Private Placements
1. What is a Private Placement?
2. Who is This Good For?
3. When is This the Best Choice for
Me?
4. When is This Not Advised?
5. Tips for Getting The Money.
6. Ingredients You'll Need on
Hand.
7. Watch Out For...
8. Web Links.
1. What is a Private Placement?
You sell shares in your corporation -- not on the open, public
market, but to select individuals. You'll be deciding how much of
the company to sell, at what price, to how many private investors,
and even which investors. That's a lot of control, but also a lot
of footwork.
2. Who is This Good For?
Companies that need an infusion of capital to jump to the next
level of growth, but that already have a proven track record. Your
company is successful enough to be a solid investment for outside
investors, but you don't have the time, patience or inclination
to take it public right now.
3. When is This the Best Choice for Me
When you're looking for a substantial infusion of capital but
aren't a good candidate for a venture
capital firm or don't want to do a public offering.
4. When is This Not Advised?
When neither you nor anyone else in the company is comfortable
or effective in the sales role.
When your business' growth will be too flat to distribute profits
to a lot of investors fairly soon (before they become impatient
and start phoning all the time)
When you can't spare yourself (or anyone else) from operations
to chat with the number of potential investors you'll have to woo.
5. Tips for Getting The Money
Network! Turn your nose up at no one, for her contacts
and money may prove invaluable in the future. This is where contacts
within your own industry or neighborhood may pay off big -- trawl
the trade associations, local business groups, and clubs.
Get a lawyer seasoned in private placements. Private placements
are overseen only loosely by the Securities and Exchange Commission,
but state securities and exchange officials will want to review
your documents just to see what you're doing. To satisfy them, have
your attorney prepare the paperwork. Tread lightly as you promote
the private offering so as not to attract the attention of the regulators
early on for innocent hyperbole.
6. Ingredients You'll Need on Hand
- A Business Plan
- A good attorney, familiar with Private Placements
- Basic Financial Package
- Legal Documents to meet SEC and state regulations
7. Watch Out For...
Regulations that require you to qualify your investors by income.
Investors in private placements must have substantial personal wealth
and annual income. Recognizing that private placements often represent
risky investments, the government wants to make certain investors
can afford to lose the money if the company doesn't make it.
Lawsuits. It's all too easy for investors to hear your plans as
promises. If they buy shares expecting a windfall, they may be disappointed
-- and sue.
8. Web Links
Venture Associates
Ltd.
Denver financial consulting firm run by James Arkebauer.
Information on private placements as well as finding angels, venture
capital, investment bankers, management consultants and more.
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