by Noah S. Johnson*
Raising money is a major step for any young company. The questions of how and from where to secure financing are at the forefront of any entrepreneur’s business strategy. The answers to these questions are also strongly influenced by federal securities laws. An entrepreneur’s initial instinct may be to simply start emailing and calling wealthy individuals or venture capital firms. This would seem like a perfectly logical place to start. But, by doing so, the entrepreneur may quickly run afoul of the ban against general solicitation found in Rule 506 of Regulation D under the Securities Act of 1933.[1] Despite the Rule’s restrictions, companies have long relied on Rule 506 to raise funds because the Rule offers exemption from complex registration requirements and from complying with many requirements of state securities laws.[2] Continue reading “Rule 506(c) Lifts Ban on General Solicitation but Now Startups Must Select Investors Even More Carefully”