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How to Go Public Without a Stock Exchange

New York Stock Exchange
New York Stock ExchangePhotograph by Daniel Acker/Bloomberg

When the last general store serving 10,000-resident Port Townsend, Wash., folded in the Great Recession, the community 40 miles northwest of Seattle faced a dilemma. “You couldn’t even buy socks and underwear in our town,” recalls serial entrepreneur Martin Gay.

So in 2011, Gay and a handful of others turned to a little-used alternative: a direct public offering (DPO). By selling shares in the store to more than 1,000 individual investors from as far away as Spokane, they raised $700,000 and opened the Quimper Mercantile Company in October 2012. The store took a loss in 2013 but is projected to be profitable this year, says Gay.