The Direct Public Offering
The Direct Public Offering gives small investors a way to partner with small enterprise leaders in the creation of businesses that express their shared values.
October 16, 2013—In September 2013, Capital Institute released its fifth Field Guide study, “Evergreen Direct Investing: Co-Creating the Regenerative Economy,” exploring a new investment architecture purpose built to provide large stewardship investors, notably pension plan sponsors, with an opportunity to partner with values-aligned enterprise leaders through a cash-flow-sharing investment model.
But what options are available to smaller investors who also want to be active participants in shaping the regenerative economy? The Direct Public Offering holds considerable promise for connecting these investors with smaller enterprises, and can even be structured as a revenue-sharing model.
The DPO has existed as a capital raising method for small businesses since the early days of securities laws. Most recently DPOs enjoyed a period of popularity in the 1990s, after which interest waned as would-be entrepreneurs found it easier to secure start up money from home equity bank loans during the real estate boom years. A confluence of recent events--on the one hand, investors’ rising suspicion of Wall Street and their growing interest in “place-based” investing, and, on the other, banks’ reluctance to extend home equity financing to entrepreneurs in the wake of the mortgage meltdown--his now creating a resurgence of interest in DPOs.
A DPO allows a for-profit business to sell debt, stock or other investments directly to the public and to advertise its offering widely. (Nonprofits can also sell debt as a DPO.) Generally, securities can only be sold in the state(s) where the offering has been registered, although some states make exceptions to this rule for nonprofits and cooperatives. Offering size typically ranges from about $500,000 to $3 million.
Cutting Edge Capital' animates the story of the Direct Public Offering.
Read our Q&A with Jenny Kassan of Cutting Edge Capital here.