Limited partners get tons of requests to put money in the latest greatest funds and their missions. Unfortunately, many private placement memoranda ignore key points people use to make their financial decisions. The next time you hire someone to help you with a PPM, make sure they cover the information that matters the most.
PPM on Management Teams
By far, the people who make up your management team – the people making the decisions in how money gets invested – are of primary importance to potential LPs. They want to know their money is being handled by people who have experience and a history of excellence. This section is of primary importance because it is often the thing that keeps someone from reading the rest of your proposal.
Make sure your management team information is comprehensive and thorough. List experience, including struggles, but place an emphasis on successes. Make sure the LP is given enough information to check out your management team to make sure they have earned good reputations. This is the make-it-or-break-it section for many PPM, particularly the ones that neglect it!
Private Placement Memoranda on Performance Track Record
Promises, promises. Potential limited partners are interested in results, and your PPM should be full of them. Shine light on your past successes. It’s accepted and normal for winners to keep on winning. Unfortunately, that’s not all they need to see.
Not only do you highlight successful past performances, but they need to see what factored into those situations. Why were you a winner? What are your strengths? In short, you need to prove there was more at work than pure luck. Stranger things have been known to happen, and a company that relies on luck one day will suffer a lack of it the next.
PPM should leave no doubts about this happening. Being aware of what causes your success shows you have more control than businesses that haven’t analyzed their past performances very thoroughly. Stand out by going overboard in this area, and you’ll keep an LP reading.
PPM and Investment Strategy with Market Identification
This is the section where you don’t just brag about your theories, your practices and why they work – you show how your take on things is different from someone else. Why do you deserve funding? How can you be sure you’ll offer a pleasing return? Why you instead of the next guy? What should keep that LP from picking up the next PPM in the pile?
Tough questions get answered by thorough research when presenting in private placement memoranda. It’s important to know what the decisions makers are after. They want to see you have the right people in place to get the job done, that you know why what you’ve done has worked in the past, and that you do it better than anyone else. That comprehensive faith in and knowledge of your processors will make the difference between success and a pass.