City celebrates new Kiva Zip-funded local businesses

Oakland City Council member Libby Schaaf was admiring artwork in Oakland City Hall’s crowded outdoor plaza last week when a man selling bagels cheerfully accosted her.

“Plain, lox or vegetable?” Jason Scott, co-founder of the Authentic Bagel Company, shouted to Schaaf over loud music.

Schaaf chose plain and handed $3 to Scott, who wore a baseball cap and t-shirt. The two chatted like old friends as Schaaf’s bagel disappeared into a revolving toaster oven that Scott had brought to the plaza.

Jason Scott did not bring his toaster to the plaza just to sell bagels. He was one of 12 Oakland-bred business owners being honored that afternoon at a party for a special program that helps entrepreneurs gather zero-interest startup funds through online crowd-funding. Other entrepreneurs at the party have founded businesses that provide art and gallery space, small-batch kombucha, handmade corn chips, vintage clothes and ethically sourced chocolate.

Each of these businesses receives money from an online crowd-funding platform that distributes loans at zero percent interest through mobile payments and Paypal. An offshoot of the international online micro-lending platform Kiva.org, Kiva Zip was launched three years ago to develop small business growth in the United States. This summer, following a proposal co-authored by Schaaf and city attorney Barbara Parker, Oakland became the first city in the US to serve as a Kiva Zip trustee.

In order for a business to receive loans through the Kiva Zip’s online platform, a trustee must publicly endorse it as a borrower. Once a trustee publicly endorses a business — by stating why he or she feels the business should receive loans on Kiva Zip’s site — individual lenders can use the site to make loans to that business. Trustees can be individuals or organizations, usually with knowledge about community development, business or economics. Along with the representatives for the city of Oakland, who review applications through the city’s Business Assistance Center, trustees in Oakland include churches, university student groups and community-focused non-profit organizations.

“Oakland’s dedication to growing small businesses is impressive,” Kiva Zip’s national Senior Program Director Johnny Price, who’s normally based in San Francisco, said at last week’s party. “Oakland is seeing the opportunity for small businesses and creating community and getting citizens to invest in economic development in their city.”

With support from Kiva Zip lenders, Authentic Bagel Company is aiming to increase bagel production.

Three years ago, Jason Scott and his brother Mark were packing the basement of their childhood home in Rhode Island when they found tattered recipes folded and tucked between the pages of forgotten cookbooks. Their great-grandmother had handwritten the recipes in the early 20^th century. Her bagel recipe, made from dough leavened by natural fermentation rather than commercial yeast, piqued their interest.

After the brothers relocated to California, Scott said, they could not find good bagels, so they looked to their great-grandmother’s recipe and began mixing, kneading, boiling and baking. The resulting bagels were so good that the brothers decided to turn the recipe into a business.

A key to their great-grandmother’s recipe is refrigerating the bagels for 24 hours before they are boiled and baked. Currently, the brothers operate their business using six small refrigerators. Jason Scott says they need a walk-in refrigeration unit now, but the unit costs $5,000. This is why they were grateful to Schaaf when she contacted them about an opportunity to raise money through Kiva Zip one month ago.

When he first launched the business, Jason Scott had worked as a chef at an Oakland restaurant frequented by Schaaf. The two had spoken from time to time about Scott’s entrepreneurial ambitions. When Schaaf learned about Kiva Zip, she said, the Scott brothers seemed to her a good match for the program. They were Oakland entrepreneurs with a solid business model, business experience and promise to create jobs and build stronger communities in Oakland. These are elements that Kiva Zip trustees look for when endorsing a business.

So on September 8, Schaaf, who, along with the City of Oakland, is a Kiva Zip Trustee, personally endorsed Authentic Bagel Company. Schaaf has endorsed two other Oakland businesses besides the Scotts’: Oakstop, a gallery and event space; and Tina Tamale.

“In this economic climate, so many banks and conventional lenders have been pulling back and not making loans to small businesses anymore,” Price said. “If banks say no to lending $5,000, we want to say yes by collecting 100 people to give five dollars.”

Schaaf’s endorsement allowed the Scott brothers to post a request for $5,000 on Kiva Zip’s online crowd-funding platform. $5,000 will allow them, Scott said, to purchase a walk-in cooler that will triple production, scale business and reach customers outside of the East Bay.

Through Kiva Zip, loans as small as five dollars, said Schaaf, can “help fabulous entrepreneurs to succeed and grow our Oakland sustainable economy.”

Since September, 59 lenders have loaned Authentic Bagel Company a total of $1,275, according to its lending page on Kiva Zip. The company has until November 4 to reach its goal of $5,000.

If the Scott brothers receive the cash, they will have up to two years to repay their lenders. If Authentic Bagel Company chooses to repay in monthly installments (borrowers can choose between weekly and monthly repayment plans), it will pay Kiva Zip $208 monthly for two years. This money will be paid back to its lenders proportionately — if 50 lenders contributed $100 each to Authentic Bagel Company, each lender will be repaid around $4.15 every month over the following two years, until he or she is repaid the full loan of $100. Ideally, Authentic Bagel’s new refrigeration unit will allow the company to grow its income dramatically over those two years.

At the heart of the Kiva Zip program, Price said, is the crowd-sourced reputation of both the trustees and the businesses. If a business doesn’t pay back its loans on time, the trustee that endorsed that business loses credibility on the site. If Jason Scott fails to repay his lenders by November 4, 2016, Schaaf will lose credibility as a trustee — and lenders might be less likely to make loans to other businesses she endorses.

Kiran Jain, the Senior Deputy Attorney for the City of Oakland, personally lends to Kiva Zip. Jain said at the City Hall Plaza launch party that she lends to Kiva Zip to support businesses that she wants to see in Oakland.

“Oakland is a very do-it-yourself culture,” Jain said. “It makes sense that we would have crowd-funding to support small businesses.”

“By lending, I’m empowering not only entrepreneurs, but the way that our community looks, feels and is shaped,” Jain said, holding a toasted bagel that she said would be her dinner. “The diversity of entrepreneurs as well as their business ideas is pretty breathtaking.”

Jason Scott hopes to offer more jobs with the increased revenue from his bigger cooler space. Scott currently employees ten Oakland residents and is $3725 from reaching his goal of $5,000.

By supporting small business growth, Schaaf said, Kiva Zip will stimulate job growth in Oakland and contribute to the sustainable economy. Also, Schaaf said, Kiva Zip targets businesses that generate positive outcomes in their communities.

Part of Schaaf’s campaign as a mayoral candidate is to continue to recruit Kiva Zip trustees and lenders by holding public awareness campaigns and events such as Wednesday evening’s party to promote local businesses.

Since Schaaf and Parker’s legislation was passed last May, the City of Oakland has endorsed ten businesses.

Oakland’s role as a trustee is significant, Price said, because of “credibility and reach.”

When a trustee endorses a business, it can promote the business’s lending platform through its network. Trustees with larger networks, Price said, gain larger publicity. Also, when a potential lender recognizes a name (such as the City of Oakland) attached to a small business, he or she may be more inclined to make a loan to that business.

Price said only two other cities, San Francisco and Philadelphia, have followed Oakland’s footsteps by becoming trustees. “The city of Oakland,” Price said, “is a great example of governments leading and not following.”

Oakland Mayor Jean Quan, who attended the party, said the city helps entrepreneurs in other ways, such as assisting with business plan development. Yet because of limited resources, said Quan, “this kind of crowdsourcing might be really important for new businesses.”

At the party, event attendees perused Oakland business offerings and learned the steps to becoming lenders from Kiva Zip representatives.

“Oakland is the heart and soul of the sustainable economy movement,” Schaaf said to almost 200 celebratory guests, as they chased Tina Tamale’s crispy hand-made tortilla chips with swigs of Housemade’s bubbly kombucha. “We are fierce localists here in Oakland. That means we care about where we buy our things. We care about who we buy them from; that the people are good; that they have a social conscience; that they care about how their products and their businesses are impacting their community and their planet,” she said.

As the party dissolved and the air cooled, the smell of toast wafting across City Hall plaza lured hungry Oaklanders to a line behind the Scott brothers’ toaster.

Jason Scott handed a warm bagel and cream cheese to a guest leaving the party. “Some people haven’t had a bagel in years,” Scott said. “It feels good to be able to make someone nostalgic. We really don’t want miss out on this.”