Crowdfunding as an entrepreneurial tool is disrupting traditional forms of securing capital. Chance Barnett, founder and CEO of Crowdfunder, explains that collaboration between the new school and old school is necessary to get the most out of a new and emerging capital market.
"We’re seeing a brand-new capital market about to be born and that’s everyday people that can invest in these companies alongside those other more experienced investors. And that’s going to change the face of fundraising for equity and it’s going to change the game for how entrepreneurs speak to the people that can support them financially."
As part of Big Think's collaboration with Singularity University on Exponential Leadership, Chance Barnett explains how the exponential technology behind crowdfunding is revolutionizing the world of entrepreneurship.
In late January 2015, Big Think, where the world’s leading thinkers examine the most essential ideas of our age, and Singularity University, a teaching organization and accelerator, came together to find definitive answers to what constitutes exponential leadership––true leadership for the age of exponential disruption. Chance Barnett is featured in the resulting 2015 Exponential Leaders List.
Chance Barnett: Well I think every entrepreneur who goes out and dedicates their life and throws everything behind a venture has some moment where they thought this is the thing that I have to do. And for me with Crowdfunder after having done several ventures, I actually experienced a bit of anxiety about what am I going to do next. And so in some ways there was this moment of — or several moments of fear of failure or what am I going to do this time. But it was about four years ago that after a long series of a couple of successful startups, a couple of failed ones, I saw this opportunity with a very small group of people who wanted to change how some of the investment laws in the United States really worked.
And they were really about changing those to help small business owners and entrepreneurs. Specifically giving them more of an opportunity to go out and raise money from say their local community or the people around them. Maybe not just friends and family but a broader audience. And it’s actually funny when you look into the securities laws that govern how you can fundraise for a private company in the U.S. that it turns out you’re not supposed to talk to anyone that you don’t already know. So in a lot of ways for an entrepreneur who’s starting a business for their first time even if they’re bright, even if they have domain expertise, if they’re technically skilled, but they haven’t started a business and they don’t know a bunch of wealthy investors, they’re at a pretty significant disadvantage. So being someone who’s really grown up around the web who started my first company in the Web 1.0 boom and really have fallen in love with the idea that technology can connect us to like-minded communities and help us in a variety of ways in our lives. I felt really passionate about the idea of hey, couldn’t finance change in this way. Couldn’t finance be more collaborative and help serve entrepreneurs.
And it spoke to me really significantly that there could be an opportunity to change how investing laws work because I had been that entrepreneur in my past. I had had a couple of ventures that had been successful. Started in investing and funding some of my own ideas. I had also failed at a couple of those and actually failed specifically raising money for a company that I had put really about a quarter of a million of my own money in. And that was right around 2008 in a very difficult market to raise venture and kind of was left sitting on my hands and saying oh man, I wish there was a better solution. So Crowdfunder for me is in a lot of ways a combination, kind of culmination of a variety of different passions in my life. It’s about entrepreneurship, but it’s also about investing. And I think as entrepreneurs evolve and they have successes and failures they feel compelled then drawn to the idea of I want to help some other entrepreneurs. So really Crowdfund for me is not only putting this disruptive idea of exponential technologies squarely on early stage finance and disrupting that market, but it’s also about helping entrepreneurs at scale and that’s something I’m really passionate about.
I do believe that there are parts of the market that are being disrupted through equity crowdfunding, but that’s not really my viewpoint. I’m probably more of a collaborator than I am a jabber meaning I don’t think that crowdfunding and equity crowdfunding should disrupt and replace VCs. And I don’t think we should do away with angels or angel cribs. However, I am a strong believer that over the long term, distributed technologies, automation can really scale beyond the limits of what humans can do and start to do a lot of the more rote, mundane, or analytic jobs a lot better. And then they can also help communicate at scale. But it still takes human beings with relationships with many, many years of experience to really add value on top of that and make meaning out of all of that. So I see that we’re complementing and disrupting venture capital at the same time.
Our business today works best when we work alongside great venture investors whether that’s at the seed stage or its later stage. And we get involved and help raise money for companies that are proving and have some validation and we really further validate them. But I do think as this market evolves it’s really year one for equity crowdfunding and we’ve done nearly a quarter billion dollars in financing the first year. That’s going to exponentially grow. What happens then when you can invest alongside these much bigger institutional funds? That’s a huge opportunity and it wasn’t available even several years ago and it’s going to be widely available to the eight-and-a-half million accredited investors in the U.S. So I feel like we are disrupting it, but its best in my mind when you collaborate with the thought leaders, when you collaborate with the smartest people and the most wisdom and experience in this area.
I also see that Crowdfunder is disrupting early stage finance as a whole by looking to create an entirely new capital market. So in a variety of internet and technology-driven businesses you see that there’s a couple of winners in this given niche. But crowdfunding is different and finance is different because it’s really about creating a giant capital market. So if I was to say to you at the dawn of capital markets in the public markets in the U.S., like the New York Stock Exchange, that there would be one investment bank that would help raise money and do all the banking for public companies on Wall Street, you would look at me and say this person doesn’t understand what a capital market is. They’re crazy. What we’re seeing is the dawn and the birth of a brand-new capital market that is in itself a disruption and a creation of a new capital market for entrepreneurship and for venture. And there’s going to be a variety of players, Crowdfunder included in them, that can help serve a really important function and role in this market. So not only are we seeing the $30 billion venture investor annual market being disrupted and brought online through equity crowdfunding; we’re seeing the $20 to $25 billion angel investment market being brought online and partially disrupted. But we’re seeing a brand-new capital market about to be born and that’s everyday people that can invest in these companies alongside those other more experienced investors. And that’s going to change the face of fundraising for equity and it’s going to change the game for how entrepreneurs speak to the people that can support them financially.