Despite the fact that around 69% of Americans have less than $1,000 in savings, we, as a country, sit on a collective wealth of extra cash; somewhere in the region of $300 billion is idling in accounts nationwide. These are not emergency funds; rather, it’s what Cat Berman, founder of the new Oakland-based startup CNote, calls “just in case” cash–she estimates that there are around 30 million “oversavers,” who have an average of an extra $10,000 in their accounts.
Berman, a former managing director at Charles Schwab and the founder of several social enterprises, landed on the idea for CNote when she took a look at her bank accounts online and saw several thousand dollars just sitting there. “I thought to myself, ‘What am I doing?'” Berman tells Fast Company. “Why do I have all this money just sitting in my savings account, and not doing good for anybody?” (Experts recommend keeping about six months of funds in cash in the bank in case of emergencies).
CDFIs combine grants from the CDFI Fund with money from private investors and financial institutions in order to make community development loans. But when Berman, looking for a more productive use for the thousands in her own “just in case” fund, thought to invest it in a CDFI, she learned that she, as an individual, could not.
“It’s not that CDFIs don’t need the cash,” Berman says. “There’s a huge unmet need–CDFIs have a deficit of over $600 million in loans they want to be doing, but lack the capital to make happen. And because they’re set up as B2B organizations and accept loans from banks and foundations, they’re just not equipped to handle and vet small individual [investments].”
The process from the individual user’s side is very streamlined: There is no minimum deposit, and once users create an account, they will be met with an interface that’s not dissimilar from a standard online savings account where they can link to their regular bank account and transfer money into CNote. Because CNote is an investment product, not a savings account, the return is technically not guaranteed, but the security of people’s investments is based on the historical performance of CNote’s CDFI partners, which have lost no investor dollars since their founding and–like CDFIs in general–are noted for their trustworthy performance.
For the past 10 months, CNote has been testing its product with a small group of accredited investors, whose collective pool of $9 million is being invested in women and minority-owned businesses and low-income communities across the country through projects supported by CNote’s CDFI partners. Now that the platform is open to everyday people, Berman expects CNote will continue to scale up, bringing in more CDFI partners and deepening the startup’s impact investing potential.