What it is
Regulation D is a set of U.S. securities rules that lets companies offer securities privately without going through a full public registration. Rule 506 is the best-known part of it, and it comes in two versions: Rule 506(b) and Rule 506(c). Which one applies depends largely on how a company talks about its raise.
Under Rule 506(b), a company may not use general solicitation. That means no public advertising of the offering, and it generally relies on people the company already has a relationship with. Under Rule 506(c), general solicitation is allowed, but every purchaser must be an accredited investor, and the company must take reasonable steps to verify that status.
Around these two rules sit related ideas: what counts as an accredited investor, how verification works, and Form D, a notice filing associated with many Regulation D offerings. Each has details and exceptions, so securities counsel is the right place to confirm how any of it applies to a particular situation.
How it’s traditionally been approached
Traditionally, founders have raised private capital through personal introductions, advisors and existing networks. That approach fits naturally with Rule 506(b), because it relies on pre-existing relationships rather than public outreach.
As online platforms and social media grew, many founders became curious about speaking publicly about a raise. Rule 506(c) is the path designed for that, with the added step of verifying that purchasers are accredited. Some founders prefer the quieter 506(b) approach, while others prefer the openness of 506(c).
Verification has traditionally been handled in several ways, such as reviewing documents or relying on a letter from a qualified professional. Form D has typically been prepared with the help of a lawyer. Neither path is better or worse; they are different tools for different situations.
How the right investor may help
The right investor may help you think through how you talk about your company, what you can say in public, and how to keep your conversations organized. Some investors have seen many raises and can share what they have noticed in a general way, though they are not a substitute for legal counsel.
A first conversation is usually an exploration. You might describe your business, ask how the investor likes to be introduced, and learn how they think about non-binding indications of interest. Soft circling means gathering those indications; they are not commitments.
Good questions to ask include: How do you prefer to learn about opportunities? Have you been through accredited investor verification before? How do you think about public statements by founders? And always ask who your securities counsel should be before you speak publicly.
The bigger picture
Raising money can be stressful. Worrying about whether a post, a pitch or a casual comment crosses a line can weigh on sleep, focus and relationships. Having a clear picture of the basics may help you feel steadier, and taking things one step at a time can protect your peace of mind.
Money decisions are whole-person decisions, touching family, health and daily life. Taking breaks, leaning on trusted people and getting qualified guidance can help. If the pressure of running a practice or business is heavy, Providers.plus is one resource some people explore for support.
Keep in mind
- SoftCircle.ai is an educational directory, not a broker-dealer, funding portal or investment adviser, and it does not recommend or endorse any investment.
- Nothing here is an offer to sell or a solicitation of an offer to buy any security, and nothing is investment, legal or tax advice.
- Rule 506(b) and Rule 506(c) have different requirements, and the details matter, so consult securities counsel before speaking publicly about a raise.
- Soft circling means non-binding indications of interest, never commitments, and no outcome is promised or guaranteed.
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Frequently asked questions
What is the difference between Rule 506(b) and 506(c)?
Rule 506(b) does not allow general solicitation, while Rule 506(c) does. Under 506(c), all purchasers must be accredited investors, and the company must take reasonable steps to verify that status. Consult securities counsel to understand which fits a given situation.
Can founders advertise a raise?
It depends on the rule being relied on. Under Rule 506(b), public advertising of the offering is generally not allowed, while Rule 506(c) permits general solicitation with added conditions. Because the rules are technical, speak with securities counsel before making any public statement.
What is general solicitation for a startup?
General solicitation generally means broadly promoting an offering to the public, such as through ads, social media or open events. A startup using general solicitation startup methods typically needs to rely on Rule 506(c). A securities lawyer can help you judge whether a specific activity counts.
What is accredited investor verification?
Accredited investor verification is the process of taking reasonable steps to confirm that a purchaser actually qualifies as accredited. It is associated with Rule 506(c) offerings. The methods can vary, so securities counsel can explain what is considered reasonable.
What is a Form D filing?
A Form D filing is a short notice that companies generally submit to the SEC after relying on certain Regulation D exemptions. It summarizes basic facts about the offering. Securities counsel can explain timing and whether it applies to you.
Are soft circle investors making a commitment?
No. Soft circling describes non-binding indications of interest, which are not commitments to invest. Any actual investment would come later through proper legal documents and processes, and SoftCircle.ai does not recommend or endorse investments.
Educational resource. SoftCircle shares general information and connects people with independent investors. It is not professional advice. Talk with a qualified professional about your own situation.