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Cedarburg Fund-Raising Firm Seeks to Boost Own Coffers With Little Known Stock Opportunity
CEDARBURG, WI 2003 - Gourmet lollipops don't carry the same weight as sophisticated biotechnology in the eyes of venture capitalists.
So a Cedarburg business is taking advantage of a unique and little-known exemption to state securities laws to try and raise $1 million for expansion of its operation.
FundRaising Inc., located on Pioneer Road, helps school groups and charities raise money through selling candy, lollipops, cookie dough, candles, magazines and more. Dick Raddatz founded the company in 1990, and the company's Internet site, Fundraising.com, can receive thousands of unique hits in a single day.
But the company missed the dot-com boom by about six months, said Lauralee Oenick, the company's vice president of sales and marketing. And as Raddatz said, "The last couple of years, trying to raise money through venture capitalists, especially in Wisconsin, has been difficult. They're all into biotechnology."
FundRaising Inc. did add some private investors in 2000, working through an Illinois broker who earned thousands of dollars in commissions. Since then, Raddatz learned about Wisconsin's Issuers Exemption Program (IEP) from Orion Lighting, a Plymouth-based company which has used the program successfully.
The IEP lets small businesses sell stock directly to investors, including up to 100 who are "non-accredited" - persons with a net worth of less than $1 million who would not traditionally be offered initial stock offerings.
"This provision is unique to Wisconsin," said David Cohen, a supervising attorney in the Wisconsin Department of Financial Institutions (DFI). "We tried to take care of what we perceived to be a problem. Small businesses can go out to the public and raise money without going to the very expensive trouble of preparing a prospectus."
The law was created in 1986 but Cohen said few companies have used it because it's largely unknown. Securities laws are uniform from state to state, and only Wisconsin has this exemption.
Businesses must meet a series of provisions to participate in the program. The primary one is completion of a U-7 disclosure document. It's a fill-in-the-blank version of a prospectus, prepared by the state, completed by the company and designed to be digestible by non-accredited investors - those who do not have an armada of lawyers and brokers working on their behalf.
Oenick, a former Wall Street investment banker, said that by completing the document, "The state feels we've disclosed enough information, that someone can make a fair judgment, should they invest in our company or should they not."
Shares - the company is offering 2 million shares at 50 cents each - are not publicly traded. Cohen said the company decides whether or not to pay dividends and how it will reward investors. If FundRaising Inc. were to eventually go public on one of the stock exchanges, owners of the shares could sell to anyone, likely for a healthy profit. The minimum investment is $10,000.
"Most of these deals are done with the understanding you will not be getting your money out for a substantial period of time," Cohen said.
Oenick said the company wants to use the capital to expand its marketing efforts.
"We want to go from (sending out) a couple hundred thousand to millions of catalogs a year," she said.
FundRaising Inc. is allowed to advertise its stock offering however it chooses, as long as it notifies the DFI. Potential investors must meet with the company to review the U-7 document, and that gives them the opportunity to see the operation and meet its principals, which rarely happens when buying public stock. Oenick sees that as an important benefit.
"I think this is the way for small businesses to go," she said.
-- Matt Schroeder
This story appeared in NEWS GRAPHIC, CEBARBURG, WI - June 19, 2003.
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