Comparison
Regulation D vs General Solicitation: Key Differences Explained
Regulation D is the SEC exemption that allows private companies to raise capital without registering securities. General solicitation is the public advertising of a fundraise — historically prohibited under Reg D, but now permitted under Rule 506(c) with stricter investor verification requirements. Understanding both is essential for founders raising private rounds.
What is Regulation D?
Regulation D (Reg D) is an SEC rule providing exemptions from full securities registration for private companies raising capital from investors. The most common exemptions used by startups are Rule 506(b) and Rule 506(c).
Under Rule 506(b), companies can raise unlimited capital from up to 35 non-accredited investors and unlimited accredited investors — but cannot use general solicitation (public advertising). Under Rule 506(c), companies can use general solicitation but must verify that all investors are accredited. Most VC-backed rounds are filed under Reg D, which requires a Form D filing with the SEC within 15 days of the first sale.
What is General Solicitation?
General solicitation refers to publicly advertising or broadly marketing a securities offering — including social media posts, press releases, public websites, or any communication directed at the general public. Under traditional Reg D (Rule 506(b)), general solicitation was prohibited, limiting fundraising to pre-existing relationships.
The JOBS Act of 2012 changed this by creating Rule 506(c), which permits general solicitation as long as the issuer takes 'reasonable steps' to verify that all investors are accredited (via tax returns, bank statements, or third-party verification services). This opened the door for founders to publicly market raises on AngelList, LinkedIn, and other platforms.
Key Differences
| Feature | Regulation D | General Solicitation |
|---|---|---|
| What it is | SEC exemption from securities registration | Public advertising of a private securities offering |
| Rule 506(b) | Allows Reg D raise; no general solicitation | Prohibited — limited to pre-existing relationships |
| Rule 506(c) | Allows Reg D raise; general solicitation permitted | Permitted if all investors are verified accredited |
| Investor verification | Self-certification sufficient under 506(b) | Must take reasonable steps to verify accredited status under 506(c) |
| Common use case | Standard VC rounds, angel rounds | Public AngelList rounds, syndicate announcements |
When Founders Choose Regulation D
- →Raising a standard VC or angel round through existing relationships
- →You want self-certification and don't need to advertise the raise
- →The round is institutional and general solicitation provides no advantage
When Founders Choose General Solicitation
- →You want to publicly market your raise on social media or platforms
- →You are raising from a broad network and need to reach beyond existing contacts
- →You are using AngelList or a similar platform that markets raises publicly
Example Scenario
A founder raises a $2M seed round from five angels and a micro-VC under Rule 506(b) — no general solicitation, Form D filed within 15 days. A year later, she raises a $500K angel syndicate round on AngelList under Rule 506(c), publicly announcing the raise on Twitter and LinkedIn. All AngelList participants must submit accreditation verification before investing.
Common Mistakes
- 1Using general solicitation under 506(b) without realizing it disqualifies the exemption
- 2Forgetting to file Form D within 15 days of first close
- 3Assuming general solicitation under 506(c) is as simple as posting a tweet — verification requirements must be met
Which Matters More for Early-Stage Startups?
For most VC-backed startups, Regulation D (Rule 506(b)) is the standard framework — no advertising needed, self-certification works, and institutional investors are all accredited. General solicitation under 506(c) matters primarily for founders using platforms like AngelList that publicly market raises, or those wanting to post about their raise on social media. Know which rule you're using before you market your round.