3c hapter - Index of

188 Locavesting
a fast following. Soon, however, Klein, an affable guy with a baseball
cap usually pulled low on his head, found himself down to
his last $200,000 in working capital. He needed to raise money to
keep Spring Street Brewing Company alive.
Frustrated after venture capitalists strung him along for
months, Klein decided to put his legal skills to work. As an attorney
at Cravath, Swain & Moore, he had worked with companies
that had used Reg A, the SEC exemption for offerings under
$5 million, to sell shares directly to the public. The Internet was
still fairly young—Netscape had just released its Web browser, and
Google wouldn’t be founded for another three years—but Klein
saw that it was a great platform for marketing and disseminating
investment information. (It may seem like a no- brainer now,
but at the time, investors typically would call an 800 number to
request a prospectus, which would be sent via postal service.)
Klein had another ready- made platform: his beer. The Spring
Street offering was advertised right on the labels of the company’s
Wit beer, putting it literally in the hands of his most valuable
audience. Klein also distributed postcards about the offering at
bars and restaurants where the beer was served, inviting potential
investors to his web site, where the prospectus could be
downloaded. He had a tailor- made customer base: “young, welleducated,
Internet- generation males with a penchant for surfi ng
cyberspace and for drinking gourmet beer—often at the same
time,” as he described it. 4
The charismatic founder and his little beer company were perfect
fodder, sparking a media frenzy as word of the fi rst “Internet
IPO,” done without the aid of expensive Wall Street bankers, was
picked up by news outlets from the Wall Street Journal to CNN. By
December 1995, Klein had raised $1.6 million from 3,500 investors,
mostly beer enthusiasts.
Long after the offering was closed, Web surfers continued to
come to Spring Street’s site looking to buy shares, giving Klein the
idea to create a bulletin board where would- be buyers and sellers
of Spring Street shares could directly trade with one another.
The liquidity such trading provided would make the shares more
attractive. Spring Street could also post its audited fi nancial