Crowdfunding Is ‘Bigger Than the Internet’

Serial entrepreneur Scott Purcell says crowdfunding is “bigger than the Internet” when it comes to creating meaningful work and wealth.

Best known as the founder of Epoch Networks, one of the earliest Internet service providers in the U.S., and the creator of a trust company that surpassed $1 billion in assets, Purcell is now the chief executive of FundAmerica in San Francisco.

FundAmerica plans to let business owners raise money from everyday investors in the form of debt, equity, options or any other securities, under anticipated JOBS Act rules. The eight-person startup recently scored $1.4 million in seed funding to help entrepreneurs raise money online.

Purcell spoke with Venture Capital Dispatch about the nascent crowdfunding industry. An edited version of that interview follows:

Do you think crowdfunding is as big as the Internet?

Even bigger, actually–but it’s important for different reasons.

In November 2011, when I read about “The Entrepreneurs Access to Capital Act,” which was the proposed legislation before the JOBS Act, that was the first time I got excited about something in the same way I was when I heard about this guy, Marc Andreessen, who wrote this graphical window for the Internet thing.

When I started Epoch in the ‘90s, I knew the Internet would be big. And it was. It created industries, new art forms and transformed society. I remember big-time executives, people who were heading up car companies and law firms, all telling me: Nobody in our business will ever use email!

Other people like Steve Wynn saw it immediately. He hugged me, and said “I like this kid,” then became one of my earliest customers.

People may not see it since we’re early on. But crowdfunding is already making an impact on society, our economy and culture. Everything! It’s just like the Internet.  And it’s barely begun.

But crowdfunding is only possible because of the Internet…

Think back to the end of the 1800s–and the Industrial Revolution–what changed everything? It was not strong personalities. Even Carnegie and Rockefeller needed massive amounts of capital to get everything done, to build important companies, and take this country to another level.

By the way, the name “crowdfunding” is totally inadequate.

What should people call it, if not “crowdfunding”?

That’s a good question. “Crowdfunding” and “equity crowdfunding” were phrases that caught fire with the media when donation- or rewards-based platforms first came out. I prefer “crowd capital,” but I think that is taken.

Crowdfunding, if I have to call it that, encompasses so much. There is a wide range of securities-based investing that’s becoming possible online, now.

How will FundAmerica improve access to capital?

FundAmerica will not limit deals to equity. People forget, especially in Silicon Valley, that businesses may not always want to do equity deals, or ask for a donation. It may be better for them to raise capital through debt, warrants, options and so on.

On the investor side, lots of people would be happy to invest in a business that can give them a solid IRR–like that machine shop with a half-million in annual revenue. If they can offer a 10% debt security and profit participation for some time, it’s a pretty good investment.

SOURCE: Wall Street Journal