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Is a PPM imperative when raising a $1 million equity offering?

My startup concept is a new website aimed at a niche demographic. I have a comprehensive business plan, but do not have a PPM. I am seeking $1 million from an equity investment.

My research indicates that a PPM could easily cost me $10-20,000--money which I do not have because I have used the money to develop a beta version of my site. Do I need to continue to pursue development of a PPM?
Could I save money by doing a mock-up of a PPM and simply have a lawyer edit it?
Nina Kaufman answered April 25, 2008
Whether you draft a PPM or have an attorney do so, PPMs are an integral part of the process of raising capital (in the numbers you are seeking) and essential to ensuring that you do not need to register with the Securities and Exchange Commission. Generally, any time you are offering an investment opportunity, you are offering a "security." All securities must be registered with the SEC unless you can show that you fall under one of the exemptions to registration. Selling unregistered securities can land you in deep trouble with the SEC. In addition, given the dollars you are seeking, you may have a hard time finding the right investors unless you have disclosure documents in a PPM form to provide to them. PPMs are also a vital part of your defense against a lawsuit for fraud. Do not mess with this area. If you don't have the funds to get an attorney, find them. Borrow from friends or family to get the right attorney on board. Rack up the credit cards. Make the repayment of this loan part of your capital-raising process. Drafting it yourself and having an attorney review it may or may not be the best way to go. Ask the attorney you hire whether that will really be a cost-saving measure. It may not be.

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.