public utility in<br />
Washington in 40 years.<br />
LION began humbly enough. When the local food co- op<br />
wanted to move to a bigger space in 2000, a number <strong>of</strong> residents and<br />
co- op members raised $490,000 in loans to fund the move. Then,<br />
another opportunity would arise, and another group would come<br />
together to raise funding and then disband. LION was created, as<br />
one investor explains it, “to bring together the individuals that kept<br />
bumping into each other trying to piece together these things in an<br />
informal way, and to streamline the connection between potential<br />
investors and lenders and opportunities.” For a couple <strong>of</strong> years, they<br />
discussed what structure the group should take and began drawing<br />
up agreements and other documents. By October 2008 they were<br />
nearly ready to launch, when the fi nancial crisis gave them a shot <strong>of</strong><br />
urgency. “We just said, we need to get going on this right now and<br />
step in as banks were pulling back,” recalls Frazier.<br />
No Defaults, but Plenty <strong>of</strong> Cheese<br />
The system is as simple and straightforward as you can get. Local<br />
companies can fi ll out an application on LION’s web site. Then<br />
they make a presentation in person to potential investors. LION<br />
members don’t make investment decisions as a group. Rather,<br />
investment opportunities are shared among the members, and<br />
individuals are free to make their own deals—although quite<br />
<strong>of</strong>ten several will invest together.<br />
LION has grown from 8 charter members to about 20 today,<br />
including retired techies, small business owners, and other pr<strong>of</strong>essionals.<br />
They are not poor, by any means, but neither are they necessarily<br />
in the rarifi ed realm <strong>of</strong> accredited investors. When LION<br />
was <strong>of</strong>fi cially established, members had already informally made<br />
well over a million dollars in local investments in about 15 companies.<br />
Since then, group members have made another 8 to 10<br />
investments totaling more than $500,000. While there are some<br />
equity investments, most deals have been in the form <strong>of</strong> loans,<br />
with interest rates averaging from about 5 percent to 7 percent.<br />
To date, there have been no defaults.