Smallknot is the best way to fund and connect with the small businesses that make your neighborhood your neighborhood.

Last year JWT New York launched a partnership with TechStars, the No. 1 startup accelerator program, as a part of the agency’s ongoing innovation efforts. A few weeks ago we talked to the co-founder of Wander, one of the startups from TechStars’ spring 2012 group. Another startup from that group is Smallknot, a crowdfunding site that focuses on giving local businesses a leg up. Founder Jay Lee, who previously worked as a corporate and securities lawyer in New York City, explained to us his mission of building a “local ecosystem for finance” and why he thinks locally focused consumerism will only grow.

What’s Smallknot’s 30-second elevator pitch?

Smallknot is the best way to fund and connect with the small businesses that make your neighborhood your neighborhood. The idea is that it’s a crowdfunding platform for small businesses to raise funds from their community, their friends, their families, their customers and their neighborhoods. And the supporters will be repaid in kind. So anyone who contributes gets more back in return than they put in.

What inspired the creation of Smallknot?

We were working on Wall Street and were helping facilitate the billion-dollar transactions after the collapse of Lehman Brothers. We saw that the effects of the financial system on small businesses were devastating. We saw that small storefronts were turned down and weren’t able to get access to credit. It made us wonder why it was so easy to move large sums of money across the country, across the world, but there was no way to move money locally, to move money 50 yards down the block to your favorite places where you actually spend your life and your time, and that you actually care about.

Once we realized that large disconnect of the businesses we supported and loved that weren’t able to get financing, we tried to build a way to build that connection, a way for people to finance their neighborhoods.

What are the main goals of Smallknot in helping local businesses?

Our main goals were finding a way to let small businesses get access to capital so they can grow, expand and survive. We find that many small business owners have large dreams and large plans, but they’re helpless because they just can’t quite get a small bit of capital to get them to the next level.

So we really want to help them find their way to do that. And we also love that in doing so they’re building stronger connections with their community and with their customers. Strengthening those relationships is a really powerful byproduct of the fundraising process that we think is just great.

What are some of the macro trends your company is leveraging?

At the very highest level there are increasing shifts in people who look toward their own communities. They are starting to be more disenchanted with big box stores and strip malls and looking more at the type of places that give a neighborhood character and vibrancy and independence. You’ll see in the local movement “Buy local,” “Shop local,” and there is “Eat local.”

I think the additional media attention brought on by technology is really fascinating. The last one is the ability for technology to change the way you interact with your local environment. It’s another big trend using Foursquare or other geo-location apps where people are interacting with the offline world much more now.

How is Smallknot planning on bringing communities together?

Some of the businesses we are working with are offering really engaging things; it’s not always just a meal, not always just products or services. There are also live events.

There are a lot of ways that communities come together and can actually engage with each other. One example is we work with Bon Chovie [a fried-anchovy purveyor in Brooklyn], and they offered fly fishing, which is both goofy and fun, but also brings people together between each other and with the business.

Egg restaurant, who we work with as well, are throwing a private party just for their supporters, so there will be a way to bring the two together with business and meet brand new people who happen to love the same place. We think a lot of great real relationships are being built through the platform, something that we always hoped would happen, and now we’re actually seeing it happen.

People are losing faith in big institutions and becoming more motivated to implement their own ideas for change. Do you think this trend will influence the use and development of Smallknot?

It absolutely does. Also, I think the disenchantment that people get from financial institutions, especially the crisis in 2008, have left people looking for solutions that make more sense to them, that they have more of a hand in than the part that is mediated by someone else, whether it’s the government or a big bank or someone on Wall Street.

They want to make their own decisions, and for us that was a decision around why we built our platform this way. You get to choose directly where your money goes.

I think other people are starting to have the same feeling that they want to have more autonomy about their community or about the businesses they support or just about most things. I think that trend is inevitable. It is unstoppable and is going to help us in the future.

How does Smallknot differ from other local crowdfunding platforms, such as Lucky Ant?

Our focus is really building a local ecosystem for finance. Structurally the platforms all look similar, the mechanics are often very similar, but our focus is really our mission, which is a way to unlock capital for small businesses and connect that capital with the community. We focus on building a process that keeps value for all sides, so when people do contribute funds, they have to get back more than they put in and the business has to both repay people in kind and also repay people with engaging experiences.

It’s a matter of keeping the focus on how to help small business get capital, how to help people get value out of making their support and how to make sure that we don’t just create another site but really focus on making sure we’re doing the mission we set out to do.

How do you think the local movement will evolve in the next five years?

At its core the local movement is going to get a lot stronger. You see a lot of different trends growing, whether it’s local technology or local geo-technology. You also have the “eat local,” “buy local,” “shop local” movements, which are cultural and I think are growing, both among our generation and older generations, which are starting to see the effects of globalization or corporatization on retail.

You’re going to see it definitely get stronger, and then you’re going to start to see the intersection between technology and these movements, which we are at the beginning of.

It’s going to be a very interesting and powerful movement, and who knows where it’s going to go, but I’m pretty excited to see what happens.

Image credit: Smallknot