"These days growing my company feels like what happens when you play one of my kid's video games. You work like crazy to get to the next level, only to have the game become infinitely more complicated as a result."

-- Jim Ansara, founder and CEO of Shawmut Design and Construction, in Boston

Stock Marketing

The NASDAQ investigation may be getting all the ink these days, but probably more significant for small businesses thinking of going public is the growing popularity of so-called direct offerings, wherein companies sell shares directly to the public, often targeting their customers as potential investors. We have previously written about the direct offering of Real Goods Trading Corp. (See "He SCORs!" The Inc. 100, May 1993, [Article link].) Now comes Mendocino Brewery, which is including with each six-pack of its Red Tail Ale a bookmark-sized announcement inviting customers to call for a prospectus. The offering price is $6 a share, with a 100-share minimum. As of mid-November, some 1,750 investors had put up more than half of the $3.6 million the company hopes to raise.

So what's behind the direct-offering trend? Interestingly, it's being fueled in part by developments outside the capital arena. "I think advances in the whole art and science of direct marketing have played a major role," says Drew Field, a lawyer who served as an adviser on the Real Goods offering and who is now guiding Mendocino Brewery through the process. "Some of the more successful and better-publicized offerings have been approached less like a traditional IPO and more like a new-product launch. It's a way of delivering a different type of product to an established market of people with an existing relationship to the company."

Therein also lies one of the benefits of direct public offerings. "They create ambassadors of goodwill for a company," says Field, "satisfied customers who are now satisfied shareholders as well. That's one reason Real Goods not only did a second stock offering but lowered the minimum to 15 shares. The lower minimum is uneconomical, but customers who buy shares in effect become salespeople for the company."