David Drake

July 20, 2015: Scott Purcell is a serial entrepreneur experienced in securities, banking, technology, internet infrastructure, publishing, social networking and music industry. He is best known for founding Epoch Networks, one of the first internet providers in the United States as well as the brain behind a trust company that exceeded 1 billion dollars in assets. Scott is a top capital raiser who has raised more than 140 million dollars in angel and venture investments. Today, he is the founder and chief executive officer at FundAmerica, a crowdfunding platform based in San Francisco. In addition, he serves in the Crowdfunding Intermediary Regulatory Association as a Board Member.

FundAmerica

Scott Purcell founded FundAmerica in 2011 with the aim to provide software, compliance management and technology systems to investment advisers, crowdfunding portals, broker dealers, and other entities that constitute online fundraising businesses compliant with Title I and Title II of the Jumpstart Our Business Startups Act (JOBS Act). The Act allows for small and newly established businesses to raise capital through crowdfunding. As an equity and debt-based crowdfunding platform, FundAmerica uses FinTech to deliver value to its customers as well as the crowdfunding industry. By 2013, FundAmerica had raised $1.4 million worth of investment in a single round from a team of angel investors.

This was the second round of funding raised by Scott Purcell, with the money raised going towards the improvement of FundAmerica’s crowdfunding platform. Initially, FundAmerica was called Arctic Island before it was rebranded.  FundAmerica applies an aggressive strategy that enables it to serve as a crowdfunding platform for accredited investors and companies, as well as a syndication platform for investment banks and brokers making it easy for accountants and lawyers to provide advice about client offerings.

According to Scott Purcell, there are numerous startups in the United States with little or no access to initial capital. At the same time, the United States has millions of big and small investors looking for opportunities to support startups so that they can grow and generate jobs. This is where FundAmerica comes in to provide a wide platform for these groups to interact.

Crowdfunding potential

For Scott Purcell, “crowdfunding is bigger than the internet” for different reasons because its implementation significantly affects businesses, culture and the economy. The internet allowed for the creation of new forms of art, transformed societies and created new industries like crowdfunding. For Scott, the revelation of the potential that crowdfunding holds came after reading the proposed legislation of the ‘Entrepreneurs Access to Capital’ that came before the JOBS Act in 2011. The idea evoked similar excitement in him as the graphical window that Marc Andreessen produced for the internet that made its innovation huge.

Scott holds that the impact of crowdfunding on the society, culture and economy is already being felt. With the approval of Regulation A+ in March 2015, the impact of crowdfunding will be felt even more as startups gain access to capital of up to $50 million. The new rules released by the Securities and Exchange Commission (SEC) also did away with the requirements for state compliance and extended the pool of investors not only from accredited investors but to non-accredited investors as well.

According to Scott Purcell, the space created by Reg A+ for unaccredited investors to participate in crowdfunding and the fact that the law created tradable security was a big plus. However, Reg A+ is more costly when it comes to legal and accounting costs as well as filing of annual reports compared to the previous 506(c). This means that issuers will require more time to get an offering out there.

How FundAmerica works

FundAmerica provides services that allow people to develop its technology on their platforms or websites using Application Programming Interfaces or widgets. Users can also use the forms directly from FundAmerica’s website. Initially, FundAmerica is offering backend services that are required by most participants in the market for which they cannot get done by themselves. Such backend services include broker-dealer services, escrow, electronic signing and storage of investor subscription agreements, checking for PATRIOT Act compliance, anti-money laundering background checks, disclosure template and payment processing. FundAmerica does not offer front-end UX design or web design for participants. This crowdfunding platform does not engage with investors or businesses directly as well.

In June 2015, FundAmerica introduced a new online service that enables participants to confirm accreditation of investors for 506(c) offerings. This service attracts a $30 fee for each investor per year irrespective of the number of investments they make. This service is built into the platform’s Invest Now Button.

Purcell was quick to point out that the interesting thing about this service is that they really did not want to do it; they thought other people should do it. “But we got so much encouragement/pushing from our platform customers that we ultimately caved in and built it.”

David Drake is an early-stage equity expert and the founder and chairman of LDJ Capital, a New York City-based family office, and The Soho Loft Media Group.

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May 26, 2015: International Finance Magazine has recognized licensed US brokerage WhoTrades as the fastest growing brokerage in Latin America in 2015. After six months of working in the region, the company’s turnover reached USD 10 bn, while its client base, which currently stands at 8,500 people, doubles each month. The company’s management says that this success is due to its focus on promotion of innovative products and provision of a wide range of investment services.

Latin America is a fast developing region, and the fact that it is of interest for brokerages is not surprising. The market is becoming increasingly competitive, and success of a European company, that proved to be a key player, deserves attention. WhoTrades entered the Latin American market in 2014, turning this region into one of the key regions in its development strategy. By that time, the company was a global player, present in 90 cities of Americas, Europe and Asia.

No matter how large-scale operations of a brokerage are, it is impossible to enter a highly competitive market and stay their without making a unique offer, which would sharply distinguish a new player from other market participants.

As for WhoTrades, it benefited from high technologies. The company offered Latin American traders its flagship product, ??? (Multi Market Account) service, which allows trading on various global venues – from Latin America, the US and Europe to Japan and Thailand – using a single account. The service provides access to 15 stock exchanges on various continents, and in the near term, the list of the venues will double: investors will have an opportunity to trade on stock exchanges of Australia, Canada, Singapore, South Korea and other countries. Hence, clients of the company may carry out operations and earn profit 24 hours a day all over the world without leaving their homes.

Investors have thousands of instruments at hand – shares, derivatives, currencies etc., which help them implement the most complex strategies. Trading from a single account, a trader does not need to open accounts with many brokers to gain access to various markets and does not need to use different trading programs. This service will interest many categories of traders, speculators and long-term investors, as well as traders that use arbitrage and hedging strategies. The important advantage of the company is that it provides support for Spanish-speaking users, making it easy even for neophyte traders to learn to use the services.

WhoTrades has another important instrument in stock that allowed it to rapidly increase its popularity among Latin American traders: this is whotrades.com site. This is a powerful means of communication, which unites a social network and trading opportunities. These opportunities promote mutual cooperation between experienced traders and novices. One of such cooperation model is Chain Trading service available on whotrades.com., which allows traders to automatically copy transactions of other market participants on their accounts. The service is easy to work with – a user has to choose a strategy, join in, and the system will automatically repeat trading steps of an experienced trader on its account. Experienced traders that have already developed an effective strategy may receive additional income: they may launch their own system, which will attract other participants and bring its owner profit. In addition, it is possible to join or quit any system at any time. Furthermore, clients of the brokerage may trade using a demo account, as well as enroll in numerous educational programs, depending on their level of experience.

One more competitive strength of WhoTrades is flexible and user-friendly tariffs. As a global brokerage, providing direct access to trading venues, the company has an opportunity to adopt an accommodative tariff policy aimed at cutting clients’ costs.

Adam Wang, CEO, WhoTrades

“We entered the Latin American brokerage services market only six months ago, but have already achieved success. Local customers have appreciated ample investment opportunities provided by WhoTrades, a high-quality informational, analytical and technical support, as well as affordable tariffs. As a result, the number of our clients and the turnover increased considerably in this quickly developing region with an evolving investment culture. I am confident that this prestigious award from International Finance Magazine will allow us to speed up expansion on the brokerage services market of Latin America Adam Wang, CEO, WhoTrades

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May 5,2015: Ethical investment in the UK continues to thrive and expand its reach as the Ecology Building Society has made an investment of £250,000 through Abundance, the UK’s leading online ethical investment platform. Both organisations have a long commitment to the spirit of democratic finance and this tie up between a building society and an ethical investment platform is a historic first. Ecology Building Society will invest on equal terms alongside the individual Abundance investors who invest from just £5 in each project.

After successful completion of an extensive due diligence process, Ecology selected the Oakapple Berwickshire project, currently live on the Abundance platform, to make its first investment.  The project involves installation of 749 roof mounted solar panel systems with a total capacity of 2,595 kW across homes owned by the Berwickshire Housing Association in locations including Duns, Eyemouth and Coldstream.

Investment in this project will produce an effective rate of return (IRR) of 7.5%, paid twice yearly to investors as cash payments over the 20 year term of the project.  Berwickshire Housing Association tenants living in the homes on which the solar panels are installed will enjoy a substantial drop in their energy bills – up to as much as a 30% reduction – without having to pay anything towards the project.

Oakapple Berwickshire is a perfect example of the Abundance mission in action; offering a low risk investment that pays an attractive return to investors, but also has wider positive outcomes – for the Berwickshire Housing Association residents, the UK’s international commitment to cutting its carbon footprint and the environment generally.

Bruce Davis, cofounder and joint MD of Abundance said, “We have always admired Ecology Building Society’s commitment to ethical and sustainable finance – they have been doing it successfully for more than 30 years – and feel genuinely proud that after a long period of due diligence they selected the Abundance platform and projects to make their first investment.  We hope this collaboration will help shape the future of ethical finance for the next 30 years.”

Paul Ellis, CEO of the Ecology Building Society said, “We’re pleased to be involved with the Oakapple Berwickshire project. It’s a great fit for us as it addresses our members’ desire to tackle fuel poverty, support social housing and add to the UK’s growing renewables capacity. We believe that investing via crowdfunding platforms allows institutions to stand alongside individual investors, and amplify the impact of their investments in a diverse funding package. We have been impressed by the rigour of Abundance’s underwriting, and expect to develop our relationship further”.

This first injection from the Ecology Building Society increases the total investment in Oakapple Berwickshire to more than £1.5 million, well past the minimum raise of £500,000. The target total raise remains £3.1 million.  Since launch, Abundance has raised more than £9.5 million of investment into its ethical projects.

Investment in projects offered by Abundance is made through the purchase of Debentures – official IOUs that commit to pay returns on top of the original capital.  Returns will be paid in single or twice yearly payments over the term of the project (depending on the project), although investors wishing to cash in early can sell their holdings on to others via the Abundance website.

Capital is at risk and returns are variable.  Investments are long term and not readily realisable.

Press Release

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Suparna Goswami Bhattacharya

April 29, 2015: Over the past 5,000 years, Egypt has changed its capital city 29 times. The Pharaohs of Egypt often moved the capital by building new cities. But since 950 AD, the country has had a stable capital in Cairo, which houses nearly 20 million inhabitants.

But President Abdel Fattah el-Sisi is taking a cue from the Pharaohs. A millennium on, Egypt will see a new capital — a grand plan which the President thinks will attract fresh investments. The government has passed on the baton to build the new capital (currently nameless) from scratch to Mohamed Alabbar, the Emirati businessman who built Burj Khalifa in Dubai — the tallest building in the world.

The $300 billion ambitious project plans to house 21 residential districts, 663 hospitals and clinics, 1,250 mosques and churches, and 1.1 million homes housing at least five million residents. And the aim is to have the city up and running within seven years. Though some investors have welcomed the plans, there are many who argue that similar schemes have failed to succeed in Egypt in the past.

Brent Toderian, Vancouver’s former city planner, says, “The tight timeframe for planned build-out of an entire new city is a red flag that causes me some concern. It’s one of the things that makes this feel more like a land development play than a real city-building exercise.”

In fact, the government did not even consult citizens before deciding to shift the capital. “The current government is still following the top-down approach and there is no sign that they are going to change it. There is an absence of parliament and no elections are in sight,” states Hussein Hassan, an international anti-corruption and asset recovery expert.

As said previous such plans have gone awry for Egypt. The country is dotted with several ‘desert cities’. The initial plan, while building these cities, was to make it affordable for the masses but most of the developments consisted of upper class residencies and, hence, could not cope up with the demand for affordable housing. Such cities have a vacancy rate between 64% and 70% while at the same time the country faces the problem of high homelessness. These towns collectively hold a population, which is lesser than Cairo.

Though neighbouring UAE has been successful in following this approach, the fact of the matter is that Egypt is a different model and economy all together. One must take into account that Dubai is a small and rich city and the culture and ruling system is in the hands of a monarch. “Egypt is still in the phase of building and modernising its infrastructure. Since Egypt has high political instability, I do not see investors investing heavily unless they see a real robust democratic reform process in place,” rues Hassan.

To be fair, the government in Egypt has taken some commendable steps which have made the economy look much better than what it was four years ago. For instance, the decisions related to reform of subsidies for both fuel and food, the Suez Canal project, announcement of investments plans etc.

Simon Williams, chief economist, Central Europe, Middle East and Africa, HSBC, says, “The economy has been weak since the 2011 revolution, but after four difficult years, it has begun to move forward. The pre-requisite for this has been an improvement in political situation and security, which has allowed for gains in policy making. Investor interest is improving and I expect it to strengthen further into 2016.”

GDP growth in the fourth quarter of the 2013-14 fiscal year was 3.7% compared to 1.5% a year previously. The African Development Bank, in fact, supports the government’s initiative in creating a new capital. “The new capital city development is one of the mega projects to spur growth and development and create jobs. It is a new annex city attached to Cairo and so it will be to attract new investments in service industry and financial sectors and, perhaps, if the governments decides to move some or all the ministries there, it will also facilitate doing business,” says Prajesh Bhakta, chief country programme officer, African Development Bank, Egypt.

However, economic recovery remains fragile due to high inflation rate estimated at 10.1% in 2014, the country’s high outstanding public debt to GDP ratio, up to 97% in June 2014 from 94% a year previously. Even the unemployment rate has risen to 13.3% in 2013 from 9% in 2010.

According to Bhakta, though a top-down approach is not a problem, the government should also have a parallel down-top approach “to reverse the poverty path and ensure the poorest are not adversely affected by the cuts in subsidies”.

Despite this, Toderian feels that a new city should be a result of success and not a response of desperation. “New cities need to take advantage of momentum as they generally do not create momentum. I tend to prefer strengthening existing cities in sustainable growth patterns rather than trying to start from scratch on new cities with a blank sheet of paper. Having said that, with the population growth we are expecting globally, new cities will be inevitable. The key will be to put them in places that make sense, and do them for the right reasons with the right conditions for success – not because a country is desperate to kickstart some economic momentum.”

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