It used to be that you could not "generally solicit" or "generally advertise" your private company's securities offering.
This changed with the JOBS Act and the ensuing SEC regulations.
You now can generally solicit or generally advertise your securities offering, but doing so gives rise to additional limitations and work.
The big things that happen when you generally solicit are:
- You have to take steps to verify the accredited investor status of your investors. You cannot rely on a simple certification from your investors that they are accredited. Instead, you have to ask for their financial statements, or tax returns, to verify that they are. You can also use certain third parties to do this for you.
- You can only accept investments from accredited investors.
- You have to check the box on your Form D that you were relying on Rule 506(c). When you check this box, you may draw additional scrutiny from securities regulators.
There are also proposed SEC regulations that would require a bunch of other things, like pre-filing your Form D, filing your offering materials, and other requirements. But those rules are only proposed and not yet final.
The bottom line--there is a reason there hasn't been a rush to do this. But things are changing. 500 Startups generally solicited for investors for its last fund. And the BufferApp company generally solicited its last round. These are probably indications of a trend towards greater use of this alternative in the future.