Scott Purcell is in the perfect position to comment on the current state of the crowdfunding industry. As the founder and CEO of Fund America and CEO and Chief Trust Officer of Prime Trust, Mr. Purcell provides escrow services, custody of accounts state clearing, document esign tools, broker-dealer execution and other back office services to portals and others engaging in technology-driven fundraising.
Mr. Purcell is a featured speaker at FundIt 2017, the crowdfunding, compliance, marketing and fintech conference taking place on June 1 and 2 at the Liaison Capitol Hill Hotel in Washington, D.C. He will participate in a wide-ranging fireside chat with SEC acting chairman Michael Piwowar, noted crowdfunding attorney Douglas Ellenoff, and Competitive Enterprise Institute senior fellow John Berlau.
“We’ll be discussing what changes we might see to regulations that might affect private capital formation,” Mr. Purcell said. “Industry people will be very curious to hear what acting chairman Piwowar has to say.”
Mr. Purcell said everyone is frustrated by an industry that is growing much slower than expected. A few years ago many predicted hundreds of portals offering thousands of deals when in reality we have seen a small fraction of that. While regulation has played a role, allowing both higher caps and accredited investor participation in Reg CF offerings would help.
So would marketing, Mr. Purcell added. Get the right kind of deals with the right kind of retail focus in front of interested investors. Take a compelling story and tell it well.
“There’s a tendency in this space for people to offer equity securities when that’s not appropriate,” Mr. Purcell explained. “Most of these companies are not going to go public or be sold for giant multiples.”
For clues on what the crowdfunding industry can do to help itself, it should look at the area most successful – real estate, he added. Investors understand the risks, exit strategy and any other factors that help them make reasonable investment decisions.
“A tech car company raising seed capital?” Mr.Purcell asked. “Who in their right mind would ever put equity in that?”
And when you get people excited about a concept car or craft brewery, don’t treat it as a one-off, continue to educate them not only about that campaign, but about others along the same lines they might want to invest in too. (That is an area of disagreement among attorneys as to how much one can electronically match people with platforms, Mr. Purcell cautioned.)
Mr.Purcell said his companies Fund America and Prime Trust are both doing well. Fund America enables people to build its technology into their websites and platforms using APIs, embeddable apps and direct-use forms from Fund America’s site. They provide backend services including escrow, broker-dealer services, electronically-signed and stored investor subscription agreements, payment processing and background checks for anti-money laundering and PATRIOT Act compliance.
Prime Trust is a technology-driven trust company focusing on asset protection and private securities with a team well-versed in trust operations banking, securities regulations and governmental affairs.
The technology supporting the various capital raising initiatives needs to evolve with regulations and changing industry needs and Mr. Purcell said he will ensure his companies stay on the cutting edge.
“There’s always room for improvement. I have 10 full-time engineers on staff, not outsourced, who are constantly working on the technology.”