Choosing the path within Regulation D
Regulation D is a set of SEC rules that let companies sell securities without registering the offering, provided they stay inside the rule's conditions. Most private raises rely on one exemption within it that comes in two versions. One prohibits general solicitation but allows a limited number of non-accredited investors, who must receive more extensive disclosure. The other permits public advertising, including on social media, but every purchaser must be accredited and the company must take reasonable steps to verify that status rather than simply relying on an investor's own checkbox. Mixing the two approaches, such as posting about a raise while planning to sell to non-accredited friends, is a common way to lose the exemption.
Filings and disclosures that come with it
A Form D notice is filed with the SEC after the first sale, and many states, New York among them, expect a notice filing and fee for offerings made to residents there. These are notices rather than approvals, but missing them creates problems that surface in later rounds and in acquisition diligence. The exemption from registration is not an exemption from antifraud rules, so the pitch deck, any private placement memorandum, and what founders say on calls all need to be accurate and complete on what matters. The rules also disqualify offerings connected to people with certain past securities or fraud-related history, so the company should screen the people involved in the raise, including anyone paid to find investors. Paying an unregistered intermediary a commission on money raised raises separate broker-dealer questions.
Setting up the raise
Before any outreach, we look at who you plan to approach, how you plan to reach them, and what you intend to sell, whether common stock, preferred stock, convertible notes, or SAFEs. Those choices determine the exemption, the documents, and the investor questionnaires. Bring your cap table, any prior financing documents, the draft deck, and a list of people already contacted, since earlier conversations can affect which path remains open. We also ask whether any investors are outside the United States, because offers to them may be structured under a different set of rules.
