The Internet is called everything from an information resource to a great equalizer. For those seeking business financing, another description comes to mind: facilitator.
A growing number of Web sites connect business owners with financing resources ranging from banks and venture capitalists to private investors looking to purchase stock in direct public offerings. Some charge hundreds of dollars for their assistance, while others offer services for free to entrepreneurs. Most are privately owned, but one-ACE-Net-is SBA-backed. And they each offer their own range of assistance. For example:
Direct Stock Market is an industry pioneer that began as an online market for direct public offerings in 1993 and has evolved into a site that helps connect investment bankers with entrepreneurs seeking $20 million or less (and refers those looking for more than $20 million to its banking partners). There's no charge to investors, but entrepreneurs whose applications are accepted pay a fee starting at $10,000.
Offroad Capital "acts as an agent to place private equities with a diverse network of investors, including qualified institutions and accredited individuals," says its first vice president of corporate finance, David Anderson. He also stresses that Offroad is not a matchmaking service but does help clients prepare investor information. The cost is a fixed percentage of gross proceeds, so it tends to vary from deal to deal.
Capital-Connection.com is a Web site for the more self-reliant. It charges entrepreneurs a $75 membership fee and lets them decide which investors they're interested in. Then it helps entrepreneurs review their proposals and match them with potential accredited investors in their database for 90 days. "If a match is made, we tell the investor by e-mail or fax, then send them a blind description of the project. If investors want additional information, we tell the entrepreneur the name and contact information of the investors," explains Dee Power, Capital-Connection.com's co-founder.
The key to finding the right online financing site is determining what you need: whether it's someone to help you through the complexities of conducting a DPO or the low-cost, low-maintenance approach of a matchmaker service. Whichever option you choose, remember, online searching should only be part of a comprehensive strategy to find financing.
Access to Capital Electronic Network, or ACE-Net, is a password-protected, fee-based national securities (stock) offering listing service. Initially developed by the SBA's Office of Advocacy, the site is managed by the Whittemore School of Business and Economics and maintained by the Research Computing Center of the University of New Hampshire. Regional ACE-Net Network Operators (listed on the site) manage the day-to-day operations and can charge entrepreneurs and investors up to $450 annually to enroll in the service. Investors are self-certified accredited individuals, venture capital firms, Small Business Investment Companies (SBICs) and institutions. In order to participate in ACE-Net, entrepreneurs must be eligible to sell securities in their company and must conform to SEC rules for Regulation A or Regulation D Rule 504. These requirements are detailed on the site.
BusinessFinance.com is a free Web site offering entrepreneurs access to funding ranging from commercial finance to venture capital. Those interested in venture capital should be seeking at least $250,000, have a management team with a proven track record and be in an extremely high-growth industry. Those seeking other types of investment funds will find sources for private placements, reverse mergers, acquisitions, mezzanine funds and convertible debt offerings. In addition to funding sources, this site features an expert center, which includes links to SCORE, basic information about business assistance and business software to purchase.
Capital.com is an online resource and financial portal offering small and midsized companies free access to capital and financial services ranging from loans and leasing to investment money. It considers requests ranging from $250,000 to $100 million from entrepreneurs who have been in business at least three years and have revenues in excess of $1 million. Included in the assistance this site offers are an automated online valuation system and a team of investment bankers with whom you can talk directly for free to determine what types of financing are best for your company.
Capital-connection.com is a membership organization that provides computerized matching of investors and entrepreneurs. This site says it does not give information to or accept listings from intermediaries, finders or brokers. For a $75 membership, a blind description of members' investment projects are posted for 90 days. The service then automatically matches investors with opportunities and contacts each party to let them know about the potential match. In addition, members get the site's list of venture capital companies and SBICs organized by state. They also receive a report on what venture capitalists really want and the booklet 50 Tips for a Better Business Plan.
Capital Matchmaker matches investors with investment opportunities worldwide from entrepreneurs who seek at least $25,000 in funding. This service charges entrepreneurs $89 to $249 to list their executive summaries for three months on the Web site. (The cost depends on how much money you're trying to raise.) You have the option of sending your summary in on a disk, by e-mail or by mailed hard copy ($30 extra charge).
Commercial Finance Online allows entrepreneurs to list their financing needs free and then offers two ways to find a match. You can do an easy search, which does not require registration, to find more generic financing, or you can become a registered member and submit a more detailed description of your needs. In this case, your profile is automatically matched to that of the finance members. This site offers a fairly exhaustive breakdown of financing options ranging from debt to equity.
Direct Stock Market, which began as an online market for direct public offerings in 1993, has now evolved into a site which helps connect investment bankers with entrepreneurs seeking $20 million or less (those seeking more than $20 million are referred to Direct Stock Market's banking partners). DSM will refer potential deals to investment bankers for underwriting and will distribute the banker's offerings electronically on their site. Those DSM can't refer to the investment bankers will be directed to the resources they need to help them become a potential investor-owned entity. DSM will also take doable deals that are below the investment bankers' financial threshold, spruce up the documentation, and then help the company raise the capital needed.
The Elevator is a password-protected site that allows entrepreneurs 150 words to hook investors. Registration is free for business owners and $150 for investors. In order to visit any area of the site, you must register at the reception desk. From there you move to level three to compose the 150-word pitch. This is reviewed by Elevator staff members, who charge $79.95 if revisions or more information is required (only about one-fifth of pitches posted on the site need revising). Once your pitch is approved, a full business plan must be posted on level four. This is where predominantly local investors go to review plans. Entrepreneurs go into the lounge to check to see how many people have looked at their plans. Entrepreneurs and investors meet on the conference level to negotiate deals.
freePrivateCapital.com connects accredited investors and early-stage growth companies. Entrepreneurs complete a company profile free of charge. It's placed in the database and is matched with all the investors who have created a free profile that matches the business owner's specified criteria. Investors can then log on to the site to review the entrepreneur's profile; if interested, they request that their profile to go into the entrepreneur's investor pool. This enables the business owner to contact the investors directly. Entrepreneurs can also authorize to have their contact information released to investors.
Garage.com is a dealer/broker that helps technology start-ups find seed funding via a password-protected Web site. Entrepreneurs who have developed a basic business idea and strategy, assembled a core management team and who want to raise $1 million to $5 million from accredited investors, venture capitalists or corporations start the process by going to the Web site and clicking on Garage. There you receive a password, which enables completion of a company overview. This is reviewed by Garage.com, and if it meets the criteria, the business is invited to complete a more detailed application. The most promising are invited to meet in person with Garage.com staff in one of their offices. The companies with the most interesting investment opportunities are placed in the Portfolio section of the Web site, where the business owners receive valued-added grooming services before being presented via online to member investors. Garage does not participate in negotiations between entrepreneurs and financiers.
Those firms who have been asked to submit a detailed application but don't become portfolio companies are placed in the DataMine, which investors can peruse on their own. In addition to the online connection, Garage.com hosts start-up boot camps and monthly showcase breakfasts to introduce portfolio companies to investors. Once a Portfolio company receives funding, Garage.com takes a percentage of funds raised and an opportunity to purchase stock in the respective company.
Idealive, a fee-based online marketplace where the creators of intellectual property-type products such as filmmakers, musicians, artists, visual artists and inventors can find accredited investors willing to provide funding for as little as 1 percent of a project to as much as 100 percent. For a $2,000 one-time fee (that includes the fees associated with creating a public company), arts entrepreneurs can list their project prospectus, which should include a description, reviews, interviews, links to Web sites, downloading capabilities and more. While anyone can view the artist's work, only registered investors can access the offering and bid via e-mail.
Currently, the site focuses on working with emerging artists who have a following but who have not gone that next step. By the end of the year, a Basement section will be added, where for $50 (no $50 fee until February 2001), any artists seeking funding will be able to post a prospectus.
NVST.com Inc. is an Internet site connecting entrepreneurs seeking early-stage (but not seed or start-up) capital to private equity funding sources. There are three levels of membership for business owners. The entry level is a free service where owners can list a brief business profile, the opportunity and contact information. Interested investors will contact you directly. For $39.50 a month, entrepreneurs can post their opportunity and also have the opportunity to search the site's advisor and investor database. A $1,995 fee entitles business owners to list their opportunity in the Private Placement Library for six months. This secured portion of the site is only accessible to accredited investors. Here entrepreneurs post only a one-line description and are automatically notified if an investor is interested. The business owner controls how much and to whom information is released.
In addition to facilitating matches, nvst.com offers an increasing number of tools at each membership level to help entrepreneurs complete tasks such as company valuation and investor due diligence.
TECNET, the Technology Capital Network Matching Service, is a computerized matching program that charges both the entrepreneurs and the potential investors. Entrepreneurs needing seed or early-stage funding pay $300 for one year and must fill out a four-page application detailing the company, market and how much money they're seeking. Business owners are also required to send an executive summary and one-page, five-year financial projection. Investors, who must self-certify that they are accredited by Security Exchange Commission standards, also complete a four-page summary detailing their investment criteria, industry they seek, geographic boundaries, investment amounts and what expertise they bring to the table. When a match is made, TCN sends the appropriate information to the investor, who must then contact the service for the entrepreneur's information. At the same time, the entrepreneurs is sent the contact data for the investor.
The Capital Network is a fee-based matching service that focuses on connecting early-stage entrepreneurs seeking $500,000 to more than $10 million with venture capitalists as well as corporate and accredited investors. Before paying $750 for six months, entrepreneurs can submit an application characterizing the venture along with an executive summary to see how many investors in the TCN database match up. If you like the results, pay the fee, and if an investor indicates an interest, TCN sends contact information to both parties.
The fee includes review of the executive summary and assistance in formulating an effective one. In addition to the matching services, TCN hosts international venture conferences, hosts a monthly angel dinner and provides for-fee mentoring services on a case-by case basis.
Universal Business Services is a fee-based matching site. For $495, Universal will list an entrepreneur's opportunity on the site until funding is received. These projects can be viewed by anyone with access to the Internet, but in order for potential investors to obtain contact information for a business owner, they must register.
Virtual Wall Street connects small to midsized companies seeking anything from seed to follow-on funding with accredited and corporate investors through the Virtual IPO section of its Web site. Eligible entrepreneurs fill out an application form in the corporate services section detailing the company, its financial needs and management team, and within 48 hours you will be notified if your are accepted. Business owners are listed for free in the Virtual IPO, and Virtual Wall Street will act as your agent in conjunction with the two broker/dealers the site is affiliated with. The fee for the services depends on the company but can range from a percentage of the funds raise to equity only.
Vista Growth Capital, VistaWEB is an investment banking firm that has created a comprehensive digital marketing program targeting entrepreneurs in emerging companies with proprietary technologies. Business owners can find funding ranging from private placements to investors for their IPOs. Vista, whose Web site is available in 10 languages, takes a company through the entire funding process from preparing a private placement or IPO offering to creating an online road show and even a live Webcast. The cost ranges from $25,000 to $250,000 and begins with a $1,500 submission fee. Once a business plan with financials is submitted, Vista subjects it to a merit approval due diligence process. If approved, the company has an opportunity to go into the sites' IPO Spotlight. Anyone with Web access can view the offerings here, but only sophisticated, accredited foreign investors who are registered with Vista have the opportunity to invest. Vista does not charge stockbroker commission, underwriting or finder fees and will invest up to $1 million itself in technologies it considers especially promising.
Here are a few guidelines to help you evaluate online funding services:
"How long has the online company been in business? At least one year is a good rule of thumb," says Dee Power of Capital-Connection.com.
"Evaluate the Web site," says Power. "The more educational information provided, the more it indicates a depth of commitment to helping entrepreneurs find capital."
"Who is behind the matching service?" asks Power. "Is there a person or company you can contact for more information?"
"Carefully examine 'free' services. Some sites allow entrepreneurs to list for free, but if a match is made, you must pay to find out who you're matched with," says Power.
Who are the investors on the site? Are they venture capitalists, institutional investors, private foundations or accredited investors? Are they listed on the site?
Play Keyboard For Cash
Listing his company on an Internet investor matching service was a no-brainer for Gary Puckett, co-founder and COO of Los Altos, California-based SalonsConnect.com, a business-to-business Web site that connects salon owners with manufacturers, distributors and service providers in the beauty industry.
"We embarked on a number of fund-raising avenues. A few people suggested going to the Internet," explains Puckett. After reviewing several different Web sites, what sold him on his final choice was the price and simplicity of the information request.
After two months on that site, Puckett received about 30 inquiries, most of which came from brokers offering to help the company find money, and he has serious discussions in the works. "One reply came from a [venture] company with a large operation based out of Europe, and this is a group we've begun some initial discussion with and provided our business plan [to]," says Puckett. He studied that VC's Web presence and researched its investors before sending information about SalonsConnect. He hopes these simple actions have helped separate the dross from the potential gold.
- Clay Womack Direct Stock Market, Mike Harris, (310) 566-4500
- Dee Power, Capital-Connection.com, P.O. Box 18460 Fountain Hills, AZ 85269, (480) 837-9590
- OffRoad Capital, David Andersonm, (415) 796-5127
- Internet Capital Bulletin Board, www.icbb.com