The following is a rough transcript which has not been revised by The Jim Rutt Show or by Mara Zepeda. Please check with us before using any quotations from this transcript. Thank you.
Jim: Today’s guest is Mara Zepeda. Mara is a Senior Consultant at Hearken and she’s Co-Founder and CEO or was of Switchboard, which provides training and technology to colleges, universities, and independent schools around the world.
Mara: Hello. Wonderful to be here, Jim. Thank you so much.
Jim: Hey, it’s great to have you here. As I was digging in doing my research, you have led a very interesting life with lots of things that will be, I think, very worthwhile to talk about. In addition to running a company, she also speaks, leads workshops on education, trust, social networks, and the future of business. She’s also Co-Founder of the Zebra Movement, a conference and community that aims to create a more ethical and inclusive startup culture. And this is, I don’t know if you still do this but I found during my research, that you do calligraphy for wedding invitations, place and escort cards, corporate identity and logos, tattoos, et cetera, at neithersnow.com. Is that still a live thing.
Mara: It was something that I will never be able to give up because I love doing it so much. Once a calligrapher, always a calligrapher.
Jim: Yeah, my daughter’s a calligrapher also. She did her own wedding invitations and she’s a professional graphic artist, but calligraphy is one of her great loves. She has, as I’m sure you do, this astounding collection of pen nibs and special inks and all that sort of stuff.
Mara: It’s a practice that can carry you a lifetime. It’s such simple materials and it provides so much nourishment. That’s great to hear.
Jim: Love it. Anyway, the main reason I reached out to you was I saw a discussion on Twitter about Switchboard, which is her company that provides tools for online communities, but as I dug deeper, I found that there’s quite a bit more story about Switchboard and how you decided to grow it and paste it and all that sort of stuff. But let’s start by having you tell us a little bit about what Switchboard does and who some of your customers are, et cetera.
Mara: Sure. Well, Switchboard is a platform and I guess it’s less of a platform and it’s more of a way of thinking that the world exists, so that’s always, every time you create a technology product, my parents are artists and the technology product is sort of… technology is the medium and then what you are communicating is really what the product is, to my mind. And so the medium in this case is technology and what we are communicating with Switchboard and what we deeply believe in is the notion of mutualistic reciprocal relationships within community.
Mara: And when you think about how that happens, what the verbs are, the engine that drives this human potential to give and receive, you can think of it in terms of asks and offers. So, our human nature is one in which at times we are vulnerable and we need to ask for help and we come to our community from a place of need, and there are times when we have resources that we can offer and so, we’re coming from a place of generosity of spirit. This ask-and-offer cycle is embodied quite deeply in communities of artists, and it’s a feast and famine mentality where you may go and not sell a piece for a month or two, and so you have to call on your community, you have to ask, and then you suddenly sell a few pieces, and now you’re flushed and so now you’re able to give.
Mara: There’s no keeping tabs. There’s not an accounting system for it. It’s embedded in our DNA as people and it’s what keeps society moving. It is the original social safety net. So, we took that premise of ask and offer and this engine of generosity and we created a technology platform for the community that has been most influential in my life, which is that of Reed College, which was where I went to college. I graduated in 2001, right out after that recession and the kernels for the idea of Switchboard were born in 2008, 2009, in that recession, and we started to see students that were graduating and had no net of love to catch them.
Mara: And a number of alumni friends and I, 20 of us got together, we approached the college and said, “How can we help you call us and ask us for money every year, but how can we provide the generosity of our networks, our connection?” And they didn’t have a method to do that. Career Services was one office, Alumni Affairs was another office, Student Affairs was another office, and never the twain shall meet, and then Higher Education that actually largely is still the paradigm. And so we helped them to solve this problem and they had said to us, “What are we going to do? Are we going to just stick your resumes on the bulletin board? Like, how are we going to create these connections?” And we incentivize them, we said, “Look, we really want to do this. We’ll give you $40 for every student that you connect us to.”
Mara: It was a $10,000 pledge to the college between all of us which at that time, it was extraordinary. It was the highest we would have ever given. Many of us were still paying off our student loans. They didn’t have a mechanism for making that connection, and so we introduce them to the internet, and my co-founder, Sean Lerner, who I happened to meet on Twitter, was generous enough to start to work on this platform of asks and offers. We were doing it informally through a number of bananas ways I won’t get into, but we saw this real need that students were asking for jobs, internships, mentorship, connection, advice, hospitality, and you had alumni willing to offer the same. It was a two-sided marketplace that didn’t have a connection point.
Mara: So, we launched it at Reed and then it just took off. There have been, I think, over 40,000 connections that have been made. That particular Switchboard has been going for almost eight years, and it’s just been extraordinary what has yielded through this network of generosity. So, through that experience, we saw, “Oh, we have a scalable platform and a scalable technology. And so, Switchboard the company was born and we were then able to partner with other colleges, universities. We also have startup communities, farmers, the Public Defender’s Office of Oregon, business associations, philanthropy. We’ve now gone into many more sectors to essentially provide this engine to connect to their community and grow in a sustainable way that’s really providing value to their members first.
Jim: Yeah, I love the idea. It’s elegant that you focused on something that’s essentially a transaction, but doesn’t have the baggage of a traditional, “I’ll bill you, blah, blah. I’ll ship you something transaction.” The ask and offer metaphor, very beautiful. Who came up with that?
Mara: Well, I think it’s the way that we have always been organized as people. I was profoundly influenced by the work of Lewis Hyde and his book called The Gift in which he talks about this notion of human altruism being like a gift that ripples through community, and what Lewis Hyde says is the gift must always move. So that concept, it just struck me. I couldn’t stop thinking about it. It was like an immutable truth, that if I were to say one thing that exists it’s when the gift is moving, we are all better people.
Mara: And whether that’s currency, what we’re looking at now with the massive economic injustice and the racial wealth gap, whether it’s resources, whether it’s access to health care, this notion of the unequal distribution of the gift and the gift kind of being this creative energy that keeps us all healthy and human, the way that he articulated it and Lewis Hyde was speaking about, I think it’s called the erotic. He uses this, this term, the erotic to describe the way that the gift exchange is essentially a current, coming from currency current. This current is what keeps us healthy, bonded and our communities sustainable and thriving. So, I think his work just had the most profound effect and then my lived experience of being a child of artists and seeing that play out again and again and again.
Jim: And yeah, I love it. It fits very much into the kinds of things myself and other folks in our Game B Community have been thinking about, which is our current world, Game A as we call it, is utterly dominated if you don’t watch yourself very carefully by the short-term money on money return loop, which I’m sure we’ll talk about later when we get to entrepreneurial finance, right? So many people are utterly dominated by, “Does this move make money for me in the short term?” Right? But that doesn’t have to be the only signal in a social system and the thing that just makes our current status quo so strange and so alienating, is there’s only this one signal that dominates all the others. And I’d suggest that this idea of a network of asks and offers, which are essentially gift economies, more or less, is a completely legitimate first class social signaling system. And to the degree we have more of that, it will tend to reduce the impact of the money-on-money return loop.
Mara: Yeah, I agree and I think I would even go so far as to say that actually money will be tied to this in the future. So I think, people like me and you and so many others that have come before us have been encouraging a Game B approach because we’re motivated from an ethical place. We know that it’s right, we know it’s needed, we know this is the more sincere, authentic place to operate from.
Mara: But in this moment, I would go out on a limb and say that community is absolutely tethered to capital that when you have a strong community, when you’ve invested in the success of your students, your alumni, your end-users, the public, whoever it is that you serve, when the time comes to approach them for a financial ask, so that you can continue to serve them, because they received value up front, the financial transaction won’t come to be felt as extractive because the value is quite clear. What they’re receiving and what they’re giving what you’re asking them for, it’s like, give first. It’s the principle of giving first.
Mara: If we design networks from a place of giving first and then the ask comes from a place of saying, “Hey, in order to continue to do this work, to level it up, to include more people, to broaden our reach, we are asking you to give.” People are now believers, and I think that that will extend to brands, to institutions. And it’s different, I want to be clear, I’m not talking about like the commodification of community, I’m talking about the community really being the foundational reason that you exist, and so the value is reflective of the value that they receive.
Jim: Interesting. A good vision inclusive. I would suggest, though, it’s at least worth considering, and again, from this theory of differentiated social signaling systems, that it might be right, but I could easily be wrong, to not commingle the money signal and the gift economy signal on the same platform. I might be wrong, but I just suspect that adding the money transaction into the gift economy, ask and offer platform will somehow compromise it and the two together can be used to build a larger ecosystem. So, it might be good to keep those piece parts separate.
Mara: Absolutely. Yeah. Well, I think I agree with the separation. I think we’re coming into a moment that we don’t quite know the answer to, which is how the commingling happens in ways and that requires having very honest conversations about a lot of our biases and trauma towards currency that have been used. Currency and capital has been used as a device of power mechanism. And I loved what Richard Bartlett had to say in his interview with you, talking about this notion of transvestment where there’s something powerful in taking the capital and not demonizing the capital itself, but saying, “What can we do that’s different with what is essentially this pot of energy.”
Mara: And that requires, I think, a big conversation for us as a culture to separate the biases and extraordinary feelings that we have towards money from how we grew up and what we see happening socially and who has it and who does it and who gets it and who doesn’t and who has access and who doesn’t. It’s used as a weapon right now. And so I think one of the responsibilities of Game B is to deweaponize, to demilitarize what is fundamentally energy.
Jim: I agree. In fact, one thing I would suggest for vocabulary, at least what I tried to do, is not just talk about capital and money but rather to expand the idea to resources. For instance, in some of the experimental work we’re doing planning the first Pro-Bs, which will be the first small scale Game B communities. We are thinking about having resources which are vested in the community irrespective of money, including housing, food and child care. They will just become part of the sub straight and no money changes hands, right? Obviously, money has to flow at a higher level to enable those things to happen, but we can decapitalize and demonetize significant part of the substrate necessary for life.
Jim: And I’m pretty sure that that will change a fair amount about how we think, you pointed out how we’re raised. People that are raised in that environment will have a different relationship to money. Money will be for the extra special things, not just a struggle to survive, which gives it that weird and dire edge sometimes.
Mara: Yeah, I couldn’t agree with you more. I mean, I think about this a lot. I think we’re living through so many moments in history at once, but for me, when I think about all the work that I’ve done with access to capital and really the way that Black Lives Matter has started to mobilize conversations around access to capital for black, brown and indigenous founders, I think concurrent to experiments like yours, that don’t use that resource because we have resources through time and talent. As an artist and as someone that has been profoundly impacted by small amounts of capital, I really want to see capital be put to different use as well.
Mara: And so, when I see founders of color, and entrepreneurs get that $20,000 seed check, when I see a first-time black fund manager raise $23 million as Brian Brackeen did today, I am ecstatic. It’s not because I’m rooting for the capitalist system in the status quo, it’s because it’s like a paintbrush and paint being put in the hands of a different artist. And I’m just so excited to see what those different resources or what those resources look, the same resources in different hands like what they create.
Mara: So, I’m coming from a cultural perspective of wanting to see the culture change that’s possible with the redistribution and deployment of those resources. I just think what’s culturally possible is quite astonishing when we use capital in that way as well. So, for me, it’s a both-end strategy of “How can we make it? How can we render it?” As your plan B describes of not that important, but also when we do use it, how can it just be used fundamentally in a more creative fashion?
Jim: And in fact, I would argue that if you do the first, make it less important for your mere existence, it actually makes it more interesting to do out there kinds of stuff, right? Because if you don’t have to worry about, “Oh, if I lose my little nest egg, I might starve,” right? So, “Well, I’ll do something wacky with my little nest egg and if I lose it, oh, well. My family doesn’t end up on the street.” And I think that will actually make for a more dynamic culture by a longshot to say the least.
Mara: And I just want to point out that I think is really interesting is there is something that capital does that I’ve been thinking about a lot and I would actually love to hear your experience if you’d be open to sharing, which is instills confidence. So, when I was 16 years old, I received a pretty transformational check of patronage from a woman I had never met for $1,400 dollars, so I could do an internship in Washington D.C. and it was like, it was life changing. Everything that my whole life can be traced to that moment, and it wasn’t the $1,600 dollars, it was like someone believed in me and there was a pretty blunt object symbol that could communicate that belief.
Mara: And that has happened in my life over and over again, raising my first investment for my company. I see it with my niece right now who just started a little… she has a lip gloss business, and when she closes a sale, it’s not the purely capitalistic transaction. I see her confidence, in that she’s able to level up into new skills. And so, the money is this energy that’s allowing you to level up because you feel as though you have the foundation under your feet.
Mara: So, I think similar to your point, if that thing is already taken care of it allows you to level up, but I think a lot about like, how is that thing already taken care of? Is it something that you have brought someone along on the vision for and that is like a foundational act of creation to verbalize a vision for the future and for another person with an open heart to hear it and believe in it so much that they can put that resource down that feels so out of grasp? So, anyway, I just love the nuance of the conversation that I’ve been thinking about that a lot actually, so I appreciate you bringing it up.
Mara: But you had that experience, it sounds like of growing up from in relatively modest means and then, exiting all of these companies. And so I’m just curious in your own entrepreneurial journey, when you got that first check or like that first capital, do you have memories of what that was like for you?
Jim: Oh, hell yes. Yeah, my father dropped out of high school after ninth grade, my mother left home when she was 14, so I grew up in working class, lower middle class. My dad was a big city cop, so I wouldn’t say we ever missed a meal, but we were not a fluent either. It was some ways the perfect way to grow up. And frankly, I took advantage of that in my career, which it was, again, sort of the accidents of our trajectories we can extract lessons from and one of the things that helped me tremendously in fact, I put this in my advice to a lot of young people is always live below your means, period. Right? And even when you’re making minimum wage, you can still save 10%. Imagine somebody chopping jute in Bangladesh, right? They’re a shitload worse off than you are.
Jim: And so always, always, always save. Never go into debt unless you absolutely have to, except for an education. I’m not sure I’d even do a high fancy education anymore at the current prices. It was pretty tolerable deal. My total cost for MIT for four years was $16,000, if you can believe that. Holy shit, right? Even after inflation, it was only $64,000 and then of course, I got about half of that paid with scholarships and low interest rent loans and stuff. But anyway, live cheap, save money, so you could generate your own small amounts of working capital, to start being able to experiment with your ideas.
Jim: But you’re right. That first, I still laugh about it. My very first startup, I was not the founding founder. There was a much older guy who had had a track record as an entrepreneur and he and I connected somehow and he talked me into considering being part of his venture and we worked on the business plan nights and weekends. I went up there on my vacation. I was living in Virginia, he lived in Boston and we finished the business plan. He then circulated it to some folks and based on the fact that five people came up with $25,000, $25,000, my wife and I quit our fairly decent jobs in Virginia and moved to Massachusetts. And that was utterly transformational in my life.
Jim: But it goes back to the other one, we had always lived cheap and saved money, owed money to nobody, paid off our student loans, had a couple of cheap cars, and so hence, we could quit good jobs, take a pay cut and move to Boston because we raised a fairly modest sum of $25,000. And off we went to the races and the company was successful, and it spawned another company that was successful. And yeah, I still remember the excitement that somebody else believed in us enough to write a $5,000 check, five people.
Mara: Amazing, right? It’s like money is like a character in us in the story and I always love hearing stories like yours, where we’re more transparent about the role that that character played. And I think it’s a place of privilege to move into conceptions of the economy that are post currency. And I know the both of us know what that, we can imagine a world and I think we’re both gunning for that world. But I do think that in the interim, that character needs to play a bigger part in more people’s stories. And as we’re moving towards Game B, we can be working towards that character, just playing a different and new role as well.
Mara: So it’s something to have a conversation where two people have been privileged enough to receive the wisdom, however it comes of being able to save and who’ve also received that catalytic check of $25,000 that sets in motion an entire hero’s journey series of events. And when you look at what’s going on now socially, I think that the more creative distribution of that catalytic small capital is going to be such a joy to witness, so I’m here for that story as well.
Jim: Yeah. Absolutely. If you follow the trajectory of that $25,000 funding, the number of people that are currently working in the companies that flowed down from that, it’s thousands of people, right? And it’s amazing. And in fact, to your point, this amazing, nonlinearity, asymmetric return, in this case social return from the small amounts of capital is something both my wife and I believe in. In fact, she is a founding member of something called Virginia Foodshed Capital, and what they do is collect money, we put in a fair amount, and they lend it out to sustainable permaculture oriented farmers in Central Virginia at zero interest.
Mara: Oh, that’s great.
Jim: Yeah. And for catalytic projects that will allow a farmer to level up. So for instance, one person had a very good business doing greens and vegetables and stuff at three or four farmers markets, but because they didn’t have storage, they really couldn’t play in the wholesale marketplace. And so they put in a grant for, I think it was, like $7,500 for a cold box, right? And that $7,500 completely changed how they could do business. They could couple to the larger marketplaces over in the Big Valley across the mountain from us, and could substantially lever their business up and it’s just changed their life, $7,500.
Jim: And the sweet spot for Virginia Foodshed Capital is between $5,000 and $50,000. And on the scale of venture capital, that’s less than the lawyer bill typically to get the deal done and these investments, they made a number of them now have transformed this local permaculture food economy that we care so much about. So, there’s an example of being able to use capital in a nontraditional way. It’s not being given away, it’s being loaned, but it’s being loaned at zero interest, so that it is not burdensome compounding interest for people.
Mara: Oh, I love it. Yeah, I just encourage everyone who’s listening to find something like that. My colleague, Astrid Scholz and I with the Zebras Unite are working on a project called the Inclusive Capital Collective, which is essentially a group of I think it’s now 60 or 70 place-based regional loan funds that have done just what you’re describing. They’ve realized that lack of access to capital is a huge problem and it’s a long story as to why, but essentially, traditional banks and credit unions are no longer providing our local communities with the capital that they need on the terms that work for them and they aren’t frankly, understanding their businesses. And so, you have a massive misalignment between what capital is out there and then what you’re describing, which is these gaps of $5,000 to $50,000 at zero interest that will have profound impacts on local food systems.
Mara: And so we are starting to see the rise in the wake of the gutting of community lenders after the 2008, 2009 financial crisis, there was a consolidation of these banks and credit unions, and it’s not in the financial interest of big banks to be lending loans under a million dollars and it’s just pure business. If you’re able to underwrite $1 million loan, it doesn’t make sense to do 20 at $50,000. It’s taking 20 times more time for your staff and for your back office operations. And so these big lenders and you see this now playing out with PPP loan, this is what it looks like at scale, to shove $500 billion through the system and see who benefits.
Mara: But so, there’s this huge opportunity for new types of capital systems like the one that you’re describing and it’s being spearheaded by people, I wouldn’t be surprised, I’d be curious to know if there were farmers that were involved in the creation of this because their lived problem showed them that there needed to be a solution. So, that’s what we’re seeing when it comes to the inclusive capital collective, these funds that are distributed all across the country. It’s the same thing from New Mexico to Kentucky to rural places, to Detroit. These place-based loan funds are our entrepreneurs and founders and the community itself that are designing their own solutions.
Jim: Yep, absolutely. I have to look at that. Inclusive Capital Collective, is that what it’s called?
Mara: Yep, it’s ICC. It hasn’t come out formally as anything. We’re sort of behind the scenes constellating this group. The ironic challenge to access to capital is that there’s a lot of primary capital out there, but the checks are so big. So take, for example, Oregon’s Public Pension Fund. These are public employees paying into pension system, that pension fund is $100 billion, if you can believe it. It’s one of the largest pension funds in the country. Well, when that pension fund wants to invest, the minimum check size they write is maybe $50 million. It’s $50 to $200 million. Well, I’m sure that the funds that you’re invested in, I can’t imagine, is it more than $2 to $5 million?
Jim: Ouch. At this point, it’s a lot less than that. I don’t know. I had to ask my wife, but I’d be surprised if it’s more than a million dollars and it’s been in operation. If the total loan is outstanding or even a million dollars yet, and truthfully, the funding is kind of rattle the tin cup, get some money, make some more loans, right? So, yeah, certainly not $50 million. It’s funny, you mentioned that.
Mara: But it’s transformational.
Jim: It is and as you point out. The current institutional structures, because as you point out, if you are obeying the signal of short-term money on money return, it is difficult for a bank to do a $10,000 loan because it cost them almost as much as to do a million-dollar loan. And it’s also funny you mentioned about the impact capital. I sat on an investment board for the State of New Mexico State Endowment, which we had $17 billion under management, and we had to approve all the major allocations of capital. And you’re exactly right, we did all kinds of interesting alternative investments, but our minimum was $50 million, right? Most of these interesting niches are not ready to accept 50 million. Maybe they will be someday, but there has to be other sources of capital that can get there.
Jim: If you’d like I’d be happy to chat with you or maybe connect my wife, too and you guys talking about this Inclusive Capital Collective, because I have a whole lot of ideas about how to do interesting forms of finance and capital that don’t fit in any of the usual buckets.
Jim: One of the things I learned was that one of the beauties of the English common law system, which we live in here in the United States, is that you can do almost anything you can imagine in forms of structure and capital. You just have to imagine it, then you write it up, and don’t force yourself to be constrained by, “Okay, we only have preferred As or C corpse, or…” Truth of the matter is if you can state it to me in language that parses, I can probably tell somebody how to create a legal entity to do that and a capital structure that at least in theory, could achieve that. The world is much more plastic than we tend to think about it as, because we look at “role models” and they did it this way. Well, that’s not the only way to do it.
Mara: Totally. And I love that you have that experience in New Mexico and I kind of, I call it it’s too big to work. You wouldn’t have the mechanism for deploying that capital into the local community, and so as a result, if you’re trying to park $50 million, you have to go out of State, often out of country, often into private equity that directly undercuts the community’s needs. And so my colleague, Astrid Scholz describes it as getting the capital into the capillaries, right? If it has to pass through this big thing in order to reach the small thing.
Mara: So the experiment that we’re working on with the ICC is, well, if you have 70 loan funds that are each doing a million dollars, suddenly that’s a $70 million fund. So how do you create this collective? And so you come out looking bigger than you are and now you are a big enough size such that you can start to get institutional capital, and then instead of that going into bigger places, out of State, out of country, you’ve created the container, so it can be distributed to the local capillaries.
Mara: So I am such a fan of people like you that are curious to think about these creative structures. And I think, for those of you out there, I know, Jim and I are now walking out on access to capital. It’s so fascinating. I just can’t emphasize it enough, but to bring it down to something that will be relatable to everyone that’s listening just with your commercial lender or with your personal lender with your personal bank, if you are banking at a big bank, you can walk in and ask them about their investment portfolio and see what they say. How much is reinvested into the community? What is their average size commercial loans? Who are those going to? What is their policy on diversity?
Mara: I think all of us can start by asking more questions of our personal banks and our personal investments to really, I used to be an economic reporter and the first rule of economic reporting is follow the money. So right now, in this moment of extraordinary social injustice, all of us are complicit and participants in extraordinarily unjust systems that are unfolding at the level of the capital markets. So, becoming extremely curious about where that current of yours is sitting and what It is doing when it’s sitting there.
Jim: Damn good point. And you’re right, they have to give you that information if you ask for it, at least state chartered banks for sure. That’s very, very good point. Let’s switch back now talk about Switchboard a little bit more, then we’ll go on to some other things. I actually joined one of your Switchboard communities as part of my research. The Meat Collective, right?
Mara: Oh, that’s one of my favorites.
Jim: Yeah, yeah. People who listen to the show know that I am a farmer, and though the best kind of gentleman farmer. I supervise other people doing the work and don’t have to get out there and do it myself too often anymore, but yeah, it was very interesting. And I wouldn’t call it a big community, but it seemed relatively vibrant.
Mara: It is, yeah. And so this is a backstory. Camas Davis who started a nonprofit called The Good Meat Project, to really preserve small and local family farms and ranches and meat production, started the Meat Collective Switchboard. She wrote an incredible blog called Killing It, about her journey to learning the art of butchery in France and working as a woman in that industry. And so, with the local food systems now, it’s so important, she created the Switchboard that allows local meat producers to offer their meat and for people who value buying local meat to buy it directly through these purveyors.
Mara: So there was one, I think, I don’t know if you saw this post from Alex Machado who is a first generation Latina shepherd, and has been raising Navajo-Churro sheep. So, Alex is able to go on Switchboard, post an offer and then people are able to buy those heritage sheep and in the process, you’re strengthening the local economy, you’re supporting an underrepresented entrepreneur, and we hear time and again these small family ranchers that wouldn’t be able to scale otherwise are selling out of their shares, so it’s one of my favorite Switchboards. And so, I’m curious, what was your experience?
Jim: Truthfully, I didn’t post either an offer or an ask, but I just wanted to get a sense of it. What I loved about it was the earnestness and the seriousness of the people. They were very detailed and knowing a fair amount about this industry, one of the things we did do in our local communities, we help fund a startup slaughterhouse. Humane Slaughter, designed by Temple Grandin’s people, and we were great believers in being able to cut out all the middlemen and move people from commodity production to specialty production. So, I was able to read the asks and offers and realized that these are serious people who know what they’re talking about in the main. Just like in any online community, there’s a few flakes, but I would say 90% of it was very solid stuff. That was my take.
Mara: Oh, I’m so glad you joined.
Jim: Yep. And I’m going to think about, is there an opportunity for our local producers to either get involved or for us to build a clone of that for our local region.
Mara: Yeah, we’d love that. Camas is a very special person. The charisma that it takes to launch communities. I was listening to your interview with Howard Rheingold, who’s one of my heroes and mentors and someone I look up to so much. He has written about this so extensively. The really serious care and feeding that community takes and Camas is one of those incredible stewards and Switchboard operators that is meeting her community’s needs.
Jim: You’re absolutely right. It’s indispensable. I’ve been working on building online community tools and platforms since 1981, long before the internet and you are completely right. If you just build it, they will not come, right? You have to have a social entrepreneur who is the community, you don’t want them to call them the leader, I call them something like the catalyst that make it happen. Without that person, it isn’t going to happen, which brings me perfect transition to my next question.
Jim: There was an article about Switchboard in Wired a little while back and in that you said that you guys were not growing for growth’s sake, and here’s a quote, I think from you, “We value the quality of the communities, not the quantity of communities.” And again, the to the point that if you just build them, they will not come. Maybe you get paid for a while, but you’re not building a sustainable cycle of value add. Maybe you could talk a little bit about how you came to realize that it was quality, not quantity that you wanted to proceed to build and what implications that had for the company.
Mara: Thank you. That’s a great question. Well, so Switchboard went into a very unusual incubator called Portland Incubator Experiment or PIE, which at that time was part of Wieden+Kennedy in Portland, which is a legendary advertising firm that coined Nike’s “Just do it.” And so we were lucky because we weren’t put into the traditional start-up meat grinder of growth hacking your way to your series A, and yet we still talk to a lot of investors and they looked at Switchboard and they said, “Okay, well the only way to grow this is to take out Facebook ads and you need to growth hack it and you need to create automated seeded posts.”
Mara: And they were looking at it thinking like how do we growth hack our way to this and everyone saw the promise and potential of the platform, but the only way they could imagine success was by this hockey stick of inauthentic activity. And for people that are community organizers at their core that’s just anathema. So, Switchboard is called Switchboard because you need human operators. And Howard said in your interview that the early imaginings of the internet were to be an augment, to really augment human intelligence and so that means that you’re in relationship, a human is in relationship with technology and that quality of relationship is key.
Mara: Switchboard operators, those people that come in and that steward and shepherd and catalyze, and it’s such an overlooked art. So interestingly, as we started to grow Switchboard down a sustainable path, we would only partner with institutions that were ready for that and it was a big mindset shift to move from an extractive relational model to one of service and care and connection, and we ended up building a services arm on top of our company. So, services, obviously, it’s human-to-human, whether that’s training, coaching, workshops, but what we found was that this quality of catalyzing community, stewarding, shepherding, tending, watering, feeding, growing, nurturing, that is a whole field unto itself. It’s a skill set. It requires tremendous emotional intelligence. The people that have it, frankly, are often overlooked members. It’s the lowest paid Job and any food chain, because it’s so taken for granted.
Mara: And then what we saw as we started to work with more institutions was that this core competency didn’t even exist in the institution. It had become so calcified and so used to extractive ways of operating, that if you came in to an Alumni Affairs or Career Services office and said, “We’re flipping the playbook here.” So, instead of extracting dollars, you’re giving of yourself and of time, you’re stewarding these earnest and vulnerable posts towards success within your community. We would be met with blank stares, because that wasn’t a competency within their organization.
Mara: So, Chelsea Haring, who was then our Chief Operating Officer, had the brilliant genius idea to layer services on top of technology, so when people came to us and said, “Well, we built it, but no one came.” We wouldn’t just shrug our shoulders, we would have a whole services arm of strategists and helpers out there ready to have them conceptualize what that community looked like. So, in becoming a tech-enabled consultancy or a company that offered both tech and training, that is like kryptonite to investors, because the first thing they’ll say to you is like, “Well, that doesn’t scale. Humans don’t scale.” VCs are trying to get to the quickest buck, the fastest, most automated chat bot way that they can without humans. The more humans, the worse of a proposition it is.
Mara: So for us to come and say, to your question, how did it impact the business, it was an extraordinary leap of faith to say we can’t compromise on this and so that meant not being able to pursue the venture capital path and really searching for these unicorns of investors that could see what the power was when you brought this earnest and authentic community stewardship with a tool like Switchboard.
Jim: Very interesting. As I mentioned, I’ve been fooling with online communities since the beginning and finding those community managers, the right personality is not easy, right? Because it’s you can’t be a big ego person, that doesn’t work, right? On the other hand, you have to be relatively forceful that sometimes you got to make tough decisions, but you also have to be open and nurturing. It’s a very hard thing to find good people to do that. What was your criteria for the community? I don’t know, what role of community steward? What role, what name did you call it and what were you looking for in people who were good at that?
Mara: Yeah. Well, we call them stewards or operators. The archetype that you’re talking about, yeah, I hope you do a whole show just on that. Well, so what’s powerful, Switchboard just this week merged with a company called Hearken and hearken means to listen. And Hearken had been proving out the same theory of change as Switchboard, but in journalism and newsrooms, and so the CEO Jennifer Brandel and I have been kind of sisters along this startup journey. And Jen felt the same way about media as I did in Higher Ed, which was, the equation is all wrong. The audience, your public should be driving coverage, so you need to create a container where they can ask questions of reporters. And then the newsroom’s reorientation becomes serving the knowledge and information needs of the audience, not making assumptions and responding to press releases about what you think they need to know.
Mara: And Jen has been a huge inspiration in my life, so both of us are trained as reporters. We think a lot about listening and I think about it especially from a place of being very curious about ministry traditions, about the way that it unfolds in call and response in traditions of black churches, about the way that silence and meditation and listening is important in monastic communities, the way that the Quakers use it in their meeting house format. It all comes down to listening, it comes down to creating a container of safety and where people can be vulnerable, which is you do this with your podcast, Jim, and so, you are an exemplar of this.
Mara: So from there, it’s “Can this person create a safe container? Are they able to pick up on the emotional resonance and vibration of the word?” And so many of us have found that musicians are extraordinarily gifted. At this tonal, it’s like a primitive tonal ability to listen for emotion. And then from there, we started to see that reporters and journalists actually had a tremendous capability for this, which is why the Switchboard-Hearken merge makes so much sense and why we have so many former reporters on our team. Journalists went into the business, many of them to be of service, to provide information, to strengthen communities, to listen deeply. They operate from a place of deep curiosity, the best ones operate from a place of empathy and justice.
Mara: And so if you were to ask me, I think social workers also come from this place and so the criteria is about that sort of selfless egoless service where the human is becoming the container and the container itself is allowing for bigger work to unfold inside of that container. But the criteria is, exactly to your point, there’s not like a job description or a resume and so, we are constantly on the search for these types of people.
Mara: So, if you’re listening we are generally, there’s always some open role, so please go to wearehearken.com, but we are always interested in connecting with those people and we find that journalism, social service, front-facing hospitality work, especially, we have extraordinary number of parents on our team because raising children requires that skill as well, so we don’t see that as a liability. It’s a core part of the way that we serve our partners, and communities of faith ministry. So it’s all of these spaces that are being constantly devalued and we just see it as being the highest value work.
Jim: Very well said. I think you have the best perception I’ve yet heard about this role. And we both know having watched people try to do it, it’s really hard, right? This is not an easy thing for people to get good at and I think you’ve identified some of the sources for the kinds of people who have at least the capability of getting good at it. Is there anything you guys do in terms of, do you have a training method or a methodology that you have your people use that helps them become better at it more quickly rather than the old trial and error approach?
Mara: Yeah. Well, the new CEO of Hearken is named Chelsea Haring, so the woman, an incredible leader who created our services arm that has now stepped into the role of CEO which Jen and I could not be more thrilled about and she does have a framework. She just published a piece this week about it. It’s called the Care Engagement Response Framework. And so it’s first, coming from a place of connection, how do you expose your underbelly, right? How do you create an invitation for that container to begin with?
Mara: The second is amplification, so once that has been established, you want to be the other person’s evangelist as much as possible, so whether that’s attending something they’ve invited you to or cross posting something on social media, you want them to understand that what you’ve just contained is worthy of being shared, because so much of our human desire is to be heard. So, we can be the Shepherd, have that experience for them.
Mara: Then comes recognition. So, how do you express gratitude? How do you celebrate, provide shout outs, share success stories? Which is again this behavioral reaffirmation that that vulnerability is now safe, that there’s success along the path, and then empathy, so acknowledgement and understanding of that lived experience.
Mara: And this framework was kind of built off of a lot of the research that we’ve done around the Hero’s Journey in all of Joseph Campbell’s work of thinking of each ask is essentially like the hero sets out with uncertainty, right? They encounter their helpers. Very often they encounter blockers that will block their success and then the way that they move through this place of success is to be able to come back and share it back with their community. So, this is sort of Chelsea’s genius adaptation of this four-part process of the narrative arc of going from that place of vulnerability to safety to security to being helped to then being empowered enough to come back to the community to drive that resource forward and model it.
Mara: So, we do a ton of training, but to your point in terms of it being a hard job, I think it starts with all of us in childhood, and we’ll sometimes have trainings where some of the opening questions that we ask are like, “How old were you when you were first heard? When you felt that someone was really listening to you? And who was that person?” And it’s heartbreaking to hear people say I was 18, I was 19, I was in my 20s. I had the extraordinary good fortune of feeling like what I had to say mattered when I was a toddler. I remember adults taking me seriously and the deep attention that they gave my words.
Mara: So, I think the job of it to your point it is coming from a lot of trauma that we have about not being heard. And I think the second trauma that so many of us encounter is being told that moment that all of us have had in school or on the playground where you asked a question, and you were told that it was a stupid question. And the similar heartbreak of once you’re told that it’s not safe to be curious, it cuts that experience off for you as a person, potentially for the rest of your life. It’s so heartbreaking.
Mara: And so, in some of the workshops that we do that that allow for more vulnerability, my interest is in always getting down to those root experiences of being heard, being vulnerable, and being curious, and whether that was allowed for in your life because the degree to which you’re able to steward other communities is only reflective of your own lived experience of being treated that way yourself.
Jim: Wow, that’s eloquent. Make sure you email me a link to that work.
Mara: I will.
Jim: And we’ll put it on the episode page as we always do. All the things we talk about here will be on the episode page. You don’t have to take too careful of notes It will be there for you to go to. That sounds like, again about the deepest dive into this space that I’ve heard, and it’s interesting you talk about, not really focused on that much. I was lucky, too, in that both of my parents, I don’t know why. I mean, they were relatively simple, though my mother is extremely smart, they weren’t highly educated, but they somehow knew that the right thing to do was to take your kids seriously from the very beginning, right? They never told me don’t ask that question or shut up or time to go to bed, whatever.
Jim: They both took us kids seriously, from as early as I can remember, which is back to three or four or something like that and they told us stuff, which is amazing, like the household budget and how it worked. And, “Okay, we still have loans on the Deep Freeze, which means we can’t buy a dishwasher until that’s paid off.” I was probably seven or eight that we’d have these kinds of discussions. So, they treated us in a serious and mature fashion from an early age and really hadn’t focused on that before that that might be unusual, but I guess it is.
Mara: Yeah, I would encourage you to ask people. It’s always a really illuminating question, if they would think that they were taken seriously as a child. That’s a great question. I’ve been thinking a lot about politics lately. Like, what are the political parties that we need in the future or do we even need parties? But obviously, what we have now is not serving anyone. And I think if I were to run on a platform or design one, it would actually be exactly as you described it, which is a policy platform of taking children seriously because it takes the future seriously. It’s a way of having like “progressive future thinking policy” by centering it on the lived experience of the literal future, which is children.
Mara: And so, I was listening to Whitney Houston’s I believe the children are a future, and I’ve been going quite deep into monasticism and church fathers, Desert Fathers, I kind of read in strange places sometimes. But this notion of being a child of God and this posture of being childlike and if you live in the world from a place of vulnerability like that, what that demands from the society that you live in is a complete reorientation towards taking that seriously and receiving it in a totally different way than what our systems are designed for.
Jim: Ah, I love it. And I got an addition to your platform for you for your consideration. This is one I’ve toyed with for years, which is that your vote is weighted by your actuarial life expectancy.
Mara: Oh, nice. Love it.
Jim: So, us old boomers, our votes are decaying away at this point, which is as it should be truthfully, right? And even more to the point every parent is the proxy for their children’s vote. So if you have four kids, the two parents and the four kids have six votes. And those are six heavy votes, because they’re all young. Right? So they may be equal to 50 votes from some old fart like me.
Mara: I love that.
Jim: Yeah. Add that to your program. I mean, I’ll be your behind-the-scenes advisor when you run for president.
Mara: Oh, let’s totally do it. Yeah, the fact that you have a quantitative mathematical model for how you would weigh that is great. That’s terrific. I would love to work with you on that. If anyone else is interested, yeah, please reach out.
Jim: Yeah, just think how that would change the world, right? If the weights of the children were actually stronger than the weights of the adults…
Mara: Completely.
Jim: … on how our assets are allocated from the public sphere, it would be great.
Mara: Right? Yeah, I can’t say enough about this imagination experiment I’ve been doing because obviously, it goes without saying the education policy, what would be our environmental policy would have to account for that. I mean, this is certainly not new, of course, indigenous populations and communities have designed this seventh generation of thinking that is where this came from. And so I’m certainly not, they’re not claiming that this is a new idea at all. But I’m trying to think of a way in which it could become an easy cultural standard that’s comprehensible. So yeah, we should keep on talking about it.
Jim: Yeah, yeah, let’s do it.
Mara: Yep.
Jim: I love it. I love it. Very congruent. Very congruent. Let’s switch back from the very interesting esoteric and out there on the edge, how to completely reform democracy to something more prosaic but it’s got to be very important in your life right now, which is this Hearken-Switchboard merger. As I mentioned, pre-show I had created my notes for the show a couple weeks ago. And as I always do this morning, I checked to see if there was anything new or I usually start with people’s tweets, streams, et cetera. And they go, “Holy moly. They announced a merge couple of days ago.” Talk a little bit about how your company, you said it was difficult to get traditional VC, how did you get funded and kind of the road to this next step? And what does that mean for you and the company going forward?
Mara: Yeah, well, we could not be more thrilled and this is such a special experience to be speaking with you during this momentous week. We announced the merger yesterday. Hearken and Switchboard, as I mentioned earlier, these sister companies that were applying the same theory of change of a combination of technology and training, software and services into these spaces that were core to civil society, that are core to civil society, journalism, media, higher education. We now work with philanthropy, the criminal justice system, food production. We’re industry agnostic, so capital markets, so it doesn’t really matter, the same theory of change holds up.
Mara: And Jen Brandel is the Co-Founder and CEO of Hearken, or was, she just stepped down for Chelsea. But what Jen had to say in the merger announcement, which I just love. She says, “Of all the lessons these experiences have yielded, the key one is this, the way to build energy and the power to affect change is not by asking people who already have power to share it, or give it up, but to find colleagues, customers, investors and other leaders who are interested in similar problems and are open to collaboration in order to generate new power.” So that is, I think the core that ties together these companies is it’s an act of creation for all of these institutions to generate new power and to distribute it to more indifferent people.
Mara: So, what that means kind of practically for me is the company is now integrated, and we’ve been co-delivering services for about the last nine months. The team is growing, we’re hiring. And I’ve moved into a senior consultant role. I’m really interested in this deep listening and so, that’s what I want to continue to do in this one-on-one way. It’s like picking up on sound waves and the listening that I do informs what I believe I can contribute to creating and it’s just a really intimate experience. And I’ll also be on the board.
Mara: And then Jen and I, we built this Zebras Unite Movement, which we know that we haven’t chatted about yet, but that’s taken off. We now have over 6,000 members, 45 chapters on six continents, and so we wanted to continue to devote time to building that. It was just incorporated as a cooperative of this is a founder-driven, founder-led movement to create a more ethical inclusive startup culture. And one of the best ways of doing that is to interrogate our existent forms of capital access, governance, and ownership. So that movement has been growing leaps and bounds and Jen and I will now have more time to devote to that as well.
Jim: That’s so exciting. I still remember when I sold our first two companies as a group, then was able to go out and do other things in life. And sounds like you guys have wisely realized that the two founders did not need to stay running the ship and it was time for fresh blood to take it to the next level, which means that you can go on and do other things. And for about the third time here in this podcast, I love this that you’ve anticipated me perfectly.
Jim: The next topic on my list is indeed Zebras Unite, which people can find at zebrasunite.com. From the website, it says Zebras Unite is a community of entrepreneurs, investors and allies dedicated to building companies that balance both profit and purpose. Zebras Unite calls for a more ethical inclusive movement to counter-existing startup and venture capital. We believe creating an alternative to the status quo is a moral imperative. Get involved and join the movement.
Jim: So yeah, so tell us a little bit about Zebras United where it came from. If you can the symbology of the zebra, which I think It was kind of cool. I read about it in your website and let’s jump into it for the rest of the show, about 20 more minutes.
Mara: Sure, yeah. Well, so as you heard, and so, the great question you asked about the sacrifices that we had to make at Switchboard, it meant that we had to get off of the venture capital on ramp of startups. And there’s not a lot of capital available for companies like ours, that lack collateral, that are in technology that are founded by women. Women receive 3% of venture capital and so you have to get very creative with financing. And Jen Brandel and I, we reconnected at a conference in 2017 and it was like a conference for social impact investors and we went there ostensibly thinking what we’re doing is so core to social impact, certainly we can find the right investors.
Mara: And we couldn’t and we started to interrogate the actual language and vernacular of startups, and we recognized that, embedded in the vernacular of startups and entrepreneurship at that time was a very strong point of view. And the way that we cheekily described this in the post that we wrote called Sex and Startups was startups, like the male anatomy are designed for liquidity events, which got a lot of attention.
Jim: I like that. That’s good. I’m going to steal that. I’ll give appropriate credit, of course.
Mara: So from there, it went to seed capital, they were looking for hockey stick funding that was up into the right. Even words like acquisition had this definition of like power and submission, and the whole language was saturated in quantity over quality. And so that my manifesto in Sex and Startups was attempting to advocate for a more yin-yang balanced value system of startups and we call them mundane companies, so what does it look like to be investing as well in companies that are serving real problems of this world. Your farmer investment enterprise that you’re a part of being a perfect example of a Zebra company and it’s essentially a zebra companies, the zebra enterprise that’s trying to figure out a different way.
Mara: So, we heard from thousands of people to that piece. The response was utterly overwhelming and we spent the next year listening to founders and investors and others socializing these ideas. And the zebras fix what unicorns break manifesto was published the following year with our co-founders Aniyia Williams and Astrid Scholz. And it argued that there had to be another way. Silicon Valley was advocating, is advocating for growth at all costs competition, win-win, winner takes all, the investors are the ones to benefit. And we saw that it could be cooperative and mutualistic that instead of spoils, you could have shared prosperity, that the benefit could come back to local community rather than being concentrated in the hands of investors.
Mara: And again, put that out, heard from thousands of people. A group of zebras is called a dazzle, which is very fun. And so in 2017, we held Dazzle Con, which brought together these like-minded founders and investors. And so since then, we’ve been working on the organizational structure, which to your point about being creative around organizational structure, this has been one of the biggest learnings, how to create a non-extractive and reciprocal relationship with all of the things that we were doing.
Mara: We’ve done a ton of work with Nathan Schneider and others around exiting to community, so what does it look like to have alternative ownership structures where the company is essentially now owned by its user base or its employees. We’ve done all the work at the capital level with the Inclusive Capital Collective and are working with our partners, SecondMuse, to design new funds. And then we’ve been working at the community level with all of these chapters that have sprung up out of, we had no idea that so many people wanted to be chapter leads, we now have chapters and Singapore and Japan and Mexico City and London and Berlin just had an event yesterday.
Mara: So essentially, it’s the three-prong approach of how you create an organization that can advance culture change, capital and community. And I won’t bore people with the deep details, but you essentially create three different organizations to do that. So we’ve just finished that big operational infrastructure lift, and in the coming months, we will be launching the cooperative so that people can join and become members. What we’ve heard, we launched it, we did a huge zebra survey which will be coming out as well next week.
Mara: And in that survey, we just heard that the predominant feeling of zebra founders is a sense of profound isolation. They don’t know where to find to their community. They want to do things differently, but there are alternative models. And so, we feel really lucky to be kind of this umbrella, that is sharing resources of frankly, things that have already existed for quite a long time, like cooperative structures, but that may not have received broad mainstream attention and trying to socialize those alternative ownership and governance structures, as we think about more just post-pandemic economy.
Jim: Wow. Sounds really good. Very similar to some things that we think about in the Game B space. The idea of how to polarize cooperatives, it’s one I’ve been thinking about on and off for six or seven years and kind of falling into one set of ideas. There’s called hybrid cooperatives that still have the one person one vote rule, et cetera and have dividends to either the employees or the customers or both, but it turns out the law of cooperatives does allow so-called hybrids where you can have outside finance, but it typically is best if it is heavily capped in terms of its return. So it’s not owning equity per se.
Jim: But on the other hand, I always find debt to be dangerous, right? Because if you don’t pay your loan back, you miss two months, you’re out of business, potentially. And certainly a cooperative doesn’t want that. And so my favorite structure for hybrid cooperatives is using preferred stock as the financing vehicle, and preferred stock is often overlooked. It’s an odd little creature that lives in the land between common stock and debt. What we can think about it in this context is it’s essentially debt that you don’t have to meet the payment every month, and if you don’t, something bad doesn’t happen.
Jim: Now, it will start to compound at a somewhat higher interest rate, but they can’t seize control your company. So it’s quite interesting that these hybrid coins cooperatives are a way to crack the age-old problem of cooperatives which is, okay, suppose you want to operate a meatpacking plant as a cooperative, it costs a couple of million dollars to get into the meat packing business. And the 50 employees, typically relatively low wage employees, who want to start a cooperative, where the hell are they going to get $1 or $2 million dollars, right? The bank is not going to give it to them probably and this idea of hybrid where you have some fixed return, little downside capital structure looks to me at least pretty encouraging. Have you guys explored the hybrid cooperative structure at all?
Mara: We have. Yeah. And I love that you brought that up. It’s so nice to geek out on things that I don’t know that I could geek out with anyone else. So, Jason Wiener is our lawyer. Have you come across his work?
Jim: No.
Mara: On cooperatives? Okay. Yeah. It’s like you need these underground lawyers that have been like digging at this with a spoon for years to try to crack this nut. But he’s a really innovative cooperative lawyer and has actually been working with the main cooperative body, the legislative body to create more nuance, for lack of a better word, like term sheets or more nuanced bylaws, I suppose, so that cooperatives can incorporate with multiple layers of shareholders, which has been one of the primary obstacles you have identified.
Mara: You have this one shareholder, one vote model, but if you have, for example, founders that have come in and put a ton of sweat equity into it, how are they compensated? If you have early members that have put in sweat equity in time or talent, if you have investors that are financing it. And so it was only really in the last couple of years that the bylaws have been creatively amended so that you can have these more creative structures where you have shareholders, you have an investor class, but they may not have voting rights, right?
Mara: So to your point, some investors may want to be hands on and the governance, other investors may just want to put capital in and get their interest back. Institutional partners where they could invest, but they have a vested interest by participating in the governance. Founding members, so people that might be putting in a certain number of hours to get the organization up and running. How do you recognize that early belief, the founders themselves? And so if you’re interested, I’ll share with you kind of the structure for how we created this hybrid cooperative allows for those different classes of shareholders.
Mara: And then interestingly, that cooperative than jointly owns the fund, so the investment vehicle, which is an LLC is jointly owned by Zebras Unite and by SecondMuse, which is our fund management collaborator. So, what that means then is that as dividends are returned from the fund, as we invest in Zebra founders, those dividends go back into the cooperative. And then to make things even more creative, the golden share, so kind of the North Star share of our cooperative is held by our 501C3, which is our educational mission. Our mission to create and sustain and promote more zebras to come into existence. And so you maintain the mission by having the C3 have that golden share.
Mara: So, as you can tell, it’s like these three different structures stapled together to create a mutualistic interrelated relationship where and it just took a tremendous amount of really creative legal thinking.
Jim: I love it.
Mara: But it allows us to kind of operate at all of the altitudes that we want to and also hopefully become a model and a playbook and a blueprint for others that are thinking about creative hybrid structures as well.
Jim: Oh, great. I did a little research on this a few years back, you’ve taken it to a whole new level. I love this and to the point we were making earlier, that the beauty of the English common law system is you can actually do this stuff. It’s just hard, right? And you need to find a lawyer or develop the expertise yourself to think outside the box and not just to do what everybody else has done and it does take time and it does take effort and I’ve pulled up the website of jrwiener.com, who seems to be your lawyer. Is that the guy?
Mara: Yep, exactly.
Jim: Looking at his stuff here, I go, “Oh, shit, I want to talk to this guy next time I have a project like this.” Love the work you’ve done and I would strongly encourage you to document it and get it out there. What we call them the Game B world X in a box, right? So, to a degree you can put it in a box and keep in mind people the box is not a box that you can’t change. I like to describe it, it’s like Kraft macaroni and cheese, right? Who the hell wants to eat plain old Kraft macaroni and cheese but if you add half a pound of Gruyère cheese to it and a little bit of ground beer sausage, it’s a hell of a lot better, right? So, I would strongly encourage you guys to invest a bit in explaining how you’ve done it and if you’re willing, put your documents up online, et cetera, so that other people can do the same thing without having to go up the same learning curve.
Mara: Gladly, yeah, I mean, that’s the part around the education and cooperatives, education is like a core part of their mission and that was really why that structure resonated so much with us was everything we were doing, we realized that while it was painful to do the first time, we could then blueprint it so that others could spare themselves the same pain. I feel that way with our merge as well. Going through the merge process, lawyers are incentivized to protract things and for them to be adversarial. And so, what happens if you have parties that agree on the terms, and it can be just a very amicable union. And so we learned a lot in that merge process that we’re hoping to teach forward as well.
Mara: I think in the future I can’t wait to see more mergers happening of aligned businesses that recognize that they’re stronger together, but the merge process, the amount of time, the cost of legal fees can be so daunting that Jen and I wished that we had had a playbook at the beginning. That’s like, “Okay, this is what you need to figure out. And here are some worksheets.” So very, very much a big fan of what you’re describing of teaching it forward.
Jim: I love it. It sounds like you guys are not only doing right in your own organization, but the words I like to use, you’re lowering the activation energy for the people who come next.
Mara: Oh, gosh. May it be used for that. Otherwise, it would be so painful that it wouldn’t be worth doing.
Jim: Exactly. And once we lower the activation energy to classic catalysts in chemistry terms, you know what that means? It means more reactions can happen, more good faith non-lawyer infested mergers can happen, more hybrid cooperatives can be formed. Very important concept, the idea of lowering the activation energy via catalysis. In this case, the toolkit that’s made available to people and the learning that this is even possible, right? It’s admirable that you guys even figured out this was possible.
Jim: Most people won’t think outside the box enough to realize it’s possible. And then even better, you weren’t scared off by the large amount of work that’s necessary to make it happen. So, kudos to you, but not everybody has that level of energy and fortitude and so packaging it and putting it out into the world, so other people can do it without having to go all through that would be a damn good thing.
Mara: Yeah. Well, and I think the blessing and the curse of it is that you then need brave and courageous investors, so you need to find capital that rewards this and it’s been a real, we’ve had people that have provided us with capital to be courageous and to dream and to come up with these creative structures, and I can’t tell you how life changing it’s been. And then there’s also a status quo of people that will see this creative solution and ask kind of questions that are, like they will want to see things that are status quo. And so all of us are navigating that, like a full-time executive director that’s paid $200,000 in a cooperative, let’s say or something.
Mara: And it’s like, that’s not going to exist, so what about if it were four people that were putting in sweat equity and each making a little on the side and I think your interview with Richard got at this a lot, which is to the degree to which we’re creative in the creation and the catalyzing of this energy savings that leads to innovation. It’s like a tennis ball that has to be hit back with resources to actually resource these organizations. And that just requires a level of imagination, within the funding and investing community that we’re starting to see and that we always love to connect with and see more of. So the status quo it’s not going to be the future and so these new things are scary and hybrid and kind of stapled together with duct tape, but we really believe in the promise of them as models for the future.
Jim: Cool. I like it. And I commend you for not going down the damn road of executive director who hires a grant writer whose job is to get more grants so they can write more grants, right? We saw that trap in the makerspace community. I don’t know six years ago, I helped a guy in our local town start a makerspace. And one of the first things we did was examine what other people have done, an awful lot of them had gotten on the fundraising treadmill, and we said, “No, we’re going to do it differently.” And to this day, the thing is now quite big. It’s got its own 6500-square foot facility, amazing equipment, et cetera, and to this day, we’ve never had a paid employee.
Mara: Oh, I love it, so much else can be done.
Jim: Yeah. We created a whole corporate structure even, invented it actually from whole cloth, which we call the Council of Guilds System. Each of the working groups in the makerspace like woodworking, metalworking, pottery, fiber, art, et cetera, has their own guild and what would otherwise be called a Board of Directors is the Council of Guilds. And the Council of Guilds approves new guilds coming in and there’s some machinery in the bylaws and what the minimum necessary requirements are to start a guild, et cetera. And the guilds are responsible for keeping their area up-to-date, clean and safe and following all the rules. And the Council of Guilds together allocates the capital from the membership fees back to the guilds.
Jim: And it’s amazing. And at first people elsewhere say, “Oh, you’ll never make it work without a paid executive director.” Well guess what? I would say 75% of the makerspaces that started or with business six years ago with paid staff are out of business because the treadmill of fundraising just wore them down. Our thing which was relentlessly self-organized, self-directed, self-governed and now with the Council of Guild self-managed, still there and going strong in a town that would seem to be way too small to support something like this.
Mara: I would love to talk to you about borrowing that structure as we organize Zebras Unite. I would love to learn from that.
Jim: Yep. I often share the bylaws with people. I’ll send you a link to it. It’s really interesting and I advised around the edges of it. Two friends of mine, Meghan Williamson and Dan Funk are the ones who really cooked it up, and it was a kind of a cross between an anarchist and a medievalist, right? Just what you’d expect, the Council of Guilds came out the other side and my job was to keep them out of trouble with the regulatory people and be sure enough got it accepted by the Virginia Corporation Council and more difficult with the IRS not for profit thing as a 501C3, despite the fact that it has this very peculiar bylaws.
Jim: And that’s, again, this concept that hey, people, it can be done. It was a lot of work and we were lucky to have Meghan and Dan be able to do that tremendous body of work and we had a little bit of help from a lawyer, but not a lot. I think we paid $2,500 for all of our legal work. It was not bad, all the way through the 501C3 process. Don’t give up just because you don’t see a structure that exists that accomplishes what you want. As MADA has done and as we did in the Makerspace, other people are doing, invent the structures that you need, right? Or at least don’t give up until you’ve tried because within our system, the one good thing about it is it’s very, very open to new formulations as long as you abide by just a few basic principles.
Mara: Yep. And I think that’s where back to our earlier conversation of capital, what’s useful and when you were just recounting that story, there is just this reality of like incorporation fees and lawyer fees, and there’s unfortunately some bureaucratic red tape that’s involved in the creation of these new structures where capital is, it’s just necessary to cross that bridge to get you to your bylaws and your corporate forms. So, until we have a library of those that’s templatable and I think the other big piece is just the education that founders have to have about all of these systems and, and structures as well, but it’s remarkable with just some creativity at that level what’s possible.
Jim: Yep. It sounds like we’ve done similar kinds of things with different motivations. One final question for you, because we’re just about out of time, is how about the Angel investing communities that many communities have, I’m sure in Portland must have a nice Angel investing community. We have two different Angel groups here in Central Virginia. Between them, they’ve probably put out more than $10 million in investments, most of them under a million in terms of total investment in any one round. Have you guys reached out to and tapped into the Angel communities where you live?
Mara: Yeah. Oregon does have a pretty active Angel community. Oregon Venture Fund, which started as Oregon Angel Fund and Cascade Angels. There are a number of great thriving Angel syndicates and others. I think that for me, what I’ve seen at least with women and people of color who are seeking investment is that the Angel and the investor has to be, just in the same way that we were talking about the ideal Community Manager in that archetype. There’s really a role, like there’s I think being an Angel is much harder than it seems, or than it is right now. Because especially with underrepresented founders, you have to approach them with care also. And so it probably means recognizing that you don’t have an understanding of their lived experience.
Mara: When we did this Zebra survey, the majority of our founders are first time entrepreneurs, first generation college students, they were raised in a single family home, they identify as a person of color or woman, and so, the dominant paradigm of angels is they look a certain way. And so it means approaching a financing event with a tremendous amount of humility and curiosity. A lot of what I see with Angels, at least right now, in my own lived experience is that the encounter can be really violent to a dream, because the power dynamic is one in which that person can set themselves up to just think that they know more about the business. So, I had to have a lot of courage to listen to my inner wisdom to say like we’re not growth hacking this with Facebook ads. And I met with a number of mentors that provided or a number of Angel investors that provided that type of advice.
Mara: So I suppose what I would say to founders is really listen to your intuition. If you have a vibrant and humble and curious receptive community as it sounds like you do in Virginia, that’s open to new ways of thinking and that recognizes what true innovation looks like, I think that can be a transformative relationship. I think that there are other communities that continue to see it as a power dynamic of telling founders what to do, and not as a role of a coach, and so, it’s a little bit different. So I don’t know, I don’t know, that’s just my perception right now of the Angel communities that I’ve been around.
Jim: Yeah, I think that’s certainly a valid point, but pretty much most of the Angels are old white men, that’s the way it goes. Those are the people that dominated the game 30 years ago, and they’re the ones that have the money now. Hopefully, that will change over time. But in the interim, I think your point of there are definitely people out there that are open-minded and perhaps organizations like yours can do the sorting, because you’re right, it’s highly stressful for the individual entrepreneur, particularly if they’re from an underrepresented group who doesn’t have, I guess, you’d call it implicit capital to turn implicit racism and implicit sexism on its head to act as an intermediary where you can because you guys do have track records, and you do have structure and you do have creative thinking you may be able to tap into the Angels that the individuals can’t and aggregate them.
Mara: Yep. Yeah, and I also think angel investing is a system that’s ripe for reimagining. I’ve always wondered why, why if you have a hunch about someone, instead of going through the song and dance for $50,000 check, give them $1,000 and ask them to report back in a week what they did with that $1,000? Did they acquire a customer or did they make a mistake that led to a lesson, or were they able to hire, who did they hire as a result of that $1,000 that it contributed to the team?
Mara: I find that the power dynamics like these big checks with these conversations that last months, and everyone’s, the founder is so stressed out. They’re rehashing their deck in order to get this and that and it’s like just do some incremental dating first. It’s a relationship, go with them on a sales pitch and see how the customer receives it, like spend a week with them, and just see where their pain points are, so that as they take that capital, you might have insight into the dynamic that’s unfolding that could be so much more useful by just like spending a little bit more time.
Jim: Clever, very clever. That might be part of your process, right? Because if we think about it, if you can invest small amounts to get useful information to decide whether you want to invest bigger amounts, it’s quite possible that could be a winning strategy.
Mara: Yep. Yeah, I mean, please come. Jim and I have ideas about new political parties, corporate structures, and if anyone would like to reimagine Angel investing through like micro transactions that lead to bigger impact. We’re open for business.
Jim: I’m going to think about that one. You’ve tweaked the space I’d never contemplated. Other than one time, I did. I was talking to an entrepreneur with a wild and audacious thing and he needed a little bit to get over the next little hump. And I basically just after talking to him when he went home, I said, “I’m going to FedEx you a check for 10,000 bucks. And I’m not even going to take any equity or anything. I’m just going to send you the money and see what you can do with it.” Well, guess what? Turned out he was completely incompetent and it saved me a lot more money than $10,000, so it was money well spent.
Mara: That’s great. Yeah. You just have to, just it’s to your point, it’s like the energy and the catalyze. It’s the catalytic part, don’t just talk.
Jim: Yeah, get some energy going. Well, Mara, this has been one of the most interesting conversations I’ve had on the show in quite a while. I’m really glad that we were able to have you on here. It’s kind of uncanny how many bizarre things that we both like to talk about.
Mara: I know. I can’t wait until we’re finally able to meet in person and just thank you again for the incredible service and space of your podcast. I’ve learned so much listening to incredible interviews and really appreciate your curiosity and depth of questions
Jim: Yeah. Well, now you’re part of this work and this will be one of the better ones, I’m pretty sure.
Mara: Very grateful.
Production services and audio editing by Jared Janes Consulting, Music by Tom Muller at modernspacemusic.com.