The U.S. Securities and Exchange Commission (SEC) has just made private fundraising significantly easier for startups and private funds. On March 12, 2025, the SEC issued a no-action letter that loosens the requirements for verifying accredited investors under Rule 506(c) of Regulation D. This change could make general solicitation and advertising far more accessible for startups and venture capital firms raising capital.
Let’s break down what this means and why it’s a big deal for founders and investors.
What Changed?
Historically, startups and private funds using Rule 506(c) to raise capital through general solicitation (i.e., public advertising and not just using existing connnections) had to take reasonable steps to verify that their investors were accredited. This often meant collecting sensitive financial documents like:
- Tax returns (IRS forms)
- Bank or brokerage statements
- Credit reports
- Letters from attorneys, CPAs, or investment advisors
These requirements were a headache for both startups and investors. Many founders avoided 506(c) offerings altogether, opting for the more restrictive Rule 506(b), which allows accredited investors to self-certify but prohibits general solicitation.
With the SEC’s latest guidance, issuers using Rule 506(c) can now accept self-certification from investors—provided that they are making a minimum investment of:
- $200,000 for individuals
- $1 million for entities
Additionally, binding capital commitments count toward these minimums, meaning most funds should be able to take advantage of this new guidance for Rule 506(c) offerings.
If the investment meets these thresholds, startups and private funds can reasonably rely on a signed investor representation without requiring additional documentation.
506(b) vs. 506(c): Understanding the Key Differences
Many founders get confused about the difference between Rule 506(b) and Rule 506(c) offerings under Regulation D. Here’s a simple breakdown:
| Feature | Rule 506(b) (Private Offering) | Rule 506(c) (Public Solicitation) |
|---|---|---|
| General Solicitation? | ❌ Not Allowed | ✅ Allowed (can publicly advertise) |
| Investor Type | ✅ Accredited + up to 35 sophisticated investors | ✅ Accredited investors only |
| Accredited Investor Verification | ✅ Self-certification | ✅ Issuer must take reasonable steps to verify |
| Verification Burden | ✅ Low (investor simply checks a box) | 🔴 Previously high, but now reduced with self-certification if minimum investment met |
| Marketing Options | ❌ Private networks only | ✅ Social media, websites, ads, emails, pitch events |
The new SEC guidance reduces the burden of accredited investor verification under Rule 506(c), making it more attractive to startups and venture funds.
Why This Matters for Startups and Investors
1. More Flexibility in Fundraising
One of the biggest barriers to using Rule 506(c) was the verification burden. Now, startups, venture funds and private equity firms can publicly advertise their offerings without scaring away investors who don’t want to share personal financial data.
2. Faster Capital Raises
With fewer administrative hurdles, startups can close funding rounds more quickly. This benefits both founders and investors by reducing delays caused by verification paperwork.
3. Expanding the Investor Base
Since Rule 506(c) allows general solicitation, startups can reach a wider pool of accredited investors—including high-net-worth individuals who may not be plugged into traditional VC networks.
4. Competitive Advantage for Early-Stage Companies
For startups competing for investor attention, the ability to publicly promote fundraising rounds while keeping compliance manageable is a game-changer. This could level the playing field for first-time founders who lack pre-existing investor connections.
What Founders Should Do Next
If you’re considering a Rule 506(c) offering, now is a great time to take advantage of these relaxed requirements. Here’s what you should do:
✅ Review Your Fundraising Strategy
- If you’ve been relying on private fundraising (Rule 506(b)), this new change might make public fundraising (506(c)) a viable option.
✅ Update Your Investor Verification Process
- Make sure your offering documents include the self-certification requirements outlined by the SEC.
- Investors should provide a signed representation stating that they meet the accredited investor threshold and that their minimum investment is not financed by a third party.
✅ Work with Legal Counsel
- While the SEC’s guidance provides a safer path, it’s still important to consult with an experienced attorney to ensure compliance.
✅ Consider Public Fundraising Channels
- With the ability to advertise your offering, platforms like social media, pitch events, and investment newsletters become much more attractive for fundraising campaigns.
Final Thoughts: A New Era for Startup Fundraising
This SEC no-action letter represents a major win for the startup ecosystem. By removing one of the biggest pain points of Rule 506(c), the SEC has opened the door to broader access to capital—especially for startups looking to scale quickly.
Expect to see more founders leveraging public fundraising strategies in the coming months. As the startup and VC landscape evolves, embracing regulatory changes like this can provide a competitive edge in securing capital.
