The tech-stock world is full of me-too-ism. There are me-too Web "personalization" concerns, me-too Web incubators, even me-too Web browsers. But every now and then somebody comes up with an idea that takes a popular concept to the next level, a plan that's bold because it fulfills a customer need using fresh thinking and innovative execution.
, the self-styled online venture-capital firm for the masses, is an example of such new thinking. The company filed documents with the
Securities and Exchange Commission
late last week to raise as much as $68.4 million in an initial public offering.
It's a truly impressive example of how an entrepreneur -- in this case famed technology "evangelist" Guy Kawasaki -- can build a successful business out of a niche cynically being ignored by better-financed competitors.
In the case of Garage.com, the market the big guys were ignoring was venture capital. There was a time when venture firms invested relatively small amounts of money in start-up concerns to help them get going. Today, the important firms on Sand Hill Road in Menlo Park, Calif., aren't really in the venture business anymore. Instead, they pump tens of millions of dollars into well-planned projects staffed by veteran executives and second- and third-time entrepreneurs.
Palo Alto, Calif.-based Garage.com is different. It aims to make investments of as little as $500,000 and as much as $5 million. Under Garage.com's structure, wannabe entrepreneurs send information to the company by email. Garage.com reviews the solicitations, asks some for more information and then invites the best prospects for a face-to-face meeting. According to its filings, Garage.com arranged funding for 28 companies that raised a total of $90 million in 1999.
Another 12 clients raised an additional $10 million. Not only does this structure make available capital for those who only need a little, it also provides a connection to the connection-less by giving entrepreneurs without well-placed pals a shot at the money.
Garage.com makes money in two ways. First, it takes a fee as well as an equity stake in exchange for arranging financing. Second, it's running a series of highly profitable conferences for entrepreneurs called "Bootcamp for Startups." (I was an unpaid speaker at one such "bootcamp" in the Boston area last fall.)
The conference business has the added benefit of attracting sponsors eager not only to get in front of Garage.com's would-be clientele, but also to be able to invest in them. Sponsors such as Silicon Valley law firm
Venture Law Group
, start-up bankers
Silicon Valley Bank
accounted for 23% of Garage.com's 1999 revenue of $5.9 million.
What makes Garage.com unique, besides the fact that it caters to smaller players, is that it is not out to convince investors to reward it with some valuation based on future prospects of its client firms. Sure, the company aims to take about a 5% stake in each company it represents. And its buzz likely will provoke an initial valuation that's out of whack with reality.
Internet Capital Group
, Garage.com isn't out to be a holding company. It will recognize revenue from the stakes it receives in companies and then do what good investment firms do when those stakes appreciate: Sell them.
"Our policy is to dispose of these equity interests when a liquid market exists and we can do so in an orderly manner," the company states matter-of-factly in its filings. In other words, investment gains by Garage.com will be somewhat predictable and consistent.
Garage.com CEO Kawasaki, an author, speaker and magazine columnist, declined to discuss the offering due to SEC-related quiet-period restrictions. But he obviously has been moving toward an IPO for a while now, as
recently, and humorously,
observed. Kawasaki once was the "chief evangelist" for
, at a time when Apple needed to evangelize. Now Kawasaki is on a crusade to level the playing field between amateur and professional investors.
"Our mission is to revolutionize and democratize the venture financing process for entrepreneurs and investors," reads the Garage.com filing. Of course, plenty of the best-placed investors are signing up for the ride with Garage.com. Investors include a venture unit of Venture Law Group (which, interestingly, is not Garage.com's law firm for the IPO),
Credit Suisse First Boston
(which is an underwriter of the offering),
Advanced Technology Ventures
Garage.com isn't the only outfit seeking to exploit the small-potatoes niche. Venture firm
Draper Jurvetson Fisher
has teamed up with a San Francisco outfit called
. The two have formed a closed-end fund,
meVC Draper Fisher Fund I
, and have filed an IPO prospectus with the SEC to raise capital for it.
"meVC's mission is to democratize venture capital," the firm says on its Web site. Steve Jurvetson, a partner in the Redwood City VC firm, called to say SEC restrictions prohibit him from discussing meVC. One should expect ever more venture firms attempting to scoop up the low end of the market.
There is one manner, by the way, in which Garage.com will resemble the many other dot-coms that have asked public investors for their money. Although it recorded a slim profit in 1999, it discloses to investors that it will record large losses for years as it opens additional national and international offices and markets itself in order to gain market share. Garage.com also arranges to pay itself the customary 20% of profit it derives from its investments.
That's the norm for venture capital firms, only in this case, the shareholders will share the wealth.
Adam Lashinsky's column appears Tuesdays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at