General Solicitation Definition
General solicitation is the public advertising and promotion of a securities offering to any potential investor, without restriction on who can view or respond to the advertisement. Prior to 2013, general solicitation was prohibited in private offerings under Regulation D. The JOBS Act changed this by allowing companies to broadly advertise private securities offerings under Rule 506(c), so long as all actual investors are accredited investors.
Why It Matters for Angel Investors
General solicitation expands investment opportunities for angels by allowing them to discover deals through public channels rather than relying solely on private networks and referrals. This transparency helps angels access a broader pipeline of early-stage companies. However, it also increases due diligence responsibility, as investors must independently verify investment terms and company legitimacy.
For startups, general solicitation enables wider reach in capital raising, reducing dependence on established investor networks. This democratizes access to angel funding and can accelerate the fundraising process.
Key Rules and Restrictions
- All purchasers must be verified as accredited investors through documentation or third-party confirmation
- Companies cannot accept investments from non-accredited investors, even if they've seen the public advertisement
- Advertisements must include contact information directing investors to verify accreditation status
- Records of investor verification must be maintained
Example
A technology startup can now post a pitch video on their website or LinkedIn announcing an equity offering, reaching thousands of potential investors. Any accredited investor who sees the posting can express interest. However, before receiving investment terms, investors must complete an accreditation questionnaire to confirm their status.
Related Terms
Regulation D | Rule 506(c) | Accredited Investor | Private Placement | Securities Offering