When the last general store serving 10,000-resident Port Townsend, Wash., folded in the Great Recession, the community 40 miles northwest of Seattle faced a dilemma. “You couldn’t even buy socks and underwear in our town,” recalls serial entrepreneur Martin Gay.
So in 2011, Gay and a handful of others turned to a little-used alternative: a direct public offering (DPO). By selling shares in the store to more than 1,000 individual investors from as far away as Spokane, they raised $700,000 and opened the Quimper Mercantile Company in October 2012. The store took a loss in 2013 but is projected to be profitable this year, says Gay.
Direct public offerings allow local consumers of a product or service to own a piece of the company behind it. The idea is similar to equity-based crowdfunding, which is still on hold while the Securities and Exchange Commission writes the rules. DPOs are governed by widely varying state securities laws, and investors must come from within the state where the offering is taking place.
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Source: Karen Klein (www.businessweek.com)
