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Microfinance Pioneer Shifts to New Crowds

Jessica Jackley brings together entrepreneurs with investors from their communities.

by Joan Springhetti

 

Jessica Jackley photo

Photos by Amanda Friedman

 

Jessica Jackley loves a crowd. To be more precise, she loves a community — and the potential of the people in it to be enterprising and innovative and to actively support each other.

Six years after cofounding the groundbreaking nonprofit Kiva, which funds micro-loans to entrepreneurs in developing countries, Jackley has moved into the for-profit sector. Her new venture is ProFounder. Like Kiva, it uses crowd-funding, focuses on small businesses, and is based on ideas both revolutionary and traditional. But ProFounder hits closer to home: Its goal is to get family, friends, and neighbors invested in the success of the entrepreneurs they already know. And it's doing it here in the United States.

ProFounder is an online platform that guides users through a thicket of state and federal regulations so they can raise money for their businesses from their communities, and do it without the full process and expense of registering with the Securities and Exchange Commission. The site also helps with other thorny tasks, such as figuring out how to put one's best foot forward with potential investors.

Jackley cofounded ProFounder with Dana Mauriello. Both are Stanford GSB grads; both think quickly, talk fast, and laugh easily. They met at the school — over a tube of lipstick. They have become, almost inescapably, close friends.

 

Jackley-Mauriello photo

Jessica Jackley, left, and Dana Mauriello

 

At age 33, Jackley has traveled the world studying entrepreneurship and humanity. She sits on the Council on Foreign Relations (as does her husband), champions expanding women's presence in business and investment, and is a frequent public speaker. She is a visiting practitioner at the Stanford Center for Philanthropy and Civil Society. Last year, Fast Company named her one of the "most influential women in tech," and USA Network gave her its "character approved award."

She is also a poet, surfer, trained yoga instructor, and author.

Oh, and she gave birth to twin sons in September.

The offices of ProFounder are in an old brick building on Santa Monica Boulevard in West Hollywood. Everyone works together in the same room. The tech people are at desks; the rest are scattered around a large table that holds laptops, snacks, water bottles, toys, and whatnots in a home-like jumble. The "cafeteria" is across the street: a Starbucks and a Whole Foods.

Jackley, MBA '07 and the company's CEO, is answering email. Mauriello, MBA '09 and the company's president, is on the phone. So is Kate Karas, staff general counsel, down from San Francisco for the day. Ryan Garver, chief technology officer, and two programmers are working on final details of an option about to launch on profounder.com.

A major hurdle for small businesses trying to raise money from their communities (in addition to fear of being turned down, the possibility of not succeeding, etc.) has been that laws governing it vary from state to state.

Is having the backing of that uncle in Hartford more promising than the potential of 25 sorority sisters in San Diego? That's important because, even though California allows 35 investors, Connecticut's cap of 10 investors invokes the same limit nationally.

The ProFounder site guides users through those legal compliances and, by taking them through a series of questions, helps them reorganize their business plans into a pitch they can take to potential investors. Other tools include the site's term sheet generator that businesses can use to create unique investment agreements around equity or revenue share, customizing the terms to fit their business's needs.

If the fundraising goal is reached, entrepreneurs pledge to use the money for their stated business purpose. As with most investments, investors have no guarantee they will enjoy gains or get their money back.

ProFounder, still in its first year, is its own case study in how entrepreneurial ventures evolve. It launched in December, and six months later it did a pivot. At the end of June, Jackley posted on the company's blog that ProFounder was shifting focus: it would become an information and planning resource for raising money rather than
focusing on managing the transaction itself.

More change is likely as Jackley and Mauriello work on the knotty issues of state and federal regulations that require constant monitoring and legal research. "We keep exploring how best to do this," Jackley says.

They try to keep it simple and straightforward. They also think about how communities are a resource beyond financing and about the importance of confidence to entrepreneurial success.

The story of BucketFeet is one Jackley and Mauriello like to share. The Chicago-based startup turns canvas sneakers into wearable artwork and commits a share of the proceeds to kid-specific charities. It raised $60,000 from 33 investors using ProFounder. It was one of the 19 small businesses that raised more than $500,000 from 315 investors during ProFounder's first six months. Among the others: a textile design company in South Carolina, a candle company in Massachusetts, and electric motorcycle builders in San Francisco.

ProFounder recently entered an agreement with Etsy, the online marketplace for makers and sellers of handmade and vintage goods. It will partner with the company for its Hello Etsy two-day summit in September in Berlin and a series of related events across the United States. And it will support the company's users in taking their small businesses to the next step.

Jackley and Mauriello are dedicated in their belief that when people invest in entrepreneurs they are making the economy stronger and more resilient and that entrepreneurs not only create jobs and increase wealth, but, as they say on their website, "inspire us to be better every day."

And they appreciate the backing they received to launch ProFounder: $1.3 million from friends, family, and even some big-ticket investors.

At a lunch-hour meeting of the student-run GSB Entrepreneur Club on campus in June, Jackley and Mauriello shared how they see ProFounder in the marketplace. Not everyone with a good idea for a business has the potential to connect with bankers and venture capitalists, they tell the group. "Some VCs are absolutely insulting to anybody but 22-year-old dudes in the Silicon Valley," Jackley says.

She urges those in the audience, including the 22-year-old dudes, to never stop reviewing assumptions behind a business plan. "Even after you launch, it will help you change as you need to change,"
she says. "You are always iterating."

Jackley is a collector of stories, especially about the determination of entrepreneurs. In addition to her direct experience with Kiva and ProFounder, she has witnessed the launch of many startups. It has made her sensitive to the importance of finding the right investors, not just the money.

"The entrepreneur and investor need to share the same values," she says, whether the goal is sustainability or profitability. It's important to "find people who will meet you where you are" rather than trying to become something or someone you aren't.

Jackley has just finished a book, due to be released in spring 2012 by Random House/Spiegel and Grau, about the business lessons she's learned from entrepreneurs around the world.

Don't know where to start? Think about the Ugandan who literally had nothing but the dirt he was standing on. He added water and formed bricks by hand; it grew into a business with three employees. How to plan? Listen to the Kenyan who knows every inch of her one-acre farm so well — its clay deposits, its rocks, its dips and rises — that she is able to put each plant in the very spot it will grow best.

The stories underscore Jackley's skills at listening and at distilling what people are saying beyond the immediate context. And her earnestness.

"Jessica gets her energy from other people," Mauriello says. "It's so genuine for her."

Another friend describes her as a "persistent optimist."

She describes herself as a hugger, and a "sharer."

Among those who have been a regular sounding board for Jackley — and become a friend in the process — is Jennifer Aaker, a marketing professor in the GSB and coauthor of the social marketing book, The Dragonfly Effect. The two met several years ago when Aaker asked Jackley to be a guest lecturer.

It is Aaker who describes Jackley as a persistent optimist, which is more complex than either of the two traits taken separately. It is a quality that allows Jackley to "support, enable, and connect with others." And, importantly, it allows her to take setbacks in stride, to "quickly process criticism and roadblocks and move past them adeptly," Aaker says.

Jackley's skill as a leader and innovator is also enhanced by
"a healthy skepticism about the status quo," Aaker says. It's a skepticism that makes her more likely to come up with a new system of doing things instead of doing what most everyone else does — keep trying to make the old way work.

Jackley arrived in California by way of Pennsylvania — from Pittsburgh, where she grew up, and Bucknell University, where she studied philosophy, political science, and poetry.

As a kid, she was a baseball-cap-wearing tomboy in a middle-class neighborhood, the kind who in 5th grade got into a fistfight with a boy over a stickball game. She was elected class president as a freshman in high school and ended up in that role all through high school and college.

She was first exposed to extreme poverty on a church-sponsored trip to Haiti while she was still in high school. Later, as a junior in college, she spent a Semester at Sea, an experience that included
her first visit to Kenya. She had such a profound new sense of self that, to underscore it, she shaved off her hair.

Her family, she says, is "ridiculously strong and loving." Her mother, Sandra, a first grade teacher, shared with her the value
of learning; her father, David, a management consultant, showed her how to live creatively; her brother, Adam, who became a pastor, is
a spiritual anchor and best friend.

When she got to California in 2001, she had a poetry prize from Bucknell in her hand and no clear idea of the direction she wanted to take. She was hired at the GSB on the staff of the Center for Social Innovation. For three years she worked around people "doing things I wanted to do but wasn't," she says.

She attended lectures and absorbed ideas. When she heard Bangladeshi economist Muhammad Yunus speak in 2003 about his work with microfinance in developing countries, she was deeply moved. (Three years later, Yunus would be awarded the Nobel Peace Prize.)

Jackley quit her job and moved to Africa, where she went to work for the nonprofit Village Enterprise Fund. She listened to people in Kenya, Uganda, and Tanzania.

Seeing that even small amounts of capital could make a dramatic difference to the business plans of those living in poverty, she and then-husband Matt Flannery came up with the then-new idea: use the internet to crowd-fund microloans, do it by connecting every-day entrepreneurs in developing countries with everyday backers in developed ones.

It was an idea that changed the dynamic of how individuals, committing amounts as small as $25, could invest in others.

Kiva, based in San Francisco, formally launched in October 2005. Realizing how much more she wanted to know about business, Jackley enrolled in the GSB while she and Flannery built the organization. It drew on her people and marketing skills, and on his
in technology and systems — he holds two degrees from Stanford,
a bachelor's in symbolic systems and a master's in philosophy.

The profile of Kiva skyrocketed after Bill Clinton cited it in his 2007 book, Giving: How Each of Us Can Change the World, and after Jackley and Flannery appeared on the Oprah television show.

Kiva thrived, but the marriage of its cofounders did not. In the fall of 2008, as their relationship was ending, Jackley transitioned away from Kiva. Flannery continues to lead the organization as its CEO; another early collaborator (and Stanford economics alum), Premal Shah, is president. Kiva now has made $230 million in loans with money pooled from 600,000 individual lenders.

After the breakup of her marriage and her move away from active involvement with Kiva, Jackley says, she found her bearings again when she gave herself permission to "do more than this one specific thing."

She became involved with a research project on case studies of women entrepreneurs led by Garth Saloner, now dean of the GSB. That research took her around the world, and further expanded her view of entrepreneurship. After nearly a year on the road, she was ready to find a sense of community again.

Back on the ground at Stanford, in the ladies room, Jackley met her future business partner. Mauriello was putting on lipstick for a photo shoot as part of a product plan for a cosmetics company. Jackley told her she liked the color and introduced herself. The women hit it off instantly and in the nick of time. It was spring 2009, and Mauriello was just days away from graduating.

The inspiration for ProFounder turned out to be right under their noses: the experience of two other members of Mauriello's graduating class. The two students wanted to bring their classmates into the launch of WikiMart, an online marketplace for Russia and former Soviet-block nations. There were plenty who wanted to invest, but the process of doing it in a legally compliant way was frustrating, costly, and full of hurdles.

Jackley, Mauriello, and another Stanford graduate, Evan Reas, MBA '09, put their heads together and came up with the "what-ifs" for a business that would take the negatives out of that process. Before the launch of ProFounder, though, they parted ways — they had different visions for the company. Reas went on to cofound another startup, of which he is CEO, Palo Alto-based Hawthorne Labs.

Before launching ProFounder, Jackley and Mauriello spent a year planning and conducting costly legal research and figuring out a business plan that was consistent with their values. "The social component comes first," Jackley says, "but it would be intellectually lazy to not figure out how to make that profitable."

"We complement each other so well," Mauriello says of their partnership. "We support each other and unequivocally trust each other."

Which is not to say they always agree or that they don't sometimes trip over each other in their zest for talking about ProFounder. "We share values but have different opinions. Having different ideas is a great strength of the partnership — it gets us to a place we wouldn't have as individuals," Mauriello says.

As plans for ProFounder were coming together, there was another development: mutual friends introduced Jackley to Resa Aslan. He soon became the love of her life.

Aslan, an Iranian-American activist and scholar of religions, is a professor at UC Riverside and an acclaimed writer. His first book, No god but God: the Origins, Evolution and Future of Islam, has been widely praised and translated into many languages. His most recent, Tablet and Pen, is an anthology of work by writers and poets in the Middle East. He is also a popular speaker, including recurring guest spots on The Daily Show with Jon Stewart.

When Jackley shared with ProFounder investors the news of her pregnancy at the 12-week mark, one of them wondered publicly in
a blog whether it would mean a reduced commitment to building the business. She responded on another site: "I've never heard someone ask the same of a founder-CEO-dad." She does what all entrepreneurs do, she wrote, "prioritize mission-critical tasks each day and night and then share, delegate, delay, or skip the rest."

And of course, she added, "I expect to be even busier with not
just one but two babies."

Every few months, Jackley and her husband host a poetry party in their home. They invite dozens of guests, each of whom is asked to bring a poem. The poems don't have to be shared, but as the evening goes on, many are.

In the ProFounder offices there is a "Haiku Wall." It is actually just a pin-up with Post-it notes of staff compositions:

Where brains collide
Legos run from east to west
A tractor is born

Among the toys on the group desk is that Lego tractor, one of two constructed during a team-building exercise one afternoon. Both are prized proof of cooperation and communication in the face of deliberately rigged obstacles.

Another pinup holds cartoon illustrations of how users move through the ProFounder website. Still another spells out the company's statements of vision ("All people are empowered to pursue their dreams through entrepreneurship") and mission ("To ensure all entrepreneurs have access to the resources they need to succeed through the engagement of robust, supportive communities"). Above are photos of the small business creators who have made those connections with the help of ProFounder.

If ProFounder succeeds to its fullest, Jackley says, it will unleash the latent enthusiasm of community to invest in itself. The kind of crowd even people who don't like crowds can appreciate.