Raising Capital with a stock offering - a profitable start-up ask me how

Discussion in 'Economics' started by birdman, Mar 12, 2010.

  1. birdman


    A young medical staffing company is asking me how to raise capital through a stock offering (as in otc bulletin board) and i think they are way to young, but thought i would get some opinions.

    The biz is only 9 months old and they project 2 mil revenues this year but have cash flow problems and capital would help them grow faster.

    What say ye?
  2. They may first want to investigate Private Equity / Angel Investors, before preparing to offer stock to the public.
  3. birdman


    Thanks for the suggestion and i can see how that would be the natural progression.
  4. Have you ever done this before?

    First of all, why are they looking to raise capital? Medical staffing does not seem to be a heavy capex business, it's a service oriented with revenue cash flow closely aligned with expense cash flow. Expansion can be accomplished steadily with little investment.

    Second of all, how much are they looking to raise? Likely this is something a bank credit line can accomplish

    Third of all, going public even on the OTC is relatively expensive process. And it brings a host of problems. These guys think that they can just go public and cash out, is my guess. Seems like they are not really making any real cash via the super duper growing business.
  5. there are also angel networks like

    I would suggest that avenue first before attempting to LEAP into a public offering.

    Finally, if u DO have strong cash flow and track record, generally speaking a great possible alternative to the full public offering process is just buying an existing public "shell", then issuing further stock.

    A true public initial offering is monster of a process.
    Good to explore and keep in mind less onerous options.

    Good luck.
  6. nLepwa


    I've seen a lot of start-up fail within the first 3 years.
    For about 80% of them, it was due to overoptimism concerning cash flow.

    If they can show that their primary concern is controlling and monitoring cash flow they won't have issues rising money anywhere (banks, venture capitalists, business angels..).

  7. Quickest and least expensive is a reverse merger into a shell. Raise the capital through a PIPE fund.

    That being said, projected $2 million in revenue isn't worth the paper it's printed on. Company needs to do a family and friends round until they can actually generate revenues.
  8. better read up on the Private Placement rules and reg 144....

    Blue sky's as well.

    The FEDs are keeping everything on Radar, gota watch stepping over the line when when raising money ....and make sure it's not defined as a "Security" if you carry zero liscense.
  9. birdman


    Thanks for all the comments / suggestions. You guys are way smarter than me. Personally, i favor self financing at a slower growth rate, no matter how slow, but then I'm an old conservative and them young whipper-snappers are apt to think and move faster than me :)

    I'll pass this on by directing them here and if they have additional questions they can ask.
  10. zdreg


    five years have passed. how would the answers be different today?
    #10     Apr 24, 2015