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Published in U.S. 1 Newspaper on February 9, 2000. All rights
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Angel Matching on the Web: Susan Woodward
Stock trading on the Internet is now old hat. The next
new thing is Web-based angel investments, an investment banking model
being pioneered by San Francisco-based Offroad Capital Corp. (E-mail:
Investors who aren’t in the Silicon Valley neighborhood have a hard
time finding and participating in interesting offerings, says Susan
E. Woodward, vice president of research and chief economist of
OffRoad Capital. “We do deals with interesting ideas not in the
Silicon Valley. Offroad really improves the access to private equity
market for both investors and issues.” She will tell about Offroad
Capital’s new model for private equity financing at the Venture
Association
of New Jersey on Tuesday, February 15, at 11:30 a.m. at the Westin
Hotel in Morristown. Cost: $45. Call 973-631-5680.
The daughter of a GM dealer in southern California, Woodward has a
bachelors (Class of 1970) and a Ph.D. from UCLA and taught on the
college level before moving east to take jobs with the federal
government:
for the Council of Economic Advisors, as the chief economist at
Housing
and Urban Development, and as chief economist at the Securities and
Exchange Commission. She left Washington in 1995 to get married and
move back home to California.
What makes her company different from other investment banks is that
virtually all its business is conducted on the Internet. “We
select
the best ideas, put all the relevant disclosures on the Internet,
and make it available to a group of high net worth investors, mostly
individuals. We use the Internet to deliver all the materials,
including
the `road show,’ which we call the `off road show,’” she says,
referring to the tour made by a start-up’s executive team to meet
with investors in cities across the country.
Top Of PageEquity Research Group
In presenting a virtual road show Offroad Capital resembles the
Princeton-based
Equity Research Group, affiliated with U.S. Trust Co. at 5 Vaughn
Drive (U.S. 1, June 30, 1999.) But Offroad Capital uses the Internet
even more. “Essentially we hold an auction to rank the orders
by price,” says Woodward. The lowest bid that will fulfill the
amount needed sets the price for the whole deal. Every person who
bids that price or higher gets to buy stock on the first day. On the
second day, those who underbid the winning price can get another
chance
— at the higher rate.
Woodward claims “thousands of investors” on her network, and
it may be easier than you would think to qualify as one of those angel
voyeurs. The net worth standard for angels that Offroad Capital uses
is the same as the SEC’s standard — $1 million in net worth, and
that can include your house. “We don’t ask investors for proof,
but we do a credit check and a fraud check to be sure they pay their
bills and haven’t served time for SEC violations.”
Woodward scoffs at supposed competition, such as the recently
introduced
ACE Network of Angels run by Stash Lisowski at the New Jersey
Institute of Technology Enterprise Center (973-643-5740, E-mail:
stash.r.lisowski@njit.edu).
Under this plan, “angel” investors of sufficient net worth
can qualify to enter the network to view deals put up by
entrepreneurs.
The angels can browse anonymously until they get ready to enter a
deal.
“The ACE network is just a bulletin board,” says Woodward.
“It has no intermediary to do any research, and no facility to
price a deal. We put all our materials on Internet and use our auction
engine to determine price. We recommend a price, but it is the
investors
who determine the price of the deal.” The software includes an
Oracle database and an engine written in C++ with a Sun Solaris 2.6
operating system.
Her company’s portfolio includes Patchlink.com, in Scottsdale, Arizona
(a remote server manager), PlexusNet Broadcasting (which takes trade
shows onto the net) and Quantum 3-D (which makes fancy simulations).
“Our website went live in March, 1999, our broker-dealer license
was put in place in June, our first deal was put up in August, and
our fifth deal is live now,” she says.
For the angels in New Jersey she has this promotional advice:
“Even
if you are not interested in our product directly, you would learn
a lot by watching our deals and seeing how they are valued. Even if
your goal is to invest in companies closer to you, see how our deals
get priced.”
For the entrepreneurs, she echoes familiar advice: A well-prepared
business plan is essential. The good signs: a management team that
knows where it is going, and some kind of defendable market niche
that someone else can’t duplicate immediately.
The unspoken advice is that if you want an Offroad deal, show up on
February 15. “Deals are coming to us,” says Woodward.
“Some
we run after, but some are coming to us.”
— Barbara Fox
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