Santa Clara has the Silicon Valley. San Diego has a booming biotech corridor. And Los Angeles is starting to be regarded as the online stock market capital of the world.

The first brokerage to take a stock public through the web is here, as is the first company to use a brokerage to do so.

Even Yahoo! Inc., the web on-ramp company based in Sunnyvale, came here to raise money, through Torrance-based Imperial Bank.

"Los Angeles is the hub for Internet offerings," said Russell Frandsen, a lawyer with Radcliff Frandsen, Tricker & Dongell in downtown Los Angeles. "I think we are on the cusp of a major change in the methodology of the securities business. Costs are going to be lowered, and more companies will be able to go public."

Frandsen was the first lawyer in the country to win a "no action" letter from the Securities and Exchange Commission, granting his client, Pasadena-based brokerage W.S. Gallagher & Co. Inc., the right to seek small investors for an online initial public stock offering in North Hollywood-based Netter Digital Entertainment Inc.

Netter Digital, which produces the "Babylon 5" television show, did raise money over the Web, though the lion's share of its IPO ended up being sold the old-fashioned way, through solicitation calls from stockbrokers.

Though Netter didn't overwhelm anybody with its web offering less than $500,000 was raised Frandsen said the Netter-Gallagher web model is the one that will emerge dominant in the years ahead.

That model involves a traditional brokerage using the web as a cost-effective sales tool to solicit thousands of investors at a cost of pennies each. The brokerage, however, still performs the essential service of due diligence.

"Investors want, and need, the comfort that a licensed securities brokerage has looked at the company, met with management, and is willing to extend their reputation to the intial public offering," said Frandsen.

Other Internet devotees say there are many ways to skin a cat.

Culver City-based Digital Planet Inc., which produces web advertisement-sites for major movie studios, is itself seeking shareholders over the web, with the help of Direct IPO Inc., a brokerage based in Santa Monica.

Direct IPO, led by founder Mark Perlmutter, has a different strategy than a traditional brokerage. Though it works with a licensed broker-dealer, Direct IPO plans to sell shares in Digital Planet that are not liquid. Direct IPO is seeking approval from the Securities and Exchange Commission for the offering.

Direct IPO, in effect, is acting as a venture capitalist. "Our goal is to help companies raise capital on the Internet, so that they can grow, and then get on the Nasdaq with a top-tier underwriter," said Perlmutter.

The early shareholders, who bought through Direct IPO, might then sell out, or hold on for the ride in a new, trading stock, said Perlmutter. He plans for that transition to Nasdaq to happen in a two- to four-year period.

Too, Perlmutter plans to specialize in companies that are web-related, on the theory that online investors, by definition, understand cyberspace better than others.

Direct IPO will offer investors some additional comfort, claimed Perlmutter Direct IPO is taking its payment in the form of stock in its underwritings, in this case, in Digital Planet.

"Our interests, and that of our investors, will be in perfect alignment," said Perlmutter, who added that he has done due diligence on Digital Planet. "When I was a stockbroker, they were not always in alignment. In fact, (as a stockbroker) I earned money only when I traded, whether or not it was in the interest of my client," he said.

Perlmutter hopes to raise relatively small amounts of money from a large number of investors. "We are trying to get 100,000 people to look at the web site, and get 1 percent to 2 percent of those to invest, at an average of $2,500 each," he said. "The idea has to be so compelling, so easy to understand, that an investor will make an initial decision to invest in two minutes. Otherwise, you will lose them."

Why has Los Angeles emerged as the national capital for web-related raising of capital? Answers vary, but a general consensus seems to be that Los Angeles does not have a venture capital network already in place. Thus, L.A. companies have a tougher time raising capital.

"We were born out of necessity," said Perlmutter.

Frandsen, the lawyer, agreed. "You have a lot of venture capital firms in Menlo Park, that's where companies go to raise money. It is more difficult in Los Angeles."

Perhaps the most wide-open L.A. web forum for raising capital is Clay Womack's Direct Stock Market Inc., based in Santa Monica.

Womack's service acts more as a bulletin board for companies, although he checks to make sure information posted on his web site is consistent with filings with state and federal regulatory agencies.

Womack has 15 different issues listed on his site, some of which have raised nothing, and one of which has raised $4.5 million, he said.

Womack's strategy is to standardize presentaion of the offerings, so that once an investor works his or her way through one offering, the other offerings will be easy to access and understand.

He does not perform due diligence, beyond ascertaining that the web offering is the same as the public filing with state or federal officials, he said.

Womack sees a role for connecting the small investor to earlier-stage venture capital, or somewhat aggressive IPOs.

"You know the old joke. If my broker calls me with an IPO, I don't want it (because bigger investors have passed it up). But on the web, we are giving everyone equal access to an offering," he said. "I am allowing Joe Investor to act as venture capitalist."

Womack notes that there are roughly 20,000 public companies in the United States, but only 6,500 enjoy the liquidity of being listed on the major exchanges or Nasdaq.

"The web can be the place where investors in the other (unlisted public) companies gain liquidity," he said. "And I plan to list some of them."

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