Divide your private placement memo into sections and your writing sessions will be easier. There are several sections that will be included in your Private Placement Memorandum. General topics include a disclosure about the value, a summary of the transaction, risks of the transaction, description of the business, how to participate in the transaction.

The key to writing your private placement memo is first and foremost to be honest and second to say, don’t sell (save your sale for your power point presentation). State and federal securities laws are more concerned with protecting the investor, so don’t commit lies of commission or lies of omission. This means not misrepresenting any material facts and not omitting any important information that, if included, would lead a potential investor to a different conclusion.

Put yourself in the shoes of your potential investor. What kind of information would you like to see and have if you were on the side of the table? The challenge will be balancing the amount of information. The trick is to present the information in a clear and concise way that is easy to understand without sparing any effort, but also without diving into too much minutiae.

The extent of required disclosure would depend on a number of factors, including the size of the offering and whether you are offering the investment to non-accredited investors. Try to err on the side of caution: Under-disclosure can risk violating securities laws, but there’s no harm in over-disclosure.

Divide your Private Placement Memorandum into the following sections when preparing to put together a draft:

Investor Notices – This section will include disclosure legends informing prospective investors that the securities described are not registered with the SEC. this mostly repetitive and mostly cut and paste. Depending on your offer, you may need some additional state-specific disclosures.

Term Sheet: The term sheet provides a summary of the security you seek to generate through your offer document. Some of the parts included in the term sheet include the purpose of the issuance, the identification of the issuer, the type of security being issued (debt, preferred stock, common stock), the specific terms of the security being issued (dividends or interests). , current or increased salary, warrants, collateral), affirmation and refusal agreements, conditions precedent, etc.

Risk Factors – This is the section where you describe all the reasons why a potential investor should not invest in your transaction. This is the CYA section and it should be as complete as possible. This section sets out the risks specific to the company and the risk of investing in the type of securities being issued. Some examples include dependency on customer concentration, cyclicality, inability to meet projections, regulatory changes, etc. Read the prospectus of any public company and you’ll get an idea of ​​the types of risks to identify and discuss.

Conflicts of Interest – In this section you will want to describe any situation where someone associated with the transaction may have a conflict of interest with the Issuer. An example might be a director of the Issuer who is also a director of the Issuer’s primary supplier. A good filter for this is if you are wondering if this is a conflict of interest, it probably is.

Description of the Issuer, its Business and the Business Plan: this section describes the actual business of the Issuer. It shall include a discussion of the Issuer’s products, strategy, customers, sales and marketing, operations, analysis of the industry and competition, and a discussion of management.

Transaction Description – While the term sheet describes the security being issued, this section describes how the security being issued fits into the transaction. This section would include an outline of the transaction, a table of sources and uses, and a capitalization chart.

Financial Information: The financial section would include a presentation of the Issuer’s historical financial results with a discussion and analysis of the results. This section would also include management’s forecast and a discussion of the assumptions behind the forecast.

Subscription Section: The Subscription Section provides the potential investor with instructions on how to participate in the offering.

Some sections will require more work than others. But in general, when you break your PPM into sections, the overall writing task will be easier. Remember to stick to the facts, put yourself in your potential investor’s shoes, tell, don’t sell, and be honest in everything that comes your way. Follow these suggestions and you’ll find that your writing sessions will run smoothly and you’ll end up with a document that will do your transaction justice.