Palmer also tried talking up his offering in various newsgroups, on bulletin boards, and in chat rooms, posting nearly 7,000 messages. But most of the forums quickly erased his messages, presumably for the same reason cited by the Motley Fool when it erased the message Palmer had placed in the "Minnesota" section of that site: the site is for publicly traded companies only. The sites that didn't erase his message generated mostly "nastygrams," as Palmer puts it. By that point, he knew better than to try a mass E-mailing, a.k.a. spamming. "People don't want unsolicited E-mail, period," he says, noting that it's difficult to limit such mailings to particular states. Instead, Palmer limited his mailings to "opt-ins"--Web surfers who indicated their interest in receiving them.
Finally, Palmer says he spent $750 to place his offering on DSM. DSM has since turned over some 40 leads to him, but most turned out to be from states in which the offering wasn't registered. Palmer says DSM and other sites like it can be useful; for one thing, such sites often offer mechanisms for investors to trade stocks originally offered in a DPO, providing much-needed liquidity to the investment. Other lessons: few people are interested in downloading an 82-page prospectus (a process that takes about 10 minutes via a standard modem connection), judging by the fact that only a small number of people ever bothered to download his; no matter how interested investors become in the stock, they're more likely to call up to buy rather than plug in their credit-card number; and $500 is the largest acceptable minimum investment for most Web surfers, something Palmer figured out after starting off with a $3,000 minimum before dropping it to the lower figure.
Oh, and one more thing: pioneering is hard, be it for attic-heat-transfer systems or Internet fund-raising. Palmer ended up raising a mere $20,000 on this round. On the plus side, the company got to keep the money this time around because it had avoided states that required a minimum level of funding--proving, at least, that some sort of useful learning curve is in effect. Even better, the company's increasingly bright sales picture has helped Palmer bring the total amount of money he has privately raised to over $600,000. (He now owns no stock personally but through a family trust exercises control of 40% of the company.) The obvious conclusion: private fund-raising was the way to go for SolarAttic. But that wasn't the way Palmer saw it. "I know we're destined to be a public company," he says.
Ever the optimist, Palmer concludes, "We could grow to a hundred million a year, easy." That's a long way from the $118,000 the company brought in last year, but, on the other hand, revenues so far this year are up 250% over the same period last year. There are now more than 200 SolarAttic pool-heating units installed throughout 31 states.
Buoyed by that growth rate, at press time Palmer was registering a $4.8-million Regulation A DPO in New York and--combative fellow that he is--Minnesota. He ticks off the reasons that things will be different this time around: he's learned a lot of the ins and outs of marketing stock on the Internet; Internet DPOs are gaining credibility; and he knows how to keep the satanic state regulators at bay. He also says he's going to try to play the affinity card this time around, using the Internet to zoom in on the environmentally conscientious. He's also going for a reverse affinity play. "If you're a pool owner who learns about our technology as a potential investor, I might get you as a customer, too," he says.
And if this round fizzles like the others? Then he'll try again. "I go by the kick-the-can theory of money raising," he says. "I won't allow myself to think I have to have a certain amount or I can't make the business go. That's linear thinking. I'll spend the rest of my life making this work."
You can almost hear the Minnesota regulators gnashing their teeth.
David H. Freedman is a contributor to Inc.
Virtual road show
Clay Womack, CEO
Direct Stock Market
Launched: 1993
What Direct Stock Market is: A listing service for direct public offerings (DPOs) and private placements. Direct Stock Market provides an on-line community environment in which investors can discuss offerings, but they must do their own due diligence. Direct Stock Market also helps companies to put together Web-based "virtual road shows."
And isn't: An automated system for filing a Regulation A or Regulation D offering. You still have to do all the paperwork yourself--off-line.
The on-line advantage: Investors can scan the prospectuses of several dozen DPOs and private placements, and companies can get their offerings in front of thousands of small-business-friendly investors. "There are 80,000-plus businesses in the United States that are growing at a rate of at least 50% per annum, and the VCs are only doing 2,000 deals at any point in time," says Womack. "I want the other 78,000 businesses on our site."
Your odds of finding funding: Probably better than if you posted the offering only on your own Web site. Womack has done a good job of generating publicity for the site. But mismatches are common. Interested investors may respond on-line from states in which your DPO isn't registered. On the other hand, if Direct Stock Market becomes a broker-dealer as planned, your offering could find a much wider audience. (For a price.)
