Legal & Compliance
General Solicitation
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Quick Answer
Publicly advertising a fundraise to non-preexisting relationships — allowed under Rule 506(c) for funds raising from accredited investors only.
What it is
General solicitation refers to advertising or publicly marketing a fundraise to investors without a pre-existing relationship. Historically prohibited for private securities offerings, Rule 506(c) of Regulation D (enacted under the JOBS Act of 2012) allows general solicitation if: the offering is only sold to verified accredited investors, and the issuer takes reasonable steps to verify accredited investor status. General solicitation enables VCs and startups to advertise fundraises on social media, at conferences, and through press — something previously restricted. Most established VC funds still rely on relationship-based (506(b)) fundraising. General solicitation is more commonly used by newer funds, syndicates, and platforms like AngelList.
In Practice
Redwood Capital wants to raise a $75M fund and decides to use Rule 506(c) to allow general solicitation. They publish a fund pitch deck on their website, promote their fundraise on LinkedIn, and speak at investor conferences about their investment thesis. However, they can only accept capital from verified accredited investors — requiring income/net worth documentation from every potential LP. This public approach helps them reach new institutional investors but adds compliance costs and verification requirements they wouldn't face under 506(b) private placements.
Operational context
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Why It Matters
General solicitation rules determine how openly you can fundraise and who can invest in your fund. Violating these securities regulations can result in severe penalties and force funds to return investor capital. For emerging managers without established LP networks, understanding when general solicitation makes sense can be the difference between a successful raise and regulatory problems. The trade-off between broader reach and stricter verification requirements affects fundraising strategy and costs.
VC Beast Take
Most fund managers avoid general solicitation despite its benefits because the accreditation verification process is a nightmare. The rules were designed to 'democratize' fundraising but actually favor established managers with existing LP relationships who don't need public promotion.
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Further Reading
How to Start a Venture Capital Fund: A Step-by-Step Guide
Everything you need to know about launching a venture capital fund — from legal structure and fundraising to portfolio strategy, operations, and the realities most first-time GPs face.
What Is a Special Purpose Vehicle (SPV) in Venture Capital?
How special purpose vehicles work in venture capital — SPV structure, economics, legal requirements, and when they make sense for angel syndicates, co-investments, and emerging managers.
Comparisons
Frequently Asked Questions
What is General Solicitation in venture capital?
General solicitation refers to advertising or publicly marketing a fundraise to investors without a pre-existing relationship. Historically prohibited for private securities offerings, Rule 506(c) of Regulation D (enacted under the JOBS Act of 2012) allows general solicitation if: the offering is...
Why is General Solicitation important for startups?
Understanding General Solicitation is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does General Solicitation fall under in VC?
General Solicitation falls under the legal category in venture capital. This area covers concepts related to the legal frameworks and compliance requirements in venture capital.
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