Regulation D

Regulation D (Reg D) is the SEC framework that exempts most private securities offerings from public-registration requirements under the Securities Act of 1933. Codified in Rules 504, 506(b), and 506(c), the regulation covers essentially all venture financing rounds in the US through Rule 506(b) and Rule 506(c), allowing companies to raise unlimited capital from accredited investors without registering the offering with the SEC. It is the regulatory backbone that makes private startup financing possible, and one of the few SEC frameworks every startup founder needs at least passing familiarity with.

The three rules in Regulation D:

• Rule 504 allows offerings up to $10M annually to both accredited and non-accredited investors with certain state-level (Blue Sky) compliance requirements. Used for smaller rounds with non-accredited investors. Less common at venture-track startups.
• Rule 506(b) allows unlimited capital from accredited investors plus up to 35 non-accredited investors per offering, but prohibits "general solicitation" (public marketing of the round). The default rule for traditional venture financing because founder-to-investor relationships are personal and pre-existing. Most VC rounds use 506(b).
• Rule 506(c) allows unlimited capital and general solicitation (the company can publicly market the round on Twitter, blog posts, podcasts, etc.) but requires the issuer to take reasonable steps to verify accredited investor status of all participants. Used when the company wants to publicly fundraise. Introduced via the 2012 JOBS Act.

The compliance mechanics: Form D must be filed with the SEC within 15 days of the first sale in a Reg D offering. The form is fairly simple, naming the issuer, the exemption being used, and basic terms. State-level "Blue Sky" notice filings are often required as well, with fees varying by state. The 2010s and 2020s evolution: 506(c) usage increased significantly as crowdfunding-style fundraising on platforms like AngelList SPVs grew popular, but 506(b) remains the dominant rule for traditional venture rounds.

Ryan's Take

Reg D is the reason private fundraising works at all; without it every round would need full SEC registration like a public offering. You don't need the details, but you should know which rule your lawyer is filing under: 506(b) for the traditional warm-network round (the default), 506(c) for a publicly marketed round with accredited-investor verification. Your lawyer handles the filing. Your job is not blowing the exemption, which under 506(b) mostly means not publicly soliciting your raise.

What founders get wrong: Doing public marketing of their round (tweeting about the raise, mentioning specific terms on a podcast, sending mass outreach emails) while operating under Rule 506(b), which prohibits general solicitation. The 506(b) exemption can be invalidated by public solicitation, potentially requiring the company to refund all investor capital. Either stay private with 506(b) or convert to 506(c) with accredited-investor verification before going public.

Related: [Accredited Investor] · [Regulation A] · [Regulation CF] · [Venture Capital]

FAQ

What is Regulation D? The SEC framework, codified in Rules 504, 506(b), and 506(c), that exempts most private securities offerings from public-registration requirements. Rules 506(b) and 506(c) cover essentially all venture financing rounds in the US, allowing companies to raise unlimited capital from accredited investors without registering with the SEC.

What's the difference between Rule 506(b) and 506(c)? 506(b) allows unlimited capital from accredited investors plus up to 35 non-accredited but prohibits general solicitation (no public marketing of the round). The default for traditional venture rounds. 506(c) allows general solicitation (public marketing) but requires reasonable steps to verify accredited-investor status of all participants. Introduced via the 2012 JOBS Act.

Do I need to file anything for a Reg D offering? Yes, Form D with the SEC within 15 days of the first sale. State-level "Blue Sky" notice filings are often required as well, with fees varying by state. Your corporate counsel handles the filings; the timing matters because late filings can complicate future fundraising.