Financial Literacy: Community Rounds & Purchase Orders (Wefunder)
How a Lesson in Investing Led to the BEST Type of Capital - a Purchase Order!
In my last post on teaching financial literacy, I discussed how we are using Kiva as a way to inspire, but also teach, lending to our girls. We wanted to create engaging but also instructive ways for our girls to experience different types of capital. With the passage of the JOBS Act in 2012, equity investing has been able to go more mainstream. Now, with as little as $100, you can invest directly into a company using a platform like Wefunder. Venture investing is high risk, high reward. You invest with the goal of a 100x return but that is not guaranteed. So we felt it would be a fun way for them to find and invest in several companies they are interested in, and then to track progress over the years.
Disclaimer: Investing has gone mainstream, but it still requires you are 18 years of age…so to be clear, I made these investments, but they were clearly informed by my daughter’s thoughts on which companies to invest in.
How we did this…I asked her to go find three companies worth investing in that she felt had great potential and then to explain why she wanted to invest. I would invest $100 and if ever there was a return on investment (ROI) we would split the profit 50/50 (after I covered all of my costs, of course).
She has so far brought me…Harmony Turbines (next generation residential and small scale wind turbine development); Firelight Camps (luxurious, stylish, and social glamping experiences); LEAH Labs (developing a cost effective cell therapy to cure cancer in dogs); and, Do Only Good (healthy dog food with responsibly sourced ingredients). What was neat about this process was hearing her explain her investment decisions and for her to be able to find companies in areas of interest to her that she could invest in. Additionally, she and I get email updates about the progress of the companies.
What was really neat was what happened next…
About the same time, we had our daughters participate in a summer online camp teaching kids entrepreneurship led by my friend Scott Donnell that was a beta for his team’s new offering called, My First Sale. The challenge for the week was to create a business and work through the steps to get your product to market. Pretty soon, we had a kitchen full of all the smells!
My youngest at the time, wanted to make soap, my middle daughter made old-fashioned candies, and my oldest loves baking and animals…so she decided to make all-natural handmade dog treats. As you can imagine, one of my children quickly tired of the exercise; one of them had an idea that required a lot of parental involvement - making it super tough in this season (side note: I actually believe it to be an amazing idea I hope she explores later in life); and our oldest, Madison, really latched on! She started with a simple recipe and quickly added a gluten-free variety and an all-natural dental stick as well. She went so far as to build a brand and a website - Good Bites Bakery. Soon enough, she had some decent customers and even was interviewed on television by a local TV anchor!
But the really amazing thing was what happened when I opened my email inbox one day. I had received an email from the dog treat company she had recommended we invest in thanking me for the investment and saying they wanted to send me a free bag of dog food. I casually mentioned it was my daughter that made the investment and that she loves animals and had, in fact, just recently launched her own dog treat business.
They were so impressed and mentioned they had been looking for an all-natural dog treat for their holiday box that year. Soon enough, Madison was making an order of 50 bags for a customer in CA! She now had to take her game to the next level…she made labels (inc nutrition labels for the back); found better packaging and had to figure out shelf life. I remember her running what seemed like science experiments in our kitchen by leaving out treats on the counter or in different containers to see how long they would last before getting moldy (given all natural ingredients, there are no preservatives and they went downhill FAST!). Finally, she realized what was needed was a dehydrator and she ordered one from the revenue from her treats. With this dehydrator, her treats were great for MONTHS. She even hired a friend for the day leading up to her shipment to help make treats. All in all, she invested $100 into this company, and already has a return of $350 from this purchase order alone! Not a bad investment. She is still making treats (hint) and has gained so much confidence in the process. I even learned the other day she had emailed the National Geographic because she learned they have a store online and they clearly love animals about carrying her product :)
Next up in this series over the coming months - Stockpile and public equities. What ideas do you have for teaching financial literacy that are fun and engaging? I’d love to hear some of your thoughts as well.