Pre Paid Holdings (fka PrepaYd, Inc.)

[sons]

Bruce A Berman® Turns Idea Into $80,000,000 Market Cap in Less Than 6 Months

Bruce A. Berman®, president and CEO of a newly public business incubator got the idea for his company at a cocktail party. Or, rather, at a series of cocktail parties.

"I've been consulting with companies on how to go public for a long time," says Berman. "At cocktail parties, people were always asking me how companies go public and wanting to know if their companies qualified. I developed a series of about 50 questions to ask people in order to determine if a business had the potential to be a public company. The problem with that system is that you can't talk to very many people, no more than two or three a day. So I decided to streamline and automate the process."

My company offers a full menu of business development services through its sophisticated Web site, including many of the same services offered by venture capitalists and business incubators. The difference is that it can offer those services to a virtually unlimited number of clients. An updated version of Berman's cocktail questions automatically qualifies or disqualifies companies that apply. At the same time, since all business development services are out-sourced, there is no shortage of manpower to handle approved deals. Once accepted into the system, companies are put through a standardized preparation process.

"If the business needs a $30,000 Web site, we offer them a choice of three pre-qualified Web-design firms that specialize in that size site," Berman says. "If they need a million-dollar Web site, we offer them a different set of designers to chose from. Likewise with business plan preparation firms, securities attorneys, securities accountants and so forth. We put them together with the people they need to succeed. Once they are fully prepared, we steer them to the right funding source, whether for an interim private placement or for a public offering." "I founded the business on Dec. 3, 1999," he says. "After I wrote a business plan, I offered shares of the company to family, friends and business contacts, planning to raise $1 million in start-up money. Between Christmas and Superbowl Sunday, I took in $1.5 million."

The appeal of Berman's idea was clear from the start. "I offered the business on Dec. 3, 1999," he says. "After I wrote a business plan, I offered shares of the company to family, friends and business contacts, planning to raise $1 million in start-up money. Between Christmas and Superbowl Sunday, I took in $1.5 million."

Berman used the seed money to hire employees and start building a Web site. Shortly afterward, he teamed with Travis Morgan Securities to offer a $1.5 million private placement. It, too, was immediately over-subscribed, raising $2.2 million. The company's third round of fund-raising, also handled by Travis Morgan, took place on April 7 when, naturally enough, his company went public, offering 11.5 million shares on the NASDAQ exchange. Several days after the offering, the stock was trading at $7 a share, giving the company an immediate market capitalization of approximately $80 million.

His company makes money in two main ways. First, they take a small equity position in the companies they qualify - 1 to 3 percent, depending on the stage of development. They also receive referral fees from service providers who do work for their clients.

"Equity will be 85 percent of our revenue, service referral fees about 15 percent," says Berman. "The unique thing about our business is that it's competition less. We aren't competing with other investors or business developers. Everyone is welcome to come and look at the deals we have qualified. The more sources of money we are tapped into, the better for our clients. Anyone who decides to invest automatically brings value to our company because we always have an equity position."

Another unique thing about Berman's firm is its broad focus. While many VCs and incubators are focused exclusively on high-tech companies, Berman's company is equally interested in old-economy companies with strong potential.

"We don't look at segment so much as growth potential," Berman says. "If a company is in a billion-dollar market and has the ability to grow to a $50 million in sales within three years, it is a candidate to go public."

Berman has put together a strong management team, including CFO Eric Hopkins, who is also a CPA and who has hired away from Unisys, a major NYSE company.

"My chief technical officer is a lawyer as well as an Internet Genius," Berman says. "My executive vice president was executive VP of Travis Morgan Securities. He brings a tremendous amount of financial knowledge to the company. We have a satellite branch of Travis Morgan within our office and are making plans to buy our own brokerage firm. That will create another source of revenue."
We fielded 130 inquires in our first five hours of operation and booked $200,000 worth of revenue during its second day in operation.

In the near future, Berman plans to launch his own bridge fund to take a stronger equity position in selected deals in his network. He also plans to launch a company that will provide services and financing to good-quality companies that are not candidates to go public.