Direct Hit

With direct public offerings, entrepreneurs can take financing into their own hands.

Michael quinn's dilemma was a common one, but his solution was not.

After 10 years in business, Quinn wanted to go national. But his Hahnemann Laboratories Inc., a San Rafael, California, company that manufactures homeopathic medicines, needed to become a Food and Drug Administration-licensed pharmaceutical manufacturer if it was going to market its product across state lines. Where would Quinn get the capital to outfit a new facility?

"I went to a commercial bank, and they said `No way,' " recalls Quinn. Investment bankers weren't offering much hope, either. But Quinn had an epiphany when he realized that if just 200 of his more than 28,000 customers invested about $2,000 each, Hahnemann Labs would have the equity capital it needed.

What Quinn did next was an end run around traditional brokerages. He marketed common shares directly to individual investors in what is known as a direct public offering, or DPO.

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This article was originally published in the June 1997 print edition of Entrepreneur with the headline: Direct Hit.

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