Raising Capital Legally: A Comprehensive Guide to Securities Exemptions for Startups

65 questions on raising capital legally, answered and cited by the UpLaw editorial team.

• Are SBIR grants and other non-dilutive funding subject to securities law?
• Can a company post its deal on an online investment platform under Rule 506(b)?
• Can a company switch from Rule 506(b) to Rule 506(c) mid-offering?
• Can an early investor sell startup shares to someone else before an exit?
• Can a pitch deck create securities fraud liability?
• Can a startup advertise its fundraising round publicly?
• Can a startup keep marketing its product while raising a Rule 506(b) round?
• Can a startup pitch at a demo day without making a general solicitation?
• Can a startup raise money from friends and family who are not accredited investors?
• Does an exemption from registration mean the offering is unregulated?
• Does a Regulation Crowdfunding offering have to run through a funding portal?
• Does a startup need to worry about securities law when raising only a small amount from people it knows?
• Does complying with Regulation D protect a company from securities fraud claims?
• Does Section 5 of the Securities Act apply to a small private raise?
• How did the SEC's 2020 amendments expand the accredited-investor definition?
• How does a company convert from an LLC to a Delaware C-corporation before a raise?
• How does a SAFE work?
• How long must an investor hold restricted stock before reselling under Rule 144?
• How much can a company raise under Regulation Crowdfunding?
• How much can an individual invest in Regulation Crowdfunding offerings?
• How much capital is actually raised under Regulation D compared with other exemptions?
• Is a SAFE a security under federal law?
• Is cold-emailing a purchased investor list a general solicitation?
• Is Regulation D itself the exemption from registration?
• Is revenue-based financing a security?
• Should a startup use Rule 506(b) or Rule 506(c)?
• What are blue sky laws, and how does NSMIA preemption work for Rule 506 offerings?
• What are reasonable steps to verify accredited-investor status under Rule 506(c)?
• What are restricted securities?
• What are the conditions of a Rule 506(b) offering?
• What are the risks of taking money from a strategic investor?
• What are the safe harbors under Rule 152 for conducting multiple offerings?
• What are the stages of a startup financing round from pitch to wire?
• What counts as a disqualifying event under the bad-actor rule?
• What counts as general solicitation in a private placement?
• What did SEC v. Ralston Purina decide about private offerings?
• What disclosure must a company give non-accredited investors under Rule 506(b)?
• What does a clean seed round look like from start to finish?
• What does Rule 504 allow, and why do most startups avoid it?
• What does testing the waters mean in a Regulation A offering?
• What happens if a company forgets to file its Form D?
• What happens if a startup gets the securities exemption wrong?
• What is a ghost founder, and why does it threaten a financing?
• What is an intrastate securities offering, and when does it make sense?
• What is a pre-existing, substantive relationship for securities-offering purposes?
• What is a purchaser representative in a Regulation D offering?
• What is bad-actor disqualification under Rule 506(d)?
• What is integration of securities offerings, and why is it dangerous?
• What is the difference between a participating and non-participating liquidation preference?
• What is the difference between Regulation A+ Tier 1 and Tier 2?
• What is the difference between weighted-average and full-ratchet anti-dilution?
• What is the Howey test for an investment contract?
• What is the option pool shuffle in a venture term sheet?
• What is the practical difference between a SAFE and a convertible note?
• What is venture debt, and which companies can use it?
• What makes a fact material under the securities laws?
• What must an issuer disclose in a Form C for a Reg CF offering?
• What rights does preferred stock carry in a venture financing?
• When is Form D due, and what does it disclose?
• Which startup instruments count as securities?
• Who is a covered person for bad-actor disqualification purposes?
• Who qualifies as an accredited investor?
• Why does accredited-investor status matter so much in a private placement?
• Why does the accredited-investor net-worth test exclude a primary residence?
• Why do venture capital investors require a Delaware C-corporation?