eBay used to raise equity for recording studio

By Richard Lawson
The Tennessean

NASHVILLE, Tenn. — How do you raise a little equity in tight-fisted times?

Try an auction on eBay, the popular Internet site where you can bid on just about anything.

Fred Vail, who managed the Beach Boys when they were in their heyday in the 1960s, is doing just that with his recording studio, Treasure Isle Recorders.

"We've actually been successful with one investor," he said.

A Wisconsin investor paid $50,000 for an 8.5 percent share of the recording studio in mid-May. Vail eventually wants to sell 44 percent to 48 percent of his studio business.

He is raising money so he can update the equipment in the 29-year-old studio to become more competitive within a struggling Nashville recording industry.

"The studio was getting old," Vail said.

Attempting to auction equity in a company on the Internet is highly unusual. Typically, money is raised by a small company by taking on loans or through a closely held search for private equity.

In the long description on eBay, Vail in essence provides a mini-private offering document. It details the offer, gives a history of the studio, outlines the state of the music industry, gives Vail's biography and states how the investors will be paid.

It also notes that Sheryl Crow, Rodney Crowell and Waylon Jennings are among performers who have recorded at Treasure Isle.

The eBay description said the expectation is that investors initially should receive 16.5 percent to 20 percent return on investment in the first year.

"I don't take a management fee," Vail said, noting he shares only in the profits.

He struck on the idea of auctioning a piece of the studio on eBay rather than hire someone to raise a desired $230,000 or spend thousands of dollars on advertisements in newspapers around the country.

"I really wanted to try it on my own," Vail said. "For $22.80, you go out on the Internet and reach a lot of people outside of Nashville."

The listing first went on in April. It generated some interest. Vail said only one person actually placed a bid, which was lower than he was willing to accept.

But in the old-fashioned way of making an investment in a business, several people called and arranged to visit the studio, which Vail said he encouraged.

Friends bought a stake in the company. But one investor came through from eBay — Tom Sullivan, an auto parts store owner in Mosinee, Wis., and a music fan, Vail said.