What is a PPM and Why Do I Need It?

Raising capital through a private offering isn’t just about getting checks in the door—it’s about doing it legally, professionally, and with your eyes open to the risks. That’s where a Private Placement Memorandum (“PPM”) comes in.

In this post, I’ll break down what a PPM is, why it matters, and when you should absolutely not skip it.

What is a PPM?

A Private Placement Memorandum/PPM is a legal disclosure document provided to potential investors during a private securities offering. It outlines everything an investor needs to know to make an informed decision.

The PPM is not filed with the SEC. Instead, it's used in offerings that qualify for exemptions under Regulation D, such as Rule 506(b) or Rule 506(c).

Even in the situations where it is not strictly required, a PPM is your best legal shield in case questions—or lawsuits—arise down the road.

What's Included in a PPM?

A thorough PPM typically includes information such as the following:

• Executive Summary – Overview of your business and the raise.

• Terms of the Offering – Securities type, valuation, minimum investment, and rights.

• Use of Proceeds – How investor funds will be used.

• Risk Factors – Critical. Lists all potential risks—market, legal, operational, and company-specific.

• Company Background – History, leadership bios, financials, and cap table.

• Legal Disclaimers – Exemptions relied upon and investor qualifications.

THIS IS IMPORTANT: Avoid templates. A PPM must reflect your specific offering. Misstatements or omissions—even accidental—can lead to personal liability.

5 Reasons You Need a PPM

1. It Protects You from Legal Claims

Federal and state securities laws require full and fair disclosure of all material facts. A PPM documents those disclosures. If an investor sues, the PPM serves as a key part of your legal defense.

2. It Supports Your Exemption Under Regulation D

A PPM helps demonstrate compliance, which is especially critical if you're offering to ANY non-accredited investors.

3. It Boosts Credibility with Investors

Sophisticated investors expect professional-grade offering materials. A solid PPM shows that you’re serious, informed, and well-counseled. With many potential investors you may only get one chance to communicate with them, make sure you are showing your company, and you, in the most professional way possible.

4. It Sets Clear Expectations

A PPM clearly defines how money will be used, what rights investors will have, and what risks they’re accepting. It helps prevent misunderstandings and “he said, she said” arguments later on. I tell clients this all the time, the PPM is your shield.

5. It’s Often Required by Advisors or Broker-Dealers

If you’re working with a placement agent, underwriter or other financial professionals, they may require a PPM to proceed. It’s a mark of readiness and compliance.

When Might You Not Need a PPM?

There are LIMITED situations where a PPM might not be necessary—for example:

• All-accredited investor raises with a small number of investors and where EVERYONE is sophisticated

• Insider rounds with prior business relationships

Even then, you still need clear disclosures in writing. Verbal agreements won’t hold up if things go sideways. Having a PPM is definitely your best protection.

Final Thoughts: Don’t Cut Corners

A Private Placement Memorandum isn’t just paperwork. It’s a vital part of a legally compliant and investor-ready capital raise.

If you’re raising funds privately, make sure you:

✅ Consult with experienced securities counsel
✅ Tailor your PPM to your specific deal
✅ Treat disclosure as a risk-management tool, not a burden

In today’s litigious environment, skipping a PPM is even worse than driving without insurance. You might be fine—but if you’re not, the damage can be catastrophic. As opposed to driving without insurance, though, the liability continues even when you are done with “the drive” – you can have liability with investors or regulators long after the offering is done.

Need Help Preparing a PPM?

If you're preparing for a capital raise and aren't sure where to start with your offering documents, reach out for a consultation. A well-crafted PPM can protect you, your business, your investors, and your future.