INVESTMENT IDEAS
No doubt, the Internet is transforming the investment world, but when it comes to IPOs, not all that much has changed. Sure, some online brokers, like E*Trade and Discover, have been successful in snagging small share allocations, letting a lucky few buy in at the offering price. But most people still experience hot offerings in the typical manner: choking on exhaust fumes as the rocket takes off packed with champagne-swilling investment bankers and institutional investors.
Stephen Pelletier, a former Intuit exec, wants to let a lot more people in on the party. Startups have long raised funds through private placements - the sale of pre-IPO shares to wealthy individuals, so-called angel investors. But angel investment has remained constrained by geography. Angels tend to find out about interesting companies through informal personal networks and usually prefer to invest locally - the better to keep close watch on the company's management and finances.
Pelletier's new company, OffRoad Capital, is trying to expand the private placement world. OffRoad's Web site, which went live in March, keeps potential investors informed of upcoming private placements and lets geographically dispersed angels invest with the click of a mouse. It's also a place where investors and management can share info and hash out difficulties. Startups that get financing through OffRoad will host regular chat sessions with their angel investors and will be required to present quarterly reports online.
The market could be huge: OffRoad estimates $2 trillion in market value is locked up in companies too small for the stock markets but too large to be funded by family and friends. "We're creating an entirely new market," says Pelletier.
You'll need some cash to get into that market, though. Because private placements are inherently high-risk, the SEC requires investors to meet strict financial requirements: more than $200,000 in annual income or more than $1 million in assets. OffRoad also charges an initial $1,000 membership fee and $250 in annual dues, in addition to stipulating minimum investments of $25,000. Still, it could be a small price to pay for the opportunity to buy into the next Amazon.com at $3 a share.
OffRoad Capital: www.offroadcapital.com.
NEW MONEY
T-minus $10 Billion
Point-and-Click Angels
Playing the Market
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Summer Sale
