SOURCE: Sprowtt

Sprowtt.com: The Greenest Investing Platform on the Planet

September 21, 2009 08:00 ET

Sprowtt Launches Marketplace for Earlier-Stage Investments in Pre-Public Startups

First-of-Its-Kind Platform Democratizes Capital Markets; Gives Small Companies and Their Investors Access to Much Needed Capital and Empowers Everyday Investors to Help 'Sprowtt' the Next Big Thing

SAN FRANCISCO, CA--(Marketwire - September 21, 2009) - Sprowtt unveils plans for an alternative stock exchange that lets people invest directly in high-potential startups and gives access to much needed capital from millions of micro-investors. The company introduced its platform at the TechCrunch50 conference last week. Sprowtt was one of 50 companies hand-selected from more than a 1,000 to launch at TechCrunch50 2009.

Sprowtt is making the case for stock offerings of smaller companies. Sprowtt was founded to address the inaccessibility of capital markets for smaller investors and small companies. Increases in cost, compliance, and complexity have nearly shut down the IPO market. For smaller companies, capital markets have been inaccessible for a long time, which is a contributing factor in the IPO crisis. Today, a company typically requires a billion dollar valuation to go public.

The U.S. venture capital industry is currently suffering a liquidity drought. According to statistics published by Dow Jones VentureSource, liquidity in the first quarter of 2009 dropped 65% compared with the same period in 2008, marking the lowest quarterly total since 2003.

By opening early stage investing to the general public, Sprowtt addresses this liquidity problem head on -- spurring growth, innovation, and entrepreneurship.

While most small businesses are aware that doing a traditional IPO is an involved, expensive process, few know about two sets of regulations that allow them to raise up to $1 million and $5 million from the public for much less burden. Companies that raise money under these provisions have the added benefit of avoiding the most difficult requirements of Sarbanes-Oxley, so long as they have less than $10 million in assets or less than 500 shareholders of common stock.

These "mini" public stock offering provisions have great benefits, but are rarely utilized because they're still too complex and too expensive for small companies. Sprowtt makes such smaller public offerings feasible, even for startups. Sprowtt provides online software that guides users through federal and state compliance, as well as a marketplace to advertise companies and their stock offerings. Business managers and their advisors can now comply with securities regulation and sell stock to an expansive pool of investors -- all for a price even startups can afford.

By leveraging technology to systematize compliance and create an exchange, Sprowtt makes public stock offerings cost-effective for smaller companies, opening the door to let individuals, not just institutions, fund high-potential companies they believe in and help fuel the innovation economy. Sprowtt investments can be as low as five dollars -- the price of a latte. By lowering the investment barrier, this maximizes investor choice and encourages diversification among large and small investors alike.

Sprowtt's automated compliance system and online marketplace are primarily aimed at smaller investment banks, venture capitalists, and broker-dealers, who can utilize the Sprowtt technology platform to automate offering preparation, solicitation, and stock sales. Selected high-potential startups and emerging companies will also be able to license the Sprowtt platform to conduct their own offerings.

Although listing stock in Sprowtt's marketplace is limited to selected companies, Sprowtt also plans to license access to its guided compliance software as a stand-alone product to companies, attorneys, and other interested individuals.

Sprowtt co-founders Joshua Sams and Matt Berry are passionate about finding a way for small companies to benefit from the massive potential of micro-investing.

Sams, Sprowtt's CEO, noted, "With current securities regulations, it's easier to spend your money on San Francisco 49ers tickets or to give your neighbor a $500 bailout than it is to invest that money in his or her small company. We've partnered with some of the brightest legal minds in the country to address this irony and open lucrative and important early-round financing to the average individual."

Berry, president of Sprowtt and the one responsible for landing Sprowtt's first customers, explains, "President Obama's landmark campaign raised $500 million online with an average contribution of $80. That's an awesome demonstration of the real power of micro-contribution and mass collaboration. What if emerging companies could raise funds the same way and benefit from the same mass collaboration? They use to be able to, and they potentially could, if it were easier to offer stock to the public."

As Sprowtt grows its offerings, investors will be able to browse for potential investments based on ideas that matter to them -- from clean technology to social networking or biotech, as well as look for minority-owned and women-run businesses.

Sprowtt offers comprehensive and easy-to-read data for each startup, including company snapshots, financial highlights, product highlights, video clips, as well as objective analysis from Sprowtt analysts and community members.

Sams adds, "Another irony in today's capital markets is that for smaller investors, larger public companies are far more challenging to understand and perform practical risk assessment, and I have yet to meet a regular investor that diligently reads all of the public disclosures mandated by the SEC."

"There is a sense of distrust on Wall Street, and fairness and transparency are more closely linked to how easy you make it to understand the investments you're making. When you hand someone an 800-page 'plain-language' disclosure document without graphics, in Courier font, and call that transparency, and then make them pay for that document out of their proportion of profits, it's really easy to see where that distrust comes from," Sams concludes.

Sprowtt CTO and recent Georgetown Law graduate David Marble points out, "What we're really doing is using technology to make a 'private equity'-like market with transparency that's open to the public. We're removing unnecessary compliance obstacles that prevent small companies from selling stock to the public, and at the same time encouraging registration-level disclosure that fulfill its intended purpose -- to provide clear information that helps investors understand a company. There are plenty of rich people who can't read a financial statement but are allowed to buy stock in a startup, but what about savvy investors who make less than $200K who are shut out? We take suitability into account, but with a public offering, we can focus on how much you can invest, not if you can invest."

Sprowtt presently makes its platform available only to certain broker-dealers and investment banks that perform necessary functions in the underwriting process. Companies that wish to list directly should approach Sprowtt with a qualified sponsor, such as a venture capital firm, angel investor, broker-dealer, or other investment firm.

By listing companies through a sponsorship model, Sprowtt leverages reputable third-party pre-offering due diligence to help manage risk. Sprowtt's online platform also enables increased transparency and risk management through 'crowdsourcing,' by making disclosure information available to so many investors.

Additionally, the Sprowtt community provides proof of concept for a growing company in an emerging market, as general investment interest can indicate the potential success of a product or service in the marketplace.

Sprowtt is currently in private beta. Stay tuned later this year as Sprowtt publicly launches its platform to give individuals and startups an opportunity to be a catalyst for change in the capital markets.

About Sprowtt

Founded in 2009, Sprowtt is a development-stage online investment bank and alternative trading system that has created the first truly open marketplace for investing and trading in high-potential startups. Sprowtt gives startups access to capital, encouraging the broadest distribution of stock, and introducing them to millions of potential micro-investors. Sprowtt is building on top of the microfinance revolution, and encourages this consumer behavior to offer early-stage ownership in startup companies and an opportunity to help fuel the economy. Sprowtt is located in Palo Alto, CA. For more information visit http://www.sprowtt.com

About TechCrunch50

Founded in 2007 by leading technology blog TechCrunch and entrepreneur Jason Calacanis, the TechCrunch50 conference provides a platform for early-stage, and frequently unfunded, companies to launch for the first time to the technology industry's most influential venture capitalists, corporations, angel investors, fellow entrepreneurs and the international media. Companies are selected to participate exclusively on merit. TechCrunch50 is supported by corporate sponsors Google, Microsoft, Bing, MySpace and Facebook, as well as venture capital and legal-advisory firms including Sequoia Capital, Charles River Ventures, Founders Fund, Redpoint Ventures and Perkins Coie.

Trademarks mentioned in this document are the property of their respective owners.

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