Dealing Direct

Try direct public offerings as a way to raise capital.
2 min read

This story appears in the October 2007 . Subscribe »

Question: I've met many investors but can't get anyone to back my idea. A friend suggested I look into a DPO, or direct public offering. What do you think of this option?

Answer: While not nearly as popular as IPOs, DPOs let entrepreneurs with big ideas and small budgets raise capital by selling shares directly to investors for less cost and with far fewer regulations than traditional securities offerings underwritten by brokerage houses. DPOs work for entrepreneurs with a following--e.g., a restaurateur with many loyal patrons or a startup entrepreneur with family serving as backup. DPOs can fall into three categories: Regulation D lets you raise up to $1 million every 12 months by registering with your state securities administration; Regulation A lets you raise up to $5 million every 12 months and requires registration with the Small Business Office of the SEC; and direct offerings have no ceiling. Once the deal is done, you have a public company that trades on the over-the-counter market, which lets you raise more money in the future. But, you need to market the shares yourself and hire an investor relations firm to drum up publicity. "The biggest issue is selling your securities to enough investors to form a trading market," says Stephen Furnari, a partner at law firm Furnari Levine LLP. He advises setting aside at least $100,000 for professional and filing fees.

Rosalind Resnick is Entrepreneur's "Advisor" columnist.

More from Entrepreneur

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

One-on-one online sessions with our experts can help you start a business, grow your business, build your brand, fundraise and more.
Book Your Session

Whether you are launching or growing a business, we have all the business tools you need to take your business to the next level, in one place.
Enroll Now

Related Books

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

It Started As a Joke and Turned Into a Startup That Raised $1 Million in Funding