A lot of chief executives think that raising money in the public equity markets is reserved for larger, more established companies. But Alan Freidman, CEO of Mr. Bulb, a three-year-old distributor of energy-efficient light bulbs and other lighting products in Worcester, Mass., knows differently. Last winter his $2.3-million business managed to raise $2.5 million in a public offering.

Small public offerings of less than $5 million are more common than you might expect. (See "Who Goes Public?" February 1993, [Article link].) But as Freidman can attest, they aren't easy to orchestrate. Name-brand brokerage firms won't look at deals of less than $10 million because they say they can't make money on them. And many regional underwriters also shy away from them, noting the fickleness of the market and the substantial selling effort required. While lesser-known firms out there are eager to sell small initial public offerings, it's important to check them out carefully, ideally with the help of a good lawyer, before making any commitments.

What should you try to find out? Walter O'Hearn, senior vice-president at New York City's Keane Securities (which isn't a frequent player in this area), recommends reviewing the firm's latest offerings and talking directly with principals of the companies that raised money.

Though the compensation to brokers is regulated by the National Association of Securities Dealers, expect total expenses to run up to 20% for a $4-million offering. And it's standard for brokers to ask for money up front to cover their out-of-pocket costs. Below are some underwriters that have shown a recent interest in (and an ability to sell) small offerings:

Culverwell & Co., in Boston, looks for well-managed businesses in industries with growth potential. It will consider raising as little as $3 million. "We prefer companies with growing revenues and profits," says president Ed Culverwell. But he's done deals for emerging companies without profits.

Gilford Securities, in New York City, also evaluates management, market, and potential. Its minimum deal size is $4 million. If a company doesn't have adequate operating numbers for a public deal, chairman Ralph Worthington says, his firm will consider raising private seed money.

Thomas James Associates, in Rochester, N.Y., is open to deals for companies still in the red, says corporate-finance associate George Salloum, "if we believe the money they raise will help them become profitable."

Paulson Investment, in Portland, Oreg., has operated in this market since the late 1970s. Lately, it has emphasized secondary deals, but it plans a few IPOs of $3 million and up in 1993.

Texas Capital Securities, in Houston, focuses a lot on industry appeal. A recent deal: a $3-million financing for an energy-conservation company. Texas Capital likes to work in tandem with other underwriters. -- Bruce G. Posner