In the case of Hahnemann Labs, Quinn had a natural affinity group in his thousands of customers. Generally, people interested in alternative medicine are not those typically interested in the stock market, says Quinn. But his deal--which, in a way, was an "alternative" public offering--seemed to have a unique appeal to these investors.
Quinn sent out more than 35,000 offering announcements. The announcements resulted in about 1,700 requests for prospectuses; another 400 requests for prospectuses came from friends, family, associates, colleagues and other acquaintances. Of the initial 2,100 prospects who received a prospectus, about 240 ultimately invested.
Not that any of this was quick or easy. Quinn started drafting his prospectus in July 1994, and 12 and a half months later, in August 1995, he closed his deal's $400,000 minimum--with investments to spare. Of his 240 investors, Quinn estimates that just 15 percent, or 36 investors, sent in a check on their own after reading the prospectus. To get the rest, Quinn had to dial for dollars. In all, he figures he talked to some 700 to 800 potential investors over the telephone. Nor was any of this cheap: Legal, auditing, printing and marketing costs totaled $102,000, Quinn says.
Parenthetically, it's worth mentioning that the process described above underscores one of the primary reasons why so-called Internet IPOs are difficult to get done. Says Field, "Right now, the Internet works as a cost-effective delivery medium, but it does not work as magic. The fact is, most people will invest in an [offering] only if they already know and feel good about the company."
Although the entire effort took valuable time and resources away from his business, Quinn says it was not without benefits above and beyond raising the money. "Sure, there were days when I wished I would run into just one person who had $500,000," Quinn recalls, but he says there was also a tremendous benefit to talking to so many customers and finding out what their needs and attitudes were. "Reaching out to so many people and telling your story is never bad for a business if it's done with the right kind of heart and attitude."
In fact, sales during Hahnemann's fiscal year 1996 were $691,000--about $100,000 higher than sales for fiscal 1995. That momentum has spilled into fiscal 1997, with sales of some $400,000 at midyear.