How to Easily Draft Documents for Raising Seed Private Equity Capital Funding for New Business

Author : Mike Regd

Statistics on the failure rate for startup businesses vary but for years it is hovered between 50-90% within the first two years. Many new business owners do not go into their new venture focusing on a half-and-half likelihood of failure! Excitement over their new ideas and enthusiasm over making new sales, these are usually the topics on an entrepreneurs mind. But whether they think about it often or not, the fact remains that at least 50% of them will fail within their first two years, with many more failing in 5.

There are many reasons commonly attributed to new start up failure, including everything from poor management to the wrong motivation in the first place. But one of the most dominant is the lack of adequate business capital funding. In their heady enthusiasm to get started, businesses underestimate how much money operating will cost them and they overestimate how quickly they will see a profit from sales. Raising capital for a new business can seem like a daunting task. In their urgency to get started (and perhaps a natural proclivity towards endeavors that simply are more pleasing to do), new business owners skimp on the process of filling out the documents for raising capital and lowball the amount they actually require. The long term consequence of this can be devastating.
The first step to raising capital for a new business is to understand the lingo.

The monies necessary to get a new business idea off the ground have a few common names tossed around in the investment community.

“Seed capital” is just what it sounds like: a seed you hope will grow into a thriving success. As a business start up, you likely have already begun using seed capital in the form of your own personal assets or perhaps from a family loan. It is high-risk; at this point you could lose it all if you do not secure enough funding to take your idea to the next level.

“Equity capital” is money you receive in exchange for shares of your business. Investors fund your business and in return, become shareholders in the equity of your company or firm. Private equity investors are not part of the public stock exchange. Don assume that only large companies can receive private capital; it is available to any size firm, large or small.

Private equity is regulated by the United States Securities and Exchange Commission (SEC). The SEC has set in place a set of rules and regulations that provide an exemption from the expensive registration process for companies who need to raise capital from private investors. The most popular of these Regulations is known as Regulation D, sometimes referred to as “reg D” for short.

Small business owners may be aware of private capital opportunities, but few have the resources to locate private investors. The upfront capital to pay professionals to design and develop the investment documents can far exceed the supply of seed money. A PPM, or Private Placement Memorandum, provides the details for every aspect of the business and the investment being sought. Naturally, that can seem quite complicated and expensive and until recently, certainly was.

Using a template is the easiest way to draft the documents for raising business capital.

Paying an attorney to draft the documents for raising business capital under Regulation D can be extremely cost-prohibitive. A better option for most entrepreneurs is a fill-in-the-blank style template for private placement memorandum documents. An online service that offers live help and networking, as well as investor lists and filing in your state can save a new business thousands of dollars.

Written by Mike Regd
‘http://www.regdfast.com’