Business Funding Veteran Clark Nichols Announces Tips for Cash-Strapped Startups: Go DPO, Crowd Fund

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Direct Public Offering experts Clark Nichols and Associates announce essential strategies on how to leverage recent trends in crowdfunding for outsized profit results.

Clark Nichols

"DPOs and crowdfunding are answers to a broken system," says business funding veteran Clark Nichols.

DPOs and crowdfunding are solutions for both startups that need cash and everyday investors who are leery of stockbrokers and traditional trading.

The recent surge in crowdfunding is just one more reason for cash-poor startups with great growth potential to forget IPOs and jump directly to a DPO, says Clark Nichols, business funding expert and founder of Clark Nichols and Associates.

Initial public offerings (IPOs) have long been the golden standard of taking a company public. The IPO model: scrounge up or borrow enough capital to spark the interest of Wall Street or investors and take a company public.

A direct public offering (DPO) allows startups to raise capital by selling shares directly to employees, customers, friends and supporters in the community. Since the investment is offered directly, it often eliminates the need for a middleman like an investment bank.

Crowdfunding is a powerful way to generate DPO share sales and spark public interest in otherwise obscure, cash-starved startups. Entrepreneurs who have often been overlooked by tradition venture capital finance, like women, are getting the support they need through crowdfunding campaigns.

"DPOs and crowdfunding are answers to a broken system," says Nichols. "They’re less expensive and have fewer restrictions than traditional venture capital financing."

Nichols, a Minnesota-based DPO pro, helps transform struggling startups, with many reaching the multi-million dollar mark within months.

“If a startup had enough cash for an IPO, investors would be coming to them,” Nichols states. “IPOs can cost millions, are heavily regulated by the SEC and government, and can take years to complete.”

Small companies struggle to navigate regulations and find success. They desperately need capital for growth, but are wary of investors, the IPO model and government regulations.

“Small startups that need cash need DPOs,” says business analyst and operations expert Charles Townsend, whose work with Nichols has been profitable.

“Startups don’t have the cash or the reputation for an IPO,” he adds. “A DPO allows startups to pay due diligence and get the capital they need for growth.”

DPOs and crowdfunding can help startups with essentially pocket change for capital see rapid growth and financial gain while finding acceptance and credibility in the business world. Startups can sell shares to anyone, and shareholders can trade in stock for cash at any time.

“DPOs are less glamorous than IPOs. DPO stakes are lower for startups that want to stay in the business long-term; it’s bread and butter,” says Townsend. “The rise in the number of DPOs comes at a time when people are losing faith in the marketplace.”

DPOs and crowdfunding are solutions for both startups that need cash and everyday investors who are leery of stockbrokers and traditional trading.

DPOs can be quick to execute, but there are some essential requirements:

1. Growth potential is key. Hire a reputable consultant to evaluate your business model. If your idea is untimely or too niche, a DPO is not for you or your company.

2. Build a Dream Team. Your business finance success team should include your consultant, a lawyer and CPA, all well-versed in SEC, federal and state regulations.

“SEC regulations change regularly; they are the gospel by which you should run your business,” Nichols advises. “No one knows those regulations better than a trusted SEC lawyer or CPA.”

3. Know thy social media. The Internet has changed everything in the finance world. DPOs have been around since the 1970s. Crowdfunding and social media make it easier than ever for startups to sell shares while marketing their brand—critical to DPO execution and business growth.

4. Sell shares. Shares should be priced low enough to catch attention and high enough to be perceived as legitimate. Buyers of shares can generally feel good about their investment, as there's a level of transparency with DPOs not generally seen with traditional IPOs.

5. Post-DPO and crowdfunding profits can flow quickly; have a plan now. Ensure you have strategies in place to manage money and growth. “Each campaign is only as successful as the team and strategy behind it,” says Nichols.

Companies like natural foods advocate and manufacturer Annie's Homegrown and ice cream mogul Ben and Jerry's owe their notoriety and nationwide recognition to DPOs.

Solvency doesn't have to come with a huge price tag. With DPOs, crowdfunding and savvy strategy, startups can maintain control of their companies while seeing their bottom line soar.

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