Question: What are the risks associated with funding an Angel round without a PPM? Assume the round is under $250k. Any resources you’d recommend looking at or people to talk this through?
Our Take: Few deals these days (at any size) have PPMs written for them. The costs (legal, accounting and management time) just don’t justify creating this document most times. We still see PPMs for large rounds (above $50M), but even then, it’s not guaranteed.
The risks are pretty straightforward. Without a PPM, the investor has less information and less recourse should something go wrong. That being said, companies raising angel money don’t have enough money to pay out investors if something does go wrong, so the company is much better suited to put its limited resources to use running the business, not drafting 100 page legal documents.
