What it is
An indication of interest is a non-binding statement that someone may be interested in learning more about a possible opportunity. It is not a commitment to invest, not a contract, and not a purchase of anything. Either side can change course.
In fundraising, "soft circling" describes gathering these indications to get a general sense of how much interest exists. The phrase comes from the idea of informally drawing a circle around names and amounts that might become real conversations later.
Because indications are non-binding, they are different from subscription agreements or signed documents. Any actual investment would happen only through separate, formal steps, with the proper legal paperwork and disclosures reviewed by qualified professionals.
How it’s traditionally been approached
Founders have long tested the waters through conversations with their networks, advisors and existing supporters. These talks help them understand whether a fundraising effort is worth pursuing and what questions investors tend to ask.
Traditionally, a founder might share an introduction, answer questions, and note who seems interested. Later steps, if any, usually involve formal documents, diligence and legal review. Each of those steps is separate from the early indication.
Rules about how a company may talk to potential investors matter. Under Rule 506(b), a company may not use general solicitation, while under Rule 506(c), general solicitation is allowed, but all purchasers must be accredited and the company must take reasonable steps to verify that status. Securities counsel can explain which approach applies and how it affects early outreach.
How the right investor may help
The right independent investor may help by listening, asking thoughtful questions and sharing perspective on how they think about early conversations. That might include how they view timing, communication and what information they find useful. This is a possibility, not a promise.
A first conversation is generally exploratory. You might talk about your goals, your stage, and what kind of relationship each side is looking for. Nobody should feel pressured, and an indication of interest should never be treated as a binding commitment.
Helpful questions to ask include: How do you prefer to communicate? What does your process generally look like? How do you think about confidentiality? Which legal and tax professionals should I speak with before anything moves forward? Always involve securities counsel before sharing materials or making any offer.
The bigger picture
Fundraising can weigh on a person's energy, relationships and sense of security. Waiting for responses and weighing uncertain outcomes can be stressful, so it can help to keep a steady routine, lean on trusted people and pace yourself.
Clear, non-binding conversations may ease some pressure because nobody is locked in too early. Taking time to rest and reflect supports better decisions, and Providers.plus may be one resource for finding wellbeing support. No approach is wrong, and each person's comfort level is their own.
Keep in mind
- An indication of interest is non-binding and is not a commitment to invest or an offer to sell or buy any security.
- SoftCircle.ai is an independent directory, not a broker-dealer, funding portal or investment adviser, and it does not recommend or endorse any investment.
- Rules such as 506(b) and 506(c) shape how companies may reach investors, so consult securities counsel before any outreach.
- This page is educational only and is not investment, legal or tax advice.
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Frequently asked questions
What is an indication of interest in fundraising?
An indication of interest in fundraising is a non-binding expression that someone may want to learn more about a possible opportunity. It is not a commitment, contract or purchase. Any actual investment would require separate, formal documents.
Is an indication of interest legally binding?
Generally, no. An indication of interest is meant to be non-binding, and either side can change course. Exact wording matters, so ask securities counsel to review any language before it is used.
What is soft circling?
Soft circling is the informal practice of gathering non-binding indications of interest to get a general sense of how much interest exists. It is not a commitment from investors and not a sale of securities. Formal steps come later, if at all.
How is soft circling different from a commitment?
A soft circle is a non-binding signal, while a commitment is a legally binding obligation made through formal documents. Soft circling does not obligate either the investor or the company. Counsel can explain the difference for a specific situation.
Do securities rules apply to collecting indications of interest?
Yes, securities rules may apply even to early conversations. Rule 506(b) does not permit general solicitation, while Rule 506(c) allows it if all purchasers are accredited and reasonable steps are taken to verify that status. Consult securities counsel before any outreach.
Does SoftCircle.ai recommend investments or investors?
No. SoftCircle.ai is an independent educational directory and is not a broker-dealer, funding portal or investment adviser. It does not recommend or endorse any investment, and nothing on the site is an offer or solicitation.
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.