There are several obstacles to face with a young start-up company, and typically one of the main concerns is raising capital in compliance with funding law. One method companies can use is offering the sale of stock or membership interest in their company through private placement offerings to a limited number of private investors. A private placement offering is differentiated from a public sale of securities that must be registered with the Securities & Exchange Commission, namely because of the dollar amount being raised and the sophistication level of the investors. These investors are presented with a Private Placement Memorandum or an Offering Memorandum which contains key information that must be disclosed to the investors to make an informed decision. This offering memorandum should include such relevant information as the company history, managing team and/or key members, the financial statements, products, and business/marketing strategy.
Typically costing a fraction of the fees involved in registering securities on the open market, a private placement offering is a fund raising strategy that small to mid-size companies might want to consider if they are seeking a capital infusion.
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