How to Write a Investor Offering Prospectus

How to Write a Investor Offering Prospectus and…

How to Keep the Investor Offering Prospectus narrative flowing smoothly


The professional team at Prospectus LLC, provides clients with years of experience writing investor offering documents, from preliminary offering memorandums to red herrings to the final offering prospectus. As such, we know exactly how the respective investor document should be constructed so as to conform and comply with regulatory guidelines specific to local regulatory regimes, how it should readLike a river, it should flow smoothly and steadily. If you write a comprehensive, well-written document, your prospective investors will be intrigued, not bored. If you are writing any document meant to raise capital from investors, put yourself in their position and consider what you would want to see from the issuing company. As an investor, you would want to read a sensible offering document that is well-written, thorough, and easy to understand. Our team, with its experience, can grab the attention of the investor right off the bat with our prospectuses. With our services, we will ensure that your prospectus is written well and effectively.

how-to-write-investor-offering-prospectusThe Ten Rules for Investor Offering Prospectus Writing

1. Identify Your Investors

You may ask yourself, “Why does the investor have to come first?” And more importantly, “What does an investor have to do with the prospectus?” Well, the answer is that the investor is the main audience of your prospectus. When writing, you have to keep the investor in mind, and include what you think they would want to hear. If your service relates to cuisine, then you want to write a prospectus that encapsulates all things cuisine, not something else like theater.

2. Profit Generation

The main reason businesses exist, and continue to exist, is because their purpose is to generate profit. The prospectus, from the very start, should tell a story and a plan on how you will generate money for prospective investors. In your business, services or products that do not make large amounts of money may be viewed as a weakness to your investors. As a result, in the prospectus, focus on the core of your business and the services and products that generate the most money. This will make your prospectus much more compelling.

3. Simplicity

One of the more important aspects of the prospectus is that it needs to read well. Regardless of the actual length of the document, it is important to keep it flowing and simple. For the most part, it is easier to relay your strategies and goals if the prospectus is simply worded and easy to understand. You will want to emphasize explanations of what your company does, and the market you are in with its relevant risk factors. Try to avoid non-essential details. A majority of prospective investors who will read a prospectus, will just skip from section to section. They will often only read the ones that they find important. As a result, your goal should be to create an offering document that is simple, structured, and straight to the point. Always keep in mind that a reader’s attention is hooked in the first few sentences of a paragraph.

4. Market

A prospectus should always contain a section detailing the market the company is in, and its potential future conditions. Many underestimate the impact an analysis of the market can have on a prospectus or any other offering document. Prospective investors want to see that management has a good idea of the current market, and they want to see if the company can prosper in potential future market conditions. As we know, the success of a business depends on the size of the market it is in, the relevancy of the product, and the future expansion or decline of the industry.

5. Scalability

Scalability also plays a huge role as a deciding factor for investors. This information should be easily found in the prospectus. Scalability is how well a company can handle an expanding workload. If a company can maintain its efficiency under increased demand, it will look attractive to investors. The capability for scaling will be largely influenced by market conditions, although, a competent, experienced team that can handle itself during rough times can attest more to the scalability of the company. Any offering document should demonstrate how a company will scale based on any potential market conditions.

6. Team

Some of the most important information that the investor wants to read about is the management team biographies. This is an extremely important section in the prospectus, because it details who is leading the business. Investors want to see the qualifications and the prior experience of every member of management to see that their money is in capable and trustworthy hands. In addition to the team that directly operates the company, the prospectus should also include outside entities that assist the business in their operations. Depending on the structure of the business and the type of issued security, certain people will be referred to such as the underwriters, the team of lawyers, the fund manager, and many others.

7. Risks

In this section, the issuer should disclose any possible and relevant risks that the company may face. Any possible threats to the company’s business plan, strategies or practice should be written about in this section. Take for example an oil drilling company. They may face such problems as finding a dig site, and after operating on it, finding no petroleum. Their equipment faces depreciation, and they may have increasing risks with the progression of the alternate energy industry. This company should outline all of these risks in their offering document. They should even go so far as to outline global economic trends, or even natural disasters that could delay their operations. The major point is that when writing a prospectus, the issuer should be completely thorough in the disclosure of all possible threats to their company, and any other risk in their respective market. Withholding relevant risk information can be a crime, and it could harm your company in the long-run.

8. Funding Requirements

Every offering document has a funding requirements section. In this section, the company outlines how they plan to use the funding they will receive from their placement. Take, for example, the oil drilling company again. If they plan to raise $20 million, they would write in the funding requirement section that they plan on using $10 million for drilling equipment, $4 million for the actual refining of the product, $2 million for acquiring the land to drill on, $2 million for wages and other employee expenses, and $2 million for working capital. The point is that the issuer has to provide a detailed account of exactly what they are going to spend the money on. If the company wants to change where they allocate some of these funds after the placement, they will most likely need investor or executive approval first. In the last part of the section, the issuer will write about any future initiatives meant to obtain more funds. If there is the potential need for more funding in the future, the company would want to disclose why they think they would need the additional capital and what they would use it for.

9. Financials

In this section, the issuer will talk about how they have handled money in the past as well as currently. They will also discuss their projected revenues and use of capital in the future. The section will include a current balance sheet that details any losses or profits. It will also contain proforma statements about projected future expenses and income. Depending on the structure of the company, and whether it is listed publicly or not, the financial statements might need to be audited before they can be inserted into the offering document. The point of this section is to show that the issuer is responsible with its resources and capital, and it should show the company’s achievements in this field.

10. Exit

This section, known as the exit strategy portion of the prospectus, is most likely the most important part of the entire offering document. It highlights when the investor will receive their investment back and with what amount of profit. This doesn’t really apply to companies who do an IPO. However, for private placement companies, the exit usually happens when the business is acquired by another entity. For the most part, because private placements are only open to a select few investors, the company’s owners can’t simply sell their shares to whoever they want. An advantage of a public company who raised capital through an IPO is that they have a larger pool of investors to sell to. The ability to exit a company, and receive capital back, is the most important thing an investor considers before giving any company their funding.


An offering document is an great way to show potential investors three very important points. These three questions, and their answers, can act as a very helpful guide when writing a prospectus.

  1. What are you doing and why is this needed?
  2. How much capital do you need, i.e. where will be it be spent?
  3. When will I see my investment back and with a profit?

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How to Write a Investor Offering Prospectus

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