Reg D Offering for Startups: A Step-by-Step Guide (2024)

Hey there, startup founders and financial officers! If you’re diving into the world of fundraising, you’ve probably heard of Regulation D (Reg D) but might not be entirely sure what it’s all about, or it’s variations.

Don’t worry, we’ve got you covered. In this post, we’ll break down the basics of Reg D, its benefits, and how your startup can leverage it in 2024.

What is Reg D

Regulation D is a set of rules issued by the U.S. Securities and Exchange Commission (SEC) that allows companies to raise capital through securities offerings without having to register the securities with the SEC. Sounds technical?

Let’s simplify it: Reg D makes it easier and faster for startups to get the money they need from investors without jumping through all the usual regulatory hoops.

What are the basics of Reg D? 

Reg D includes several exemptions, but the ones most relevant to startups are Rule 504, Rule 506(b), and Rule 506(c):

  1. Rule 504: This allows companies to raise up to $10 million within a 12-month period. It’s a great option for smaller fundraising rounds.
  2. Rule 506(b): This is the most common exemption used by startups. It allows you to raise an unlimited amount of money from an unlimited number of accredited investors (think wealthy individuals and institutions) and up to 35 non-accredited investors. The catch? You can’t advertise or solicit the offering publicly.
  3. Rule 506(c): Similar to 506(b), but with a twist—you can advertise! However, you can only accept money from accredited investors, and you must take reasonable steps to verify their accreditation status.

Why Use a  Regn D offering? 

So, why should your startup consider using Reg D? Here are some key benefits:

  • Faster Fundraising: Skip the lengthy SEC registration process and get your hands on that much-needed capital quicker.
  • Cost-Effective: Save on the hefty legal and filing fees associated with registering securities.
  • Flexible Investor Base: Especially with Rule 506(b), you can include a mix of accredited and non-accredited investors (though you might have to do a bit more paperwork for the latter).
  • Advertising Freedom: With Rule 506(c), you can actually market your offering and reach a broader audience of accredited investors.

How can startups leverage Reg D in 2024?

Ready to dive in? Check the list and discoverhow you can make the most of Reg D this year:

  1. Determine Your Fundraising Goals: Decide how much capital you need and which exemption (Rule 504, 506(b), or 506(c)) best fits your needs.
  2. Prepare Your Offering: Draft your private placement memorandum (PPM) or offering document. This should include details about your business, the terms of the offering, and the risks involved.
  3. Engage Legal Counsel: While Reg D is less complex than a full SEC registration, you’ll still want a lawyer to ensure you’re compliant with all the rules and regulations.
  4. Target Your Investors: If you’re using Rule 506(b), focus on building relationships with potential investors quietly. For Rule 506(c), you can get creative with your marketing strategies—just remember to verify those accredited investors.
  5. File Form D with the SEC: After your first sale, you must file a Form D with the SEC. This form provides basic information about your company and the offering.
  6. Stay Compliant: Even after your fundraising round, maintain good records and stay in touch with your investors. Compliance doesn’t end when the money’s in the bank!

Reg D 506C offering for Startups: Final tips 

Regulation D506C can be a game-changer for startups looking to raise funds without the hassle of traditional securities registration. By understanding the different exemptions and how to use them effectively, you can streamline your fundraising process and focus on what really matters: growing your business.

Got any questions or experiences with Reg D? Drop a comment below—we’d love to hear from you! Happy fundraising! 🚀

Take Your Fundraising to the Next Level with Reg D

Now that you have the ability to reach out to accredited investors across the web, you need an easy system for those investors to invest online. That’s where KoreConX comes in. With a comprehensive, all-in-one platform, KoreConX simplifies the complexities of raising capital, offering a compliant infrastructure and a solid commitment to trust in the private capital markets. 

As you explore Reg D offerings for startups, it’s important to consider the best platforms and tools available to conduct your next raise efficiently. KoreConX is designed to meet these needs and ensure a smooth and successful fundraising experience.

KorePartner Spotlight: Douglas Ruark, Founder and President of Regulation D Resources

With the recent launch of the KoreConX all-in-one RegA+ platform, KoreConX is happy to feature the partners that contribute to its ecosystem.

 

Douglas Ruark, the Founder and President of Regulation D Resources, has always been fascinated by the mechanisms and document structure used to syndicate capital. Starting his career nearly 30 years ago in corporate finance when he co-founded Heritage Finance, Inc. in 1992. Seven years later, he served as a primary founder of Regulation D Resources. The firm works primarily within the real estate, energy, tech, and manufacturing industries.

 

With Regulation D Resources, Ruark uses his expertise to help raise money for those industries through the Reg D and Reg A+ exemptions. This experience makes a difference when crafting SEC-required disclosures, evaluating proper exposure on the market, and analyzing clients’ business positions.

 

The fun part for Ruark is the deals with entrepreneurs that have developed technology that can have a significant impact and be a game-changer. He said: “I love seeing what entrepreneurs have developed.” That is why his company focuses on Reg D and Reg A+, helping companies structure their securities offering, and drafting offering documents. The company is determined to help entrepreneurs cross the line into the market so they can grow and succeed.

 

What Ruark enjoys about his partnership with KoreConX is the responsiveness of the staff. He said: “Oscar immediately reached out and set up a call to introduce services.” KoreConX has the same drive and vision that Ruark sees in other entrepreneurs. Plus, KoreConX’s application of tech to streamline compliance aligns with the goal he set out when developing Regulation D Resources’ Investor Portal Compliance Management application.