Sticky Money The Web catches customers. Why not use it to catch investors?

The Internet is called everything from an information resourceto a great equalizer. For those seeking business financing, anotherdescription comes to mind: facilitator.

A growing number of Web sites connect business owners withfinancing resources ranging from banks and venture capitalists toprivate investors looking to purchase stock in direct publicofferings. Some charge hundreds of dollars for their assistance,while others offer services for free to entrepreneurs. Most areprivately owned, but one-ACE-Net-is SBA-backed. Andthey each offer their own range of assistance. For example:

Direct Stock Marketis an industry pioneer that began as an online market for directpublic offerings in 1993 and has evolved into a site that helpsconnect investment bankers with entrepreneurs seeking $20 millionor less (and refers those looking for more than $20 million to itsbanking partners). There's no charge to investors, butentrepreneurs whose applications are accepted pay a fee starting at$10,000.

OffroadCapital "acts as an agent to place private equities with adiverse network of investors, including qualified institutions andaccredited individuals," says its first vice president ofcorporate finance, David Anderson. He also stresses that Offroad isnot a matchmaking service but does help clients prepare investorinformation. The cost is a fixed percentage of gross proceeds, soit tends to vary from deal to deal.

Capital-Connection.com is aWeb site for the more self-reliant. It charges entrepreneurs a $75membership fee and lets them decide which investors they'reinterested in. Then it helps entrepreneurs review their proposalsand match them with potential accredited investors in theirdatabase for 90 days. "If a match is made, we tell theinvestor by e-mail or fax, then send them a blind description ofthe project. If investors want additional information, we tell theentrepreneur the name and contact information of theinvestors," explains Dee Power, Capital-Connection.com'sco-founder.

The key to finding the right online financing site isdetermining what you need: whether it's someone to help youthrough the complexities of conducting a DPO or the low-cost,low-maintenance approach of a matchmaker service. Whichever optionyou choose, remember, online searching should only be part of acomprehensive strategy to find financing.

Access toCapital Electronic Network, or ACE-Net, is apassword-protected, fee-based national securities (stock) offeringlisting service. Initially developed by the SBA's Office ofAdvocacy, the site is managed by the Whittemore School of Businessand Economics and maintained by the Research Computing Center ofthe University of New Hampshire. Regional ACE-Net Network Operators(listed on the site) manage the day-to-day operations and cancharge entrepreneurs and investors up to $450 annually to enroll inthe service. Investors are self-certified accredited individuals,venture capital firms, Small Business Investment Companies (SBICs)and institutions. In order to participate in ACE-Net, entrepreneursmust be eligible to sell securities in their company and mustconform to SEC rules for Regulation A or Regulation D Rule 504.These requirements are detailed on the site.

BusinessFinance.com is a freeWeb site offering entrepreneurs access to funding ranging fromcommercial finance to venture capital. Those interested in venturecapital should be seeking at least $250,000, have a management teamwith a proven track record and be in an extremely high-growthindustry. Those seeking other types of investment funds will findsources for private placements, reverse mergers, acquisitions,mezzanine funds and convertible debt offerings. In addition tofunding sources, this site features an expert center, whichincludes links to SCORE, basic information about businessassistance and business software to purchase.

Capital.com isan online resource and financial portal offering small and midsizedcompanies free access to capital and financial services rangingfrom loans and leasing to investment money. It considers requestsranging from $250,000 to $100 million from entrepreneurs who havebeen in business at least three years and have revenues in excessof $1 million. Included in the assistance this site offers are anautomated online valuation system and a team of investment bankerswith whom you can talk directly for free to determine what types offinancing are best for your company.

Capital-connection.com is amembership organization that provides computerized matching ofinvestors and entrepreneurs. This site says it does not giveinformation to or accept listings from intermediaries, finders orbrokers. For a $75 membership, a blind description of members'investment projects are posted for 90 days. The service thenautomatically matches investors with opportunities and contactseach party to let them know about the potential match. In addition,members get the site's list of venture capital companies andSBICs organized by state. They also receive a report on whatventure capitalists really want and the booklet 50 Tips for aBetter Business Plan.

CapitalMatchmaker matches investors with investment opportunitiesworldwide from entrepreneurs who seek at least $25,000 in funding.This service charges entrepreneurs $89 to $249 to list theirexecutive summaries for three months on the Web site. (The costdepends on how much money you're trying to raise.) You have theoption of sending your summary in on a disk, by e-mail or by mailedhard copy ($30 extra charge).

Commercial FinanceOnline allows entrepreneurs to list their financing needs freeand then offers two ways to find a match. You can do an easysearch, which does not require registration, to find more genericfinancing, or you can become a registered member and submit a moredetailed description of your needs. In this case, your profile isautomatically matched to that of the finance members. This siteoffers a fairly exhaustive breakdown of financing options rangingfrom debt to equity.

Direct Stock Market,which began as an online market for direct public offerings in1993, has now evolved into a site which helps connect investmentbankers with entrepreneurs seeking $20 million or less (thoseseeking more than $20 million are referred to Direct StockMarket's banking partners). DSM will refer potential deals toinvestment bankers for underwriting and will distribute thebanker's offerings electronically on their site. Those DSMcan't refer to the investment bankers will be directed to theresources they need to help them become a potential investor-ownedentity. DSM will also take doable deals that are below theinvestment bankers' financial threshold, spruce up thedocumentation, and then help the company raise the capitalneeded.

The Elevatoris a password-protected site that allows entrepreneurs 150 words tohook investors. Registration is free for business owners and $150for investors. In order to visit any area of the site, you mustregister at the reception desk. From there you move to level threeto compose the 150-word pitch. This is reviewed by Elevator staffmembers, who charge $79.95 if revisions or more information isrequired (only about one-fifth of pitches posted on the site needrevising). Once your pitch is approved, a full business plan mustbe posted on level four. This is where predominantly localinvestors go to review plans. Entrepreneurs go into the lounge tocheck to see how many people have looked at their plans.Entrepreneurs and investors meet on the conference level tonegotiate deals.

freePrivateCapital.comconnects accredited investors and early-stage growth companies.Entrepreneurs complete a company profile free of charge. It'splaced in the database and is matched with all the investors whohave created a free profile that matches the business owner'sspecified criteria. Investors can then log on to the site to reviewthe entrepreneur's profile; if interested, they request thattheir profile to go into the entrepreneur's investor pool. Thisenables the business owner to contact the investors directly.Entrepreneurs can also authorize to have their contact informationreleased to investors.

Garage.com is adealer/broker that helps technology start-ups find seed funding viaa password-protected Web site. Entrepreneurs who have developed abasic business idea and strategy, assembled a core management teamand who want to raise $1 million to $5 million from accreditedinvestors, venture capitalists or corporations start the process bygoing to the Web site and clicking on Garage. There you receive apassword, which enables completion of a company overview. This isreviewed by Garage.com, and if it meets the criteria, the businessis invited to complete a more detailed application. The mostpromising are invited to meet in person with Garage.com staff inone of their offices. The companies with the most interestinginvestment opportunities are placed in the Portfolio section of theWeb site, where the business owners receive valued-added groomingservices before being presented via online to member investors.Garage does not participate in negotiations between entrepreneursand financiers.

Those firms who have been asked to submit a detailed applicationbut don't become portfolio companies are placed in theDataMine, which investors can peruse on their own. In addition tothe online connection, Garage.com hosts start-up boot camps andmonthly showcase breakfasts to introduce portfolio companies toinvestors. Once a Portfolio company receives funding, Garage.comtakes a percentage of funds raised and an opportunity to purchasestock in the respective company.

Idealive, afee-based online marketplace where the creators of intellectualproperty-type products such as filmmakers, musicians, artists,visual artists and inventors can find accredited investors willingto provide funding for as little as 1 percent of a project to asmuch as 100 percent. For a $2,000 one-time fee (that includes thefees associated with creating a public company), arts entrepreneurscan list their project prospectus, which should include adescription, reviews, interviews, links to Web sites, downloadingcapabilities and more. While anyone can view the artist's work,only registered investors can access the offering and bid viae-mail.

Currently, the site focuses on working with emerging artists whohave a following but who have not gone that next step. By the endof the year, a Basement section will be added, where for $50 (no$50 fee until February 2001), any artists seeking funding will beable to post a prospectus.

NVST.com Inc. is anInternet site connecting entrepreneurs seeking early-stage (but notseed or start-up) capital to private equity funding sources. Thereare three levels of membership for business owners. The entry levelis a free service where owners can list a brief business profile,the opportunity and contact information. Interested investors willcontact you directly. For $39.50 a month, entrepreneurs can posttheir opportunity and also have the opportunity to search thesite's advisor and investor database. A $1,995 fee entitlesbusiness owners to list their opportunity in the Private PlacementLibrary for six months. This secured portion of the site is onlyaccessible to accredited investors. Here entrepreneurs post only aone-line description and are automatically notified if an investoris interested. The business owner controls how much and to whominformation is released.

In addition to facilitating matches, nvst.com offers anincreasing number of tools at each membership level to helpentrepreneurs complete tasks such as company valuation and investordue diligence.

TECNET, theTechnology Capital Network Matching Service, is a computerizedmatching program that charges both the entrepreneurs and thepotential investors. Entrepreneurs needing seed or early-stagefunding pay $300 for one year and must fill out a four-pageapplication detailing the company, market and how much moneythey're seeking. Business owners are also required to send anexecutive summary and one-page, five-year financial projection.Investors, who must self-certify that they are accredited bySecurity Exchange Commission standards, also complete a four-pagesummary detailing their investment criteria, industry they seek,geographic boundaries, investment amounts and what expertise theybring to the table. When a match is made, TCN sends the appropriateinformation to the investor, who must then contact the service forthe entrepreneur's information. At the same time, theentrepreneurs is sent the contact data for the investor.

TheCapital Network is a fee-based matching service that focuses onconnecting early-stage entrepreneurs seeking $500,000 to more than$10 million with venture capitalists as well as corporate andaccredited investors. Before paying $750 for six months,entrepreneurs can submit an application characterizing the venturealong with an executive summary to see how many investors in theTCN database match up. If you like the results, pay the fee, and ifan investor indicates an interest, TCN sends contact information toboth parties.

The fee includes review of the executive summary and assistancein formulating an effective one. In addition to the matchingservices, TCN hosts international venture conferences, hosts amonthly angel dinner and provides for-fee mentoring services on acase-by case basis.

Universal BusinessServices is a fee-based matching site. For $495, Universal willlist an entrepreneur's opportunity on the site until funding isreceived. These projects can be viewed by anyone with access to theInternet, but in order for potential investors to obtain contactinformation for a business owner, they must register.

VirtualWall Street connects small to midsized companies seekinganything from seed to follow-on funding with accredited andcorporate investors through the Virtual IPO section of its Website. Eligible entrepreneurs fill out an application form in thecorporate services section detailing the company, its financialneeds and management team, and within 48 hours you will be notifiedif your are accepted. Business owners are listed for free in theVirtual IPO, and Virtual Wall Street will act as your agent inconjunction with the two broker/dealers the site is affiliatedwith. The fee for the services depends on the company but can rangefrom a percentage of the funds raise to equity only.

Vista GrowthCapital, VistaWEB is an investment banking firm that hascreated a comprehensive digital marketing program targetingentrepreneurs in emerging companies with proprietary technologies.Business owners can find funding ranging from private placements toinvestors for their IPOs. Vista, whose Web site is available in 10languages, takes a company through the entire funding process frompreparing a private placement or IPO offering to creating an onlineroad 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 businessplan with financials is submitted, Vista subjects it to a meritapproval due diligence process. If approved, the company has anopportunity to go into the sites' IPO Spotlight. Anyone withWeb access can view the offerings here, but only sophisticated,accredited foreign investors who are registered with Vista have theopportunity to invest. Vista does not charge stockbrokercommission, underwriting or finder fees and will invest up to $1million itself in technologies it considers especiallypromising.

Check'Em Out

Here are a few guidelines to help you evaluate online fundingservices:

"How long has the online company been inbusiness? At least one year is a good rule of thumb," says DeePower of Capital-Connection.com.

"Evaluate the Web site," says Power."The more educational information provided, the more itindicates a depth of commitment to helping entrepreneurs findcapital."

"Who is behind the matching service?" asksPower. "Is there a person or company you can contact for moreinformation?"

"Carefully examine 'free' services. Somesites allow entrepreneurs to list for free, but if a match is made,you must pay to find out who you're matched with," saysPower.

Who are the investors on the site? Are they venturecapitalists, institutional investors, private foundations oraccredited investors? Are they listed on the site?

Play Keyboard For Cash

Listing his company on an Internet investor matching service wasa no-brainer for Gary Puckett, co-founder and COO of Los Altos,California-based SalonsConnect.com, a business-to-business Web sitethat connects salon owners with manufacturers, distributors andservice providers in the beauty industry.

"We embarked on a number of fund-raising avenues. A fewpeople suggested going to the Internet," explains Puckett.After reviewing several different Web sites, what sold him on hisfinal choice was the price and simplicity of the informationrequest.

After two months on that site, Puckett received about 30inquiries, most of which came from brokers offering to help thecompany find money, and he has serious discussions in the works."One reply came from a [venture] company with a largeoperation based out of Europe, and this is a group we've begunsome initial discussion with and provided our business plan[to]," says Puckett. He studied that VC's Web presence andresearched its investors before sending information aboutSalonsConnect. He hopes these simple actions have helped separatethe dross from the potential gold.

Contact Sources

• 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