Raising money is never easy

But I think raising money for a startup is particularly difficult. Unlike a real estate deal where you have something physical to see and cash flows you can count, a startup, depending on the stage, is an idea without any cash flows. And if seed financing, no customers or revenues.

So it's that much more aggravating when you're looking at a $20,000 quote to prepare a private placement memorandum. You want to raise $150,000 and at least $20,000, or more, goes to the attorney.

Busted deal expenses

And to add insult to injury, that $20,000 gets paid regardless of whether you're successful in raising your money. those are called busted deal expenses.

But it doesn't have to be that way...

With a PPM template from TransCapital Pro, you can short-circuit the upfront costs by drafting your private placement, and then taking it your attorney to review.

There are two templates to choose from

One is more geared to early-stage seed financing, and while the other can also be used for a seed round, its probably better suited for a later round.

I'll tell you about each of these two templates in a moment, but first, here are the benefits of using one of our templates:

  • They come in Microsoft Word, so its familiar and easy to use
  • The sections or concepts that require your input are highlighted in RED font so its easy to navigate and focus on the salient points of your offering
  • Its immediately available via download so that you can be started 5 minutes from now
  • It comes with a 30-day 100% money-back guarantee so the risk is all on me; if you're not happy for any reason, just shoot me an email an I'll refund 100% of your purchase

Here's what your purchase comes with:

  • Professionally Prepared Private Placement Memorandum
  • Either our Exclusive Line-by-Line Instructions with a ‘Line Numbered’ PPM, or a ‘Notes’ template using Word’s Comments function
  • Cover Page
  • Reg-D Disclaimer
  • Table of Contents
  • Notice to Investors
  • NASAA Legends for all 50 states
  • Summary of Offering | Term Sheet
  • Risk Factors | Investment Considerations
  • Conflicts of Interest
  • Transaction Summary
  • Business Description
  • Products & Services
  • Strategy
  • Customers, Sales & Marketing
  • Operations
  • Industry and Competition
  • Management
  • Board of Directors
  • Sources and Uses of Funds
  • Capitalization Table
  • Historical Financials D&A | Presentation (as applicable)
  • Projected Financials D&A | Presentation
  • Forward Looking Statement Disclaimers
  • Tax Matters
  • Description of Capital Stock
  • Ownership and Dilution
  • Subscription Instructions and Discussion
  • Exhibit Section
  • SEC Form D
  • Subscription Agreement

So here's a description of the two structures for your startup - a Convertible Note Offering and a Convertible Preferred Offering:

Convertible Note

Pricing equity in a seed financing is hard. Investors want a lot of equity (justifiably) and founders want to give up as little as possible. The Convertible Note solves that conundrum by kicking the can down the road on valuation.

A Convertible Note is a debt instrument that converts to equity when a Series A round is raised at some future point in time. Convertible notes have become popular for early stage seed financing over the last several years. Their popularity stems from a handful of benefits over issuing equity in a seed round.

  • Documentation – the documentation of a convertible note is much simpler and straightforward than documenting an equity offering.
  • Control Provisions – notes typically do not have any control provisions, such as blocking rights on future financings or a sale.
  • Board Seats – unlike an equity issuance, notes do not provide for any board seats for the note holders.
  • Rolling Close – you can have a rolling close, meaning that you can close investors over time. Time kills all deals, and if you have to wait until you get all of your capital raise circled before you close, you run the risk of investors falling out if it takes too long. It runs to your benefit to get investors closed and funded as soon as possible.
  • Variable Terms – you can offer different terms to different investors. If, for example, you want to attract an anchor investor, or motivate an early investor, you can entice them with better economics, such as a lower Conversion Valuation Cap or a higher Conversion Discount (both of these terms are discussed below).
  • Phantom Income – you have a potential tax liability if you issue common stock to your investors shortly after shares are issued to you, assuming that your investors paid a price substantially higher than what you paid. The IRS may impute a value on your shares based on the price paid by your investors. The difference between that price and the price you paid (which is typically a nominal purchase price) could be deemed compensation and be taxed as ordinary income.
  • Dilution – because of the difficulty in valuing the equity of a start-up for an equity raise, you may end up with more dilution than you initially anticipated. But by issuing convertible notes, you kick the can down the road on valuation with the expectation that a subsequent financing will be at a higher valuation than what you could negotiate as a start-up.

A convertible note is a debt instrument that converts to equity at a future time. The convertible note allows you to defer establishing a valuation for your company until a subsequent round gets raised – the Qualified Financing, which is typically an institutional round.

The Convertible Note templates come in two flavors – one if you’re organized as a C-Corp and one if you’re organized as an LLC.

Convertible Preferred

A Convertible Preferred is just what the name implies – a preferred stock that converts to equity.

This type of security is the primary structure used by VC firms. This makes for a familiar capital structure for VC firms when you raise subsequent rounds.

What’s nice about a convertible preferred offering is

  • As I mentioned, its familiar to VC firms when you step up to an institutional round (they hate complicated capital structures, like preferred with warrants)
  • The preferred stock provides investors with a preference to the common equity
  • The convertible feature allows your investors to participate in the upside
  • Your investors can receive a preferred return, if that’s how you structure your offering

And while you can use a convertible preferred for a seed financing, this security is really better suited for startups that have a demonstrable product and have validated their product and business model with paying customers.

All Templates
Are Only

No Questions Money Back Guarantee

30-Day Money Back Guarantee!

If you're unhappy with your debt or equity PPM template, just shoot me an email and I'll refund 100% of your purchase, no questions asked.


For C-Corp



Convertible Preferred
For C-Corp