I’m not a financial advisor; nothing I write in Superpowers for Good should be considered investment advice. You should seek appropriate counsel before making investment decisions.
Devin: What do you see as your superpower?
Ben: I think a real superpower when you're creating as an entrepreneur is being able to look at things, recombine them and create something new. We oftentimes think of something new coming out of ex-nihilo, like out of nowhere, born out of the mind of Elon Musk or Steve Jobs. But I don't think that's actually true. I think you're usually better off being kind of a scavenger and taking the existing things that are around, like the JOBS Act and a bond marketplace and loans, and reconstituting them, refashioning them to create a new species of, in our case, a financial product that has new traits and has new capacities to do new things that it wasn't capable of before. So I'd say the ability to kind of recombine things and think creatively was helpful for me and my co-founders.
Ben Lozano grew up working at his father's boutique financial accounting firm in Southern California, specializing in growth planning for small and medium-sized businesses. He helped many first and second-generation Hispanic Americans grow their businesses by providing accounting services and assisting in bank loan applications. That experience stayed with him.
After earning a Ph.D. at UC Santa Cruz, coincidentally defending his dissertation as Bear Stearns failed, marking the beginning of the Great Recession. He stayed in academia for several years, focusing on fintech.
1. SMBX offers debt financing to small and medium businesses.
2. SMBX connects businesses that would typically take out bank loans with people in their community who want to invest in them by lending money.
3. SMBX's rates generally sit between 7-10% and are competitive.
4. SMBX's mission is to enable people to decide, for themselves, what kind of world they want to create with their unused money and earn profits.
5. Anyone can invest in a business for as little as $10 on SMBX's platform.
6. SMBX's co-founder Ben says they initially targeted businesses with a fanbase or high believability factor to create a diversified portfolio of small business bonds.
7. Ben's superpowers are being stubborn and creating something new by recombining things.
8. To become a successful entrepreneur, rely on what you know and take input from outside the field.
9. SMBX allows people to invest directly in small businesses through bond offerings.
10. Ben is available on LinkedIn and through email for discussions.
Ben will speak at SuperCrowd23, which begins tomorrow. He’ll join a panel discussion with twelve, yes, twelve crowdfunding CEOs! Superpowers for Good readers are entitled to a 50 percent discount. Register today!
Watching the investment crowdfunding market closely as it began to unfold following the passage of the JOBS Act in 2012, he began to conceive a plan to create something novel in the space: small business bonds.
It sounds easy and obvious now, but it took two years to convince regulators that what he and his co-founders envisioned would be legal under Regulation Crowdfunding.
SMBX opened for business just weeks before the pandemic began. Challenges notwithstanding, the business is proving a real success.
“We have had a lot of businesses who have refinanced out of existing borrowing relationships that they've had, and factoring has certainly been some of them,” Ben says. “I'd say credit cards have been a big one. But the overwhelming majority of businesses listing bonds on our marketplace would otherwise be taking out term bank loans.”
The difference isn’t so much a big financial arbitrage or better borrowing rates so much as the benefit that comes from having your community, including your customers, provide the financing. It strengthens the relationship.
By way of example, Ben shared the story of a San Francisco-based wine shop that sells hoagies. Needing to raise capital for a second location, they issued a $250,000 bond on SMBX at 9.5% in recent weeks. It was substantially oversubscribed.
Tampon Tribe, which will pitch at SuperCrowd23 this week, is raising $250,000 on SMBX, too. Owned by two women, Tampon Tribe is producing organic feminine hygiene products that are healthier for their customers.
The SMBX business model is working well. Many investors are now returning to reinvest because of the economics. Ben calls them “return-focused investors.” He sees another group forming; he calls them “ethicists.”
There is a certain type of business that stands for a certain type of product that we would not list on our marketplace. But you see businesses like Tampon Tribe that do stand for what we believe in, for healthy living, for high-quality products that add value to people's lives, that make them healthier, that are sustainable, that do good for the folks who are using the products. I would call those people ethicists, that type of investor investing in a world that they want to support with their unused money.
In addition to being “stubborn”—let’s call it tenacious—Ben has developed a unique ability to create recombinant products and ideas, drawing on ideas from disparate fields.
How to Develop Recombinant Creation As a Superpower
Ben, with help from his co-founders, saw three disconnected ideas and combined them to create something new.
In one corner of this triangle, they saw the JOBS Act created a new market for publicly selling securities in private companies. In the second corner, they saw a well-developed bond market for big companies. In a third, they saw conventional small business lending.
By seeing the intersection of these three components, they created the recombinant small business bond marketplace.
Ben offers two insights for developing this ability.
“Rely on what you know, and then you want to take in some other input that is from outside that field,” he says. “Some of the greatest innovations in music that have been made from bringing something that really didn't belong within that musical genre into it. And boom, a new style of music was born.”
So, he suggests “filling 20 or 30 percent of your brain inputs from things that don’t belong in the field you’re trying to operate in.”
By following Ben’s example and his advice, you can make recombinant creation a superpower that enables you to do more good in the world.
Benjamin Lozano (he/him):
Co-Founder and CEO, SMBX
About SMBX: SMBX is a financial marketplace that connects qualified small business owners with investors in their community and throughout the country. By issuing a Small Business Bond™, businesses can borrow money from investors at competitive rates, raising the funds needed to expand their business while increasing customer loyalty. The SMBX marketplace was inspired by the belief that there was a better way for small businesses to access the financing they need to succeed.
Twitter Handle: @thesmbx
Company Facebook Page: fb.com/thesmbx
Instagram Handle: instagram.com/thesmbx/
Biographical Information: Benjamin Lozano is the Co-Founder and CEO of SMBX--the world's first Small Business Bond marketplace that links qualified small businesses with investors in their communities. He was a professor of finance at UC Santa Cruz and San Francisco State from 2009 to 2020. He built a fintech research program at UC Santa Cruz shortly after the 2008 financial crisis. He is the former Chief Product Officer for Robin Hood Minor Asset Management. He co-founded SMBX in February 2020.