What it is
Regulation D is a set of U.S. securities rules that lets private companies offer securities without going through a full public registration. Founders often hear about it when they begin talking with investors, family offices or other private backers.
Two parts of it come up most often. Rule 506(b) generally does not allow general solicitation, meaning the company can't broadly advertise the offering, and it centers on relationships the company already has. Rule 506(c) allows general solicitation, but every purchaser must be an accredited investor, and the company must take reasonable steps to verify that status.
An accredited investor is a person or entity that meets certain financial or professional criteria set by regulators. Soft circling is a separate, informal idea: soft circle investors share non-binding indications of interest, which are not commitments. Because the rules are detailed and change over time, securities counsel is the right source for how they apply to any situation.
How it’s traditionally been approached
Traditionally, founders have raised money through people they already know, introductions from advisors, and conversations that build over time. Under 506(b), that relationship-based approach has been common, with the company staying careful about public advertising of the offering.
Others have chosen 506(c) when they wanted to speak more openly, such as through public presentations, websites or social posts. That openness has traditionally come with extra work: confirming that each purchaser is accredited, often through documents or letters from qualified third parties, rather than simple self-certification.
Both paths usually involve a securities attorney, written offering materials, and careful records of who was approached and how. Neither is better in every case. Companies tend to choose based on their audience, comfort with documentation and how they prefer to communicate.
How the right investor may help
The right investor or family office may help founders think through the process with a steady, experienced perspective. They may be able to share what they commonly expect to see, how they like to be approached, and how they view the difference between private conversations and public messaging. This is a possibility, not a promise.
A first conversation is generally an introduction rather than a commitment. Soft circle investors may simply express non-binding interest, and either side can ask questions and decide whether to continue. Nothing said casually should be treated as a binding offer or acceptance.
Helpful questions to ask include: Which exemption is the company relying on, and has securities counsel reviewed it? How will accredited status be verified? What can be said publicly, and what should stay in private conversations? How are materials and communications documented? Remember that SoftCircle.ai is a directory, not a broker-dealer, funding portal or investment adviser, and it does not recommend or endorse any investment.
The bigger picture
Raising money can be stressful. Worrying about saying the wrong thing in public, or about whether paperwork is in order, can affect sleep, focus and relationships. Learning the basics ahead of time may bring some calm and help you make decisions with a clearer head.
Think about the whole person, not just the deal: your finances, your team, your family and your peace of mind. Taking time, asking questions and leaning on qualified professionals can help the process feel more manageable. If the wider health and wellbeing side of running a company is on your mind, Providers.plus may be a helpful place to explore.
Keep in mind
- This page is educational only and is not an offer to sell, or a solicitation of an offer to buy, any security.
- Rule 506(b) generally prohibits general solicitation, while Rule 506(c) permits it only if all purchasers are accredited and reasonable steps are taken to verify that status.
- Soft circles are non-binding indications of interest, not commitments.
- Consult securities counsel and your own legal and tax advisors before communicating publicly about or conducting any offering.
Investors
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Frequently asked questions
What is the difference between 506(b) and 506(c)?
The main difference is how you may communicate about the offering. Rule 506(b) does not allow general solicitation, so outreach generally relies on existing relationships. Rule 506(c) allows general solicitation, but all purchasers must be accredited and the company must take reasonable steps to verify that. Securities counsel can explain which fits a given situation.
What is raising capital the right way?
It means understanding and following the securities rules that apply before and while you talk with potential investors. That usually includes choosing an exemption such as Regulation D, being careful about public statements, and keeping good records. Working with securities counsel is a common part of the process.
What can founders say publicly while raising money?
It depends on the exemption being used. Under 506(b), general solicitation is generally not permitted, so public promotion of the offering is limited. Under 506(c), public communication is allowed within the rule's conditions. Check with securities counsel before posting or presenting anything publicly.
What is an accredited investor?
An accredited investor is a person or entity that meets certain financial or professional criteria set by securities regulators. The exact definitions are detailed and can change. Companies and counsel review the current rules to determine who qualifies.
How are accredited investors verified under 506(c)?
Rule 506(c) requires the company to take reasonable steps to verify accredited status, and simply checking a box is generally not enough. What counts as reasonable depends on the facts, and methods often involve reviewing documents or third-party confirmations. Securities counsel can advise on an appropriate approach.
Is a soft circle a binding commitment?
No. A soft circle is a non-binding indication of interest, so it doesn't obligate the investor or the company. Any actual investment would involve separate formal documents and steps handled with legal counsel.
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.