Taking Private Placements Online
March 26, 1999
by: Dan Burke
Gomez Advisors
Offroad
Capital wants to give high-net-worth investors entree to private placements
via the Internet. The firm is already tracking 400,000 companies seeking
$1 million to $10 million in capital and expects to have its first deals
ready sometime during the summer.
Here's
why Gomez thinks this makes sense for all involved.
-
Offroad facilitates deal flow. The majority of deals originate
from commercial lenders who often can only provide 80% of a company's
capital needs. Companies needing financing must then look to private
investors to fulfill the remaining 20%.
Offroad standardizes the process by offering 70% of the value that
an investment bank offers at a fraction of the cost. This is a deal
size that investment banks with high overhead cannot make money
on.
-
Offroad eases management headaches. Its online database makes
it easier for growth companies to find equity investors. This gives
private companies the same type of flexibility public companies
have in raising additional funding.
-
Offroad fulfills pent up high-net-worth private investor needs.
It provides investors: equal access to private investment opportunities;
well structured, easy to understand deals; the ability to solicit
opinions of peer co-investors; and direct dialogue with issuing
companies' principals, which facilitates a more intitmate involvement
in their investment.
Offroad's
business proposition comes at a ripe time for the private placement
sector. Offroad can add structure to an unregulated industry full of
informal angel activity and an unorganized marketplace. Offroad's management
has impressive fund raising experience and they have the skill and market
savvy to take advantage of the need for standardization and monitoring
in the private placement arena.
