A Community Investment Case Study: Real Pickles’ DPO
By Andy Bamber
If you have some time and are curious about direct public offerings (DPOs), I highly recommend the recently released case study on our client Real Pickles by Massachusetts-based Community Involved in Sustaining Agriculture (CISA). The carefully detailed study provides an excellent overview of the DPO preparation, filing, and marketing process, shedding light on many of the questions about DPOs that we encounter every day at CEC.
For one, it details the pros and cons of the common financing vehicles available to entrepreneurs, including subordinated debt, royalty financing, and equity investment—the choice of Dan Rosenberg and Addie Rose Holland, owners of Real Pickles. It shows how, by selling non-voting preferred stock through a DPO, they were able to raise capital at 4-5 percent, as opposed to 8-12 percent on a loan, or 15 percent for royalty financing. The “cost of capital” was therefore appealing to them, and to community-minded investors looking for local investment opportunities in Vermont and Massachusetts, the two states where the offering was registered.
Secondly, the study highlights a few of the central pieces to the success of Real Pickles’ DPO on the marketing side of things. This included a communications strategy of blog posts, social media updates, and regular e-newsletters with updates, events, and appeals; a series of public events, including investor briefings, tours, and store demonstrations; and press releases that ultimately garnered front-page coverage in three local newspapers and a story on the regional public radio station. But, the study points out, the most critical piece to the success of Real Pickles’ DPO was the backing of a strong community network of loyal customers, fans, and like-minded investors, who supported the company by becoming shareholders in it.
More than answering some common questions about DPOs, the study provides an account of Rosenberg and Holland’s decision to pursue an alternative form of financing in order to preserve their commitment to the food system, their employees, and the community. Had they opted for a “sell-out” scenario, as in the case of Odwalla, Naked Juice, Tom’s of Maine, and Stoneyfield Farm, it is not clear that this would have been the case. In the words of Rosenberg, to do otherwise would have led to “very bad social outcomes,” speaking about the prospect of a few big corporations leading the world.
The report concludes by stating that the capital raising strategy pursued by Real Pickles offers an innovative model to connect investors to the local economy. At CEC we help businesses across the country raise growth capital through DPOs, while creating sustainable investment opportunities for individuals.