The Problem with Private Placement Memorandums (PPMs)

I have yet to read a PPM written for a startup company that meets the parameters we angels generally establish for funding new ventures.

The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Reg D).

A Private Placement Memorandum (PPM) is a special business plan defined to meet an SEC exemption. In most cases, those entrepreneurs choosing to raise capital using PPMs retain specialists (many of whom are lawyers) to write their PPMs – a rather expensive undertaking.I don’t fund new companies that have prepared PPMs for investment.

I am an angel investor, that is, an accredited investor who is assumed by the SEC and others to be sufficiently wealthy to afford to lose the investment and supposedly experienced enough to make good choices on fundable companies. Angels, as group of accredited investors funding startup companies, are assumed to meet a Reg D exemption for purchasing equity in private companies.

By Bill Payne

Full Story: http://gust.com/angel-investing/startup-blogs/2012/04/04/the-problem-with-private-placement-memorandums-ppms/