Preparing For Raising Capital

"From the earliest "idea-stage" start-ups to some of the largest of the Fortune 500, most companies, even publicly traded ones, raise equity capital through private placements."

"As most experienced entrepreneurs know, raising significant amounts of equity capital for an early-stage company is rarely easy. The uninitiated often believe that all they need is an introduction to a couple of well-to-do investors, an hour or two in a room with them to show them the wonders of their great idea or product, and out will come the checkbooks."

"Below is the general sequence of events in a private offering of securities:

• Prepare business plan• Corporate "clean up" and "due diligence"
• Obtain necessary company authorizations
• Decide whether to use intermediaries and if so, identify them
• Negotiate agreement with intermediaries
• Select desired offering exemption
• Define parameters, procedures, contingencies, timing, and geographic scope of offering
• Identify investor qualification standards (e.g., accredited, sophisticated, state residency requirements)
• Identify prospective investors
• Conduct initial blue sky (or state securities law) research
• Prepare offering terms
• Prepare the private placement memorandum (PPM)
• Prepare offering agreements (e.g., subscription agreement, investor questionnaire, shareholder agreement)
• Set up monitoring mechanism for PPMs
• Identify printer and forward PPM for copying
• Circulate the PPM to prospective investors
• Close the transaction
• Make necessary federal and state filings
• Issue stock certificates"

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