When raising capital, a business may not offer or sell securities unless the offering has been registered with the SEC or falls within an exemption from registration. Each exemption has specific requirements that a company must meet.
This interactive tool can help you navigate the many regulatory pathways to raise capital, based on the criteria that matter most to you. While this tool does not provide legal advice, it can help you better understand your options so that you make informed decisions. Let’s get started!
", "question": "Have you formed your business under applicable state or territorial law and finalized organizational documents (such as bylaws or operating agreements)?
", "choices": [ { "cid": 1, "text": "Yes", "img": "icon-q1-yes_business_exists.png", "next_id": 3 }, { "cid": 2, "text": "No", "img": "icon-q1-no_business_does_not_exist_yet.png", "next_id": 2 } ] }, { "id": 2, "page_type": "resources", "question": "Based on your answer to the last question, the following resources may be helpful for you at this step in your capital-raising journey:
If you’d like to continue exploring capital raising pathways, click continue.
", "choices": [ { "cid": 1, "text": "Continue", "next_id": 3 } ] }, { "id": 3, "page_type": "question", "pid": 2, "question": "Founders often focus on non-dilutive capital or lower cost capital, such as grants or loans, before raising capital from investors.
", "more_info_2": "Source: Federal Reserve Banks, 2020 Small Business Credit Survey
Based on your answer to the last question, the following resources may be helpful for you at this step in your capital-raising journey:
If you’d like to continue exploring capital raising pathways with the navigator, click continue.
", "choices": [ { "cid": 1, "text": "Continue", "next_id": 5 } ] }, { "id": 5, "page_type": "question", "pid": 3, "question": "If you've decided to rely on a specific exemption from registration or to register your offering, select “Yes” to leave this navigator tool and view our resources on various offerings types under the securities laws. If you are not certain which pathway to use or want to continue to compare options using this tool, select “Not Yet.”
", "choices": [ { "cid": 1, "text": "Yes", "img": "icon-q3-yes_decided_on_type_of_offering.png", "next_id": 5, "link": "https://www.sec.gov/education/capitalraising/exemptofferings" }, { "cid": 2, "text": "Not Yet", "img": "icon-q3-no_decided_on_type_of_offering.png", "next_id": 6 } ] }, { "id": 6, "page_type": "question", "pid": 4, "question": "Different offering pathways allow you to raise different amounts of capital.
", "choices": [ { "cid": 1, "text": "Less than $1 million", "result_value": [ "rule2", "rule7" ], "next_id": 8 }, { "cid": 2, "text": "$1 million to $5 million", "result_value": [ "rule7" ], "next_id": 8 }, { "cid": 3, "text": "$5 million to $10 million", "result_value": [ "rule4", "rule5", "rule7" ], "next_id": 8 }, { "cid": 4, "text": "$10 million to $20 million", "result_value": [ "rule3", "rule4", "rule5", "rule7" ], "next_id": 8 }, { "cid": 5, "text": "$20 million to $75 million", "result_value": [ "rule3", "rule4", "rule5", "rule7" ], "next_id": 8 }, { "cid": 6, "text": "$75 million or more", "result_value": [ "rule3", "rule4", "rule5", "rule6" ], "next_id": 8 }, { "cid": 8, "text": "I don't know.", "result_value": [ "rule7" ], "next_id": 7 } ] }, { "id": 7, "page_type": "resources", "question": "Based on your answer to the last question, the following resources may be helpful for you at this step in your capital-raising journey:
If you’d like to continue exploring capital raising pathways with the navigator, click continue.
", "choices": [ { "cid": 1, "text": "Continue", "next_id": 8 } ] }, { "id": 8, "page_type": "question", "pid": 5, "question": "Different rules apply depending on whether you are soliciting investors with whom you already have a pre-existing, substantive relationship, as well as if you plan to sell securities online.
", "more_info_2": "You may be able to raise capital from investors within your state or territory using an exemption for intrastate offerings.
", "choices": [ { "cid": 1, "text": "Intrastate Only", "img": "icon-q6-intrastate_results-intrastate_offering.png", "result_value": null, "next_id": 10 }, { "cid": 2, "text": "Out of State or Undecided", "img": "icon-q6-out_of_state.png", "result_value": [ "rule5" ], "next_id": 10 } ] }, { "id": 10, "page_type": "question", "pid": 7, "question": "Depending on what offering pathway you use, you may be limited in what types of investors can participate. The vast majority of capital raised by emerging companies is from accredited investors.
", "choices": [ { "cid": 1, "text": "Yes", "img": "icon-q7-yes_all_accredited.png", "result_value": null, "next_id": 11 }, { "cid": 2, "text": "No", "img": "icon-q7-no_not_accredited.png", "result_value": [ "rule1", "rule2" ], "next_id": 11 } ] }, { "id": 11, "page_type": "results", "pid": 8, "question": "Based on your answers, the following are the most relevant pathways for you to raise capital. For information on how the navigator narrowed the results, visit the \"Methodology\" page to learn more.
", "more_info_2": "The following are other pathways to raise capital that are less relevant based on your answers.
", "post_text": "Before you raise capital, make sure you are fully prepared:
Looking for more resources? Check out resources to help small businesses navigate raising capital.
The Office of the Advocate for Small Business Capital Formation has provided this information as a service to small businesses and their investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law. Have suggestions to improve the navigator? Reach out to the SEC’s Office of the Advocate for Small Business Capital Formation.
" }, { "id": 12, "page_type": "page", "question": "The capital raising navigator tool was created by the SEC’s Office of the Advocate for Small Business Capital Formation in collaboration with colleagues from across the agency. It is intended as an educational tool to make pathways to raising capital more accessible. Importantly, the tool is not a substitute for legal counsel and should not be construed as legal advice or a statement of SEC policy. If you have questions about the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law. Below is some background information on how the tool works so that you can understand why certain results were displayed.
The navigator helps users decide among the following offering pathways that operating companies use to raise capital:
It does not include offerings conducted under Section 4(a)(2) of the Securities Act that do not rely on a safe harbor listed above.
Based on the answers you selected to the questions, the navigator filters offering types to hone in on the most relevant pathways based on the criteria below.
This question flags for nascent companies that have not yet been formed under state or territorial law the importance of organizational documentation prior to raising capital. Users who have not yet formed their business entity are directed to resources that may be more relevant to the stage of their journey than actively exploring capital raising opportunities. However, it does not filter out any offering pathways for users that proceed through the remaining questions.
This question flags for nascent companies the importance of evaluating the breadth of options to fund their business, including non-dilutive sources of capital (such as grants or loans) and lower costs of capital. However, it does not filter out any offering pathways for users that proceed through the remaining questions.
For users who have already identified a particular regulatory pathway under the securities laws, they can navigate directly to pertinent capital raising information. Selecting “yes” does not filter out any offering pathways, but instead provides users with a shortcut directly to further resources.
This question filters based on the amount the user seeks by using both upper-bound offering limitations as well as lower-bound offering utilization data, as follows:
| $1M | $1M to <$5M | $5M to <$10M | $10M to <$20M | $20M to <$75M | ≥$75M | |
|---|---|---|---|---|---|---|
| Intrastate Offering | Used | Used | Not used | Not used | Not used | Not used |
| Regulation Crowdfunding | Used | Used | Not used | Not used | Not used | Not used |
| Rule 504 | Used | Used | Used | Not used | Not used | Not used |
| Rule 506(b) | Used | Used | Used | Used | Used | Used |
| Rule 506(c) | Not used | Used | Used | Used | Used | Used |
| Regulation A | Used | Used | Used | Used | Used | Not used |
| Registered Offering/IPO | Not used | Not used | Not used | Not used | Not used | Used |
Certain exemptions limit the total offering proceeds that can be raised under that exemption during a given time period, including:
The filters flag offering types as “less relevant” if users indicate they are seeking more capital than the maximum offering limit for that exemption would permit in a 12-month period.
None of the offering pathways include requirements for minimum amount of capital raised to qualify. However, market usage of the different offering types varies. The navigator uses a lower-bound threshold and filters offering pathways as “less relevant” where the amount sought by the user falls within the lower quartile (25%) of market usage of each offering pathway. This lower quartile was determined using both the aggregate number of offerings conducted, as well as the aggregate amount raised. For example, offerings under $1 million fall within the bottom quartile of utilization for Rule 506(c) offerings, and offerings under $75 million fall within the bottom quartile of utilization for initial public offerings and other registered offerings. The navigator uses those two figures as lower-bound offering limitations for those two offering pathways, and filters them as “less relevant” where the user indicates they plan to raise a lower dollar amount. More information on the data used for this analysis is below.
The navigator directs users who select “I do not know” to resources that may be more relevant than actively exploring capital raising opportunities. However, for users who click to continue, the system filters public offerings as “less relevant” on the assumption that the company is seeking earlier-stage capital.
This question filters out Rule 506(b) and Rule 504 offerings where the user selects the option for “Online or via Advertising” because companies relying on Rule 506(b) may not use general solicitation or advertising, and Rule 504 permits general solicitation only in limited circumstances. If the user selects “Using My Personal Network” or “Other or I do not know,” then no options are filtered.
If the user indicates that potential investors are out of state or undecided, this question filters Intrastate offerings as “less relevant.”
If the user indicates that all investors are not accredited, then Rule 506(b) and Rule 506(c) offerings are filtered as “less relevant.” While Rule 506(b) permits an issuer to include up to 35 sophisticated non-accredited investors, the tool filters this type of offering as “less relevant” based on an estimate by the Commission that, in 2019, between approximately 4.45% and 9% of all Rule 506(b) offerings by issuers other than pooled investment funds included non-accredited purchasers.[2] Rule 506(c) does not permit non-accredited investors to participate in the offering. While non-accredited investors are subject to investment limits in Regulation Crowdfunding offerings and Regulation A Tier 2 offerings where the securities will not be listed on a national securities exchange, this question does not filter out those offering pathways.
Because the navigator is intended as an educational tool and not as legal advice to steer a company towards a particular offering pathway, the output of the navigator shows users which pathways are “relevant” based on their inputs, but also shows users the other pathways that are deemed “less relevant.” Users have an opportunity to explore all offering pathways to better understand their options.
Data is based on amounts reported or estimated as raised during the two-year period from January 1, 2019 through December 31, 2020. Data on offerings under Regulations D and Crowdfunding is based on information reported by companies and was collected from EDGAR filings (new filings and amendments) on Forms D and C, respectively. Data on registered offerings was collected from Thomson Financial’s SDC Platinum database. For offerings under Regulation Crowdfunding, estimates of the number of offerings are based on offerings completed during this period as shown on progress updates on Form C-U; estimates of amounts raised are based on proceeds reported in progress updates on Form C-U filed during the report period. For offerings under Regulation A, estimates of the number of offerings are based on offerings qualified during this period, excluding post-qualification amendments; estimates of amounts raised are based on proceeds reported in Forms 1-Z, 1-K, 1-SA, 1-U, and offering circular supplements pertaining to completed and ongoing Regulation A offerings and post-qualification amendments filed during the period, and for companies whose shares have become exchange-listed, information from other public sources. The data excludes offerings conducted by pooled investment funds under Rule 506(b) and Rule 506(c) of Regulation D and via registered offerings.
If you have feedback regarding this tool, including ways to improve it, please reach out to the Office of the Advocate for Small Business Capital Formation.
[1] See Table 1 in \"Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets,\" Rel. No. 33-10884 (Nov. 2, 2020) at https://www.sec.gov/rules/final/2020/33-10884.pdf.
[2]See Note 127 in \"Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets,\" Rel. No. 33-10884 (Nov. 2, 2020) at https://www.sec.gov/rules/final/2020/33-10884.pdf.
Regulation Crowdfunding allows eligible companies to raise up to $5 million in a 12-month period from investors online via a registered funding portal.
", "img": "icon-results-regulation_crowdfunding.png", "link": "/smallbusiness/exemptofferings/regcrowdfunding" }, "rule5": { "title": "Intrastate Offering", "more_info": "Intrastate Offering", "img": "icon-q6-intrastate_results-intrastate_offering.png", "link": "/smallbusiness/exemptofferings/intrastateofferings" }, "rule6": { "title": "Regulation A ”Mini-IPO”", "more_info": "Regulation A ”Mini-IPO”", "img": "icon-results-regulation_a.png", "link": "/smallbusiness/exemptofferings/rega" }, "rule7": { "title": "Registered Offering (or IPO)", "more_info": "Registered Offering (or IPO)", "img": "icon-results-registered_offering.png", "link": "/smallbusiness/goingpublic" } } }