Fee: From $2,500 to $4,000, depending on the size of the offering, for a 90-day listing. --D.F.
We're from the government. We're here to help
Terry Bibbens, Entrepreneur in Residence
Ace-net
Launched: 1997
What ACE-Net is: A Small Business Administration-sponsored listing service for companies that have completed the paperwork for a streamlined direct public offering (DPO). The Angel Capital Electronic Network (ACE-Net) was designed to make small offerings (up to $5 million) cheaper and easier to pull off by eliminating the need for a broker-dealer and lowering the legal barriers; a listing on ACE-Net satisfies many states' securities regulations.
And isn't: A vehicle for launching a full-fledged DPO--you can't sell stock to just anyone, only to "accredited" investors.
The on-line advantage: "A single filing on ACE-Net suffices to exchange stock certificates and checks in multiple states. The offering document is created from a simple Q&A the entrepreneur fills out on-line. Your lawyer, accountant, and board can also log on and review the document and make changes in real time. And you can also quickly modify the offering depending on the marketplace. Rewriting the offer and refiling it is not hard to do on-line."
Your odds of finding funding: Until recently, dismal, if you hoped to do a national direct offering. Despite its government connections, ACE-Net has lacked crucial nationwide support and publicity. That's slowly changing, now that 37 states and 1,000 investors are on board. In one recent six-month period, 20% of the 140 companies listed in ACE-Net's national database had received financing. The DPO route hasn't exactly caught fire, perhaps because it's the wrong vehicle for appealing to angels. But you don't have to do a DPO to tap local ACE-Net resources--and connections to angel groups.
Fee: Up to $450 for an annual listing. --Susan Greco
The IPO classifieds
Stephen D. Pelletier, CEO
Offroad Capital Corp.
Launched: 1999
What OffRoad Capital is: A "placement agent" for established private companies seeking growth capital of $3 million to $15 million. Several thousand accredited investors--including angel groups and some VCs--are expected to kick in a minimum of $25,000 per investor per deal. Road shows will be real and virtual: CEOs make studio appearances and take questions from investors via E-mail or phone. "We're not just a listing service. We help these companies get financed."
And isn't: An underwriter of deals.
The on-line advantage: The ability to create a public "marketplace" for vetting and selling private placements. "Real companies with real revenues and profits should be able to tap equity, not just debt. Within three years, it will happen," says Pelletier. "We're using the Internet to create a marketplace for growing companies."
Your odds of finding funding: Slightly better than at Garage.com if your annual sales growth is at least 20% and your company's valuation is at least $20 million. You also need a clear exit strategy, such as a public offering, merger, or acquisition. Of 400 companies recently considered, 5 have received financing. All industries are welcome, but "don't be surprised" if the first deals are Internet plays, says Pelletier.
Fee: From 3% to 9% of any money raised. --S.G.
A match made in . . . cyberspace?
Guy Kowasaki, CEO
Garage.com
Launched: 1998
What Garage.com is: A matchmaker for company founders and sophisticated angel investors, select venture capitalists, and corporate venture-capital divisions. Entrepreneurs receive help with creating a management team or marketing strategy and with pitching their companies to the investors involved, who collectively have kicked in an average of $2.9 million per deal. "We're a broker-dealer, quasi investment banker, and what I call a venture 'gapitalist.' We fill that gap from $1 million to $4 million," says Kawasaki. "The bottom line is we're trying to help two guys or two gals in a garage get seed capital. We find 'em, fix 'em, and fund 'em."
And isn't: The final word. "Angels have to do their own due diligence. There's no on-line yenta yet."
The on-line advantage: "It's compressing time to 'high value' money and providing a greater breadth of exposure for the entrepreneur. It's all about opening up the channels. Taking information over the Internet is 100 times more efficient for us than taking a paper business plan. We determine the questions and how much space entrepreneurs have to answer each one--it's all standardized. And the plans are searchable forever. All plans are created equal through the Internet. And we read every one of them."
Your odds of finding funding: Nil, unless you're a hot start-up in high tech, biotech, or health sciences. Garage.com expects to close on 30 deals culled from a projected 10,000 business plans to be submitted by the end of the year.
Fee: Typically, 5% of money raised. Garage.com also buys a small stake in the company at the "pre-deal valuation" price. --S.G.
On the auction block
Ian Zwicker, President
WR Hambrecht & Co.
OpenIPO
Launched: 1998
What OpenIPO is: A process by which WR Hambrecht & Co., an investment-banking firm, takes companies public by auctioning shares over the Inte
