Capital Ideas: A Direct Route to Raising Money

January 2006
by Jenny McCune

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It actually does take money
to make money, as many thriving businesses have learned. When companies reach a
certain size, they need outside capital to fuel growth. That’s as true for
independent publishers as for the Mom and Pop coffee bar that wants to compete
against Starbucks.

Unfortunately, venture capitalists
want quick and large returns. Initial public offerings (IPOs) are out for most
independent publishers because of the cost and scale. That leaves the usual
suspects (family and friends); taking on debt; or—for the adventurous,
perhaps—selling stock through a private placement only to accredited,
stock-savvy investors whose individual net worth exceeds $1 million.

After several years of relying on
private placements to raise the cash it needed to grow, managers at
Berrett-Koehler Group, Inc., a business publisher based in San Francisco, came
up with a different idea: a direct public offering (DPO) to raise capital to
expand the company’s operations so it can increase revenues from $6.6 million
(the 2004 figure) to more than $10 million by 2008. In addition to expansion,
B-K’s goals included increasing its pool of working capital and reducing its
debt. Looking for an innovative way to raise funds, such as a DPO, was in
keeping with the publisher’s mission of publishing books that support “the
movement toward a more enlighten

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