Business

All securities offerings fall into one of three classes:

1.    Registered,
2.    Exempt, or
3.    Illegal.

Private offerings of securities are just that – “private”.  The key for any private offering is that the offerer may only solicit investors through private methods.  There are all sorts of rules around what constitutes private solicitations and to whom the solicitations can be made, but in general "private" means that which is not public.  If a business attempting a private offering makes a public solicitation (not sale; merely solicitation) for the sale of its securities, it blows its exemption and falls into a world of mess with the SEC and state securities authorities. 

I’ve see business owners blow their private offering in all sorts of ways – through presentations at open forum groups, through postings in church bulletins or newspapers, and maybe most common, by making general solicitations on company websites. 

Usually it looks like this – you see an investor relations page on the company site.  On the page there is a solicitation - something like: “If you are interested in an investment in our company, please contact us.”  That is a general solicitation. 

Key is to be careful.  Know the general rules for private vs. public offerings.  Blowing a private offering exemption can give rise to investors’ rights to rescission, fines, potential legal claims against you and your company, and sit-out periods before your company can engage in another private equity round.  It is just not worth it.


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See also:

Entrepreneurial Law - Developing a Good Business Model
Culture of Private Equity
A World of Private Equity
Rules of Funding
Entrepreneurial Law - Proof of Concept & Proof of Scale
Fatal Flaws in Leadership
Keep the Good Ideas Coming but Stay Focused
Business Law - 10 Common Negotiation Mistakes
Funding Law - Presentations to Investors