Regulation D lets eligible US companies raise capital through certain securities offerings without registering them as public offerings. Your exemption has specific requirements, so the rule you choose should shape how you approach investors and communicate about the round.
What does Regulation D mean for a startup?
Regulation D comprises SEC rules that provide exemptions from registration for qualifying securities offerings. Using an exemption does not remove a company from securities regulation. Instead, it permits a private offering when the business follows the conditions attached to its chosen rule.
Many US startup financings, including SAFE offerings and priced Series A rounds, use Regulation D. The choice is relevant beyond legal paperwork: it can affect who may invest and whether you can publicly promote the raise.
Two commonly used routes are Rule 506(b) and Rule 506(c). Each has different requirements for solicitation and investor eligibility. Founders should discuss the company’s circumstances and planned fundraising communications with qualified securities counsel.
How do Rules 506(b) and 506(c) differ?
The main distinction is whether you can generally solicit investors and what accreditation conditions apply.
- Rule 506(b): You may raise from an unlimited number of accredited investors and a small number of sophisticated non-accredited investors. General solicitation is not allowed.
- Rule 506(c): You may advertise the offering publicly, but every investor must be verified as accredited.
These requirements have practical consequences for your fundraising plan. If you are considering public promotion, do not assume that the limits associated with a 506(b) offering also govern a 506(c) raise, or vice versa. Under 506(c), verifying every investor’s accredited status is a core requirement.
Discuss the intended approach with counsel before promoting the offering or accepting investments. The right process depends on the exemption the company is using.
What should founders check before raising under Regulation D?
Treat the exemption as a working part of your fundraising plan, rather than a detail to address after outreach begins. The following points can help you prepare for a conversation with counsel and make your process clearer.
- Identify the intended exemption. Be prepared to say whether the company plans to rely on Rule 506(b) or Rule 506(c). The distinction affects both outreach and investor eligibility.
- Review how you plan to communicate. General solicitation is not permitted under 506(b). Public advertising is permitted under 506(c), subject to its conditions.
- Plan for investor eligibility. For a 506(c) offering, every investor must be verified as accredited. For a 506(b) offering, consider how you will handle accredited investors and any sophisticated non-accredited investors.
- Ask about Form D. An exempt offering still has a filing requirement. Form D must be filed with the SEC within 15 days of the first sale.
- Get advice for your circumstances. A general explanation of the rules cannot determine how they apply to a particular company or offering. Consult qualified securities counsel.
These are general diligence topics, not legal advice. Clear answers can help you identify whether your communications, investor eligibility process, and selected exemption are aligned.
What Regulation D mistakes should you avoid?
One frequent misunderstanding is that an exemption means a company has no remaining obligations. Regulation D offers a way to avoid registering an offering as a public offering, but the conditions of the selected exemption still apply.
A second risk is mixing the requirements of the two rules. A company relying on 506(b) cannot use general solicitation. A company choosing 506(c) must verify that every investor is accredited. Make sure planned outreach matches the rule under which the offering is being made.
The Form D filing is another item to discuss with counsel. The company must file it with the SEC within 15 days of the first sale, even though the offering is exempt from full registration.
Do not select a rule simply because it appears more convenient. The choice affects how you can reach investors and who may participate. Get qualified legal advice before making decisions about offering communications or investor eligibility.
How can you organize investor outreach around your exemption?
Legal review and investor discovery are connected, but they serve different purposes. Counsel can advise you on the exemption, eligibility requirements, and communications. Your investor search can then focus on candidates who fit your stage, industry, geography, and check size.
Round Funded helps founders find investors, send pitches, and track replies. Its searchable coverage includes 60,000+ active VCs, angels, family offices, and accelerators, with filters for stage, industry, geography, and check size. Investors are filtered to recent activity, and emails are verified.
These features can help you organize discovery and outreach, but they do not decide which Regulation D exemption applies or whether a particular communication complies with securities rules. Those questions belong with qualified securities counsel. To submit your startup on Round Funded and get matched with investors, provide your startup details through the application process. You can also get matched with active investors.
How Round Funded helps founders organize investor outreach
- Submit your startup to get matched with investors through the application process.
- Search investor coverage using filters for stage, industry, geography, and check size.
- Review VCs, angels, family offices, and accelerators, with investors filtered to recent activity and emails verified.
- Send pitches and track replies in the fundraising pipeline, where investors, stages, and next steps can be kept together.
- Coordinate investor discovery with advice from qualified securities counsel. Round Funded supports fundraising organization, not legal advice or a determination of which exemption applies.
Frequently Asked Questions
What is Regulation D in simple terms?
It is a set of SEC rules that can let a company sell securities without registering the offering as a public offering, if the company follows the conditions of an available exemption.
What is the difference between Rule 506(b) and Rule 506(c)?
Rule 506(b) prohibits general solicitation and allows an unlimited number of accredited investors, plus a small number of sophisticated non-accredited investors. Rule 506(c) permits public advertising, but every investor must be verified as accredited.
Can a startup publicly promote a Regulation D offering?
A company using Rule 506(c) may advertise its raise publicly, subject to the rule’s requirements. A company relying on Rule 506(b) cannot use general solicitation. Discuss planned communications with qualified securities counsel.
When must a company file Form D?
The company must file Form D with the SEC within 15 days of the first sale. An exemption from full registration does not remove this filing requirement.
Can non-accredited investors participate?
Under Rule 506(b), a small number of sophisticated non-accredited investors may participate. Under Rule 506(c), every investor must be verified as accredited. Ask qualified securities counsel how the requirements apply to your offering.
Does Regulation D apply to a SAFE?
Regulation D is used for many US startup financings, including SAFE offerings. The applicable exemption and requirements depend on the offering, so confirm the approach with qualified securities counsel.