The short answer
Rule 506(b) of Regulation D is a safe harbor that lets a company raise an unlimited amount from an unlimited number of accredited investors, without registering with the SEC, as long as it doesn't use general solicitation or advertising. It's how most angel and seed rounds are done.
- No general solicitation or advertising of the offering.
- Unlimited accredited investors and unlimited amount.
- Up to 35 non-accredited investors in any 90-calendar-day period, with extra disclosure.
- File Form D within 15 days after the date of first sale.
The rules, per the SEC
- No general solicitation or advertising to market the securities.
- Unlimited amount, unlimited number of accredited investors.
- No more than 35 non-accredited investors in any 90-calendar-day period, each of whom (alone or with a purchaser representative) must be financially sophisticated.
- If non-accredited investors participate, they must receive disclosure documents and financial statement information specified in Rule 506.
- Investors receive restricted securities. A Form D notice is due within 15 days after the date of first sale, states may require notice filings and fees, and "bad actor" disqualification rules apply.
Worked example (hypothetical)
A seed-stage founder in Raleigh raises $900K from a local angel group's members, two family offices and a micro-VC, all accredited. She pitches at closed angel-group meetings and through introductions, never posts the round publicly, and verifies status through investor questionnaires. Her lawyer files Form D within 15 days after the date of first sale.
Why it matters to a pre-seed or seed founder
506(b) is the default for warm-intro fundraising. The key discipline: don't advertise the round publicly (social posts announcing "we're raising" with terms can be general solicitation). If you want to market openly, look at Rule 506(c). Get a lawyer's advice before taking money from non-accredited investors, because the disclosure burden rises sharply.
Frequently asked questions
Can I post about my 506(b) round on social media?
Publicly advertising the offering is generally incompatible with 506(b). Ask your lawyer where the line is before posting.
Can friends who aren't accredited invest?
Up to 35 non-accredited but sophisticated investors in any 90-calendar-day period, with extra disclosure documents. Most founders avoid this.
How do I verify accredited status under 506(b)?
506(b) doesn't impose 506(c)'s verification step; companies commonly use investor questionnaires. Confirm your approach with counsel.