As a corporate strategies consultant with a firm that focuses exclusively on authoring business plans, private placement memorandum (Regulation D rules 504, 505 and 506), facilitating initial and/or direct public offerings via our database of investors and taking companies public on the OTCBB, I am consistently confounded by companies that contact me regarding one of two scenarios:
- They are shopping around for the cheapest PPM author they can find with a goal of raising capital; or
- They have already made the mistake of using the cheapest PPM author they could find and are wondering why they cannot find an investor to fund their 80 page stack of garbage.
A PPM is the most technical document your company will ever produce and is crucial in raising capital and limiting your company’s liability therefrom. It is essential that you know who your audience is before you contract a consulting firm to write your PPM because you will want to use a different approach for venture capital firms as opposed to angel investors, private investors or small private equity firms. If you are not certain who your audience should be, then you should inquire of your potential consultants who they think you should address and why. One thing is certain: A sloppy or misdirected document only serves to undermine your company’s credibility when trying to convince investors that you are ready for the next step in your corporate evolution.
Because a PPM is an essential and very technical document that can help you realize a boon in your company’s growth, this is not the time to be pennywise and dollar foolish – you would do better to consider your PPM as a significant investment in your company’s future. The PPM is your “key” to raising capital and as such, it needs to be a finely tuned instrument to “unlock” the wallets of the investors you are seeking.