How much can you say when you raise private money?
This article from SiliconBeat raises the issue of what is a "public solicitation" under the securities laws, stating:
"Over the past year, it seems, more and more start-ups, venture capital firms and other types of private investment funds have been announcing publicly that they're looking to raise money. Maybe we're missing something here, but we thought that security laws forbid you from publicly soliciting funds -- a way of protecting unsophisticated investors from being duped."
A useful site, believe it or not, from the federal government, describes in understandable terms how to raise capital without violating the securities laws and provides a good general overview of the process. Regarding private securities offerings it states:
"You may not use any form of public solicitation or general advertising in connection with the offering.
The precise limits of this private offering exemption are uncertain. As the number of purchasers increases and their relationship to the company and its management becomes more remote, it is more difficult to show that the transaction qualifies for the exemption."
The site goes on to explain the requirements for complying with "Rule 506, another 'safe harbor' rule, that provides objective standards that you can rely on to meet the requirements of this exemption."
