3c hapter - Index of

The Do- It- Yourself Public Offering 185
Rolodex to rustle up investors. A DPO allows them to directly
reach out to their biggest fans and supporters—that could be
you—and save tens or hundreds of thousands of dollars doing it.
When Annie’s Homegrown, the maker of the packaged macaroni
and cheese that is a staple at natural food stores, directly
offered shares in 1996, it advertised the opportunity with a coupon
in each box of mac and cheese. When mothers went to fi x a quick,
healthy meal for their kids, they learned of the opportunity to buy
the $6 shares (although more than a few of the coupons ended up
in a pot of boiling water). Annie’s used the more than $3 million in
proceeds to expand its geographic distribution and introduce new
products for the fast- growing organic and natural foods market.
Real Goods, a renewable energy pioneer founded in 1978,
had built a devoted following among the ecominded customers
who subscribed to its catalog featuring solar panels and other
green products. In 1991, Real Goods founder John Schaeffer
was looking to branch out into new markets, but banks deemed
the business too risky. So Schaeffer offered customers a chance
to invest in the company, which was generating about $3 million
in sales. A mailing to 15,000 customers who had made a recent
purchase and lived in one of the 13 states where the offering was
registered drew 6,200 requests for the offering documents. More
than 10 percent of those, or 674 customers, became shareholders,
investing a total of $1 million. Another 175 people had to be
turned away after the offering was oversubscribed. Two years later,
Real Goods raised an additional $3.6 million in a follow- on DPO.
Even after the second offering, Schaeffer still owned 75 percent
of the company (try that with a venture capitalist or private equity
investor). To his delight, he discovered that his new shareowners
purchased twice the dollar amount of products as nonshareholders.
“Your customers become owners of your company, and therefore
become very loyal,” says Schaeffer. “If you own Coke, you’re
not going to buy Pepsi.” Real Goods’s shareholder meetings were
more like love- ins, held at campgrounds and wineries and drawing
hundreds of customer- shareholders.
For investors, DPOs offer an opportunity to get in on the
ground fl oor of a company that offers exciting growth potential.