The Private Capital Market, Inc. an advisor to private companies that are raising capital, released a business strategy paper today outlining a business model for using the internet to raise capital.
The 8 page paper is titled “The Big Picture of A Small Capital Raise For A High Tech Company,” and describes the process of how small high tech companies can combine internet-based strategies with in-person company presentations in their home communities. The paper is available free at TheCapitalMarketplace.
“Some of the economic research on the geography of capital markets suggests that most companies raise capital within 50 miles of where they are located,” said Thomas Vass, the author of the paper.
The new internet business model places the greatest priority on raising capital from local sources of capital while allowing all participants in the transaction to find new clients and make money.
Unlike the focus on startup companies in the conventional venture capital business model, the new model targets small high tech companies with 5 years of operating experience who need small amounts of capital to fund product innovation.
The new model features local web-based social networking that would be complemented by monthly capital market events where companies explained their technology and growth strategy.
“The best way for a small high tech company to find funding in a local capital marketplace,” said Vass, “is to open up the events to the greatest diversity of potential investors, including angel investors, venture capitalists, commercial bankers, asset based lenders, SBA lenders, SBIC firms, debt investors, and FINRA broker/dealers and then have them network with all the third party professional advisor who make the deals happen.”
“Much of the technology for allowing the internet to function in this new open business model already exists,” explained Vass, “but the different linkages between websites, and the new software coding on a single website, have not been organized into a coherent business model where all the parties to the capital transaction can use the internet functionality to make money. My new internet platform at The Capital Marketplace solves many of these issues.”
About Thomas E. Vass
Vass is both a regional economist and a registered investment advisor. Much of his work involves a cross between the economic theory of innovation and capital markets, and involves the creation of web-based tools that allow small high tech companies to more easily raise capital. His online company is called The Capital Marketplace (thecapitalmarketplace.com).