|Screen Test for a Direct Public Offering
Company and management meet standards of honesty, social responsibility and competency.
|The closer we feel to where our money is actually put to use, the
more we need to feel comfortable with it. "It's 3:00 a.m. Do you know where your
money is?" was the advertising theme of one of the first socially responsible mutual
funds. When people invest directly in shareownership of a company, after making their own
decision and using their own money, they feel a sense of identity with that company. Polls
consistently show that an overwhelming percentage of consumers prefer products from
companies that aren't causing harm. That carries over to buying shares as well.
business can be understood by people who may have no experience investing in shares.
|Your business doesn't need to be understandable to all people--just
to those in the affinity groups to which you will be marketing your shares. But those
affinity groups need to be large enough to buy your entire offering. (We explain a little
later how to calculate whether your affinity groups are sufficient for your DPO to work.)
Shares are sold in a DPO when someone reads the prospectus. If they are struggling to
grasp the concept, or lost in confusing details, they will lose interest. One exercise is
to try describing your business in ten words or so. Another is to try telling your whole
story--what your business is, what you're going to do with the public's money and the
particular risks of investing in your shares--in the equivalent of a one-page memorandum.