What do I do after friends and family?

Early capital usually comes from people who already trust you: friends, relatives, colleagues and clients. That is normal, and for many sponsors some of those people become long-term investors. The trouble is that the list is short. Many warm contacts will say no, often because they want to see a first or second deal finished before they commit.

Pressing the same people harder rarely works. The usual next step is to reach the people your network knows and to get into new rooms. How you do that depends on the exemption you raise under, because the exemption decides which conversations are allowed and when.

Whoever you raise from, hold friends and family to the same process as everyone else. Include them only if they are suited to illiquid risk, are choosing freely and can bear a loss. Offer them the same terms, and do not build the whole raise on them.

Under Rule 506(b), you may not advertise or publicly promote your offering. You generally offer it to people you already have a substantive relationship with, meaning one that began before the offering and in which you learned about the person's finances and sophistication. You can sell to accredited investors without a numerical limit. The rules also allow a limited number of non-accredited investors, who must meet sophistication requirements and who trigger added disclosure requirements, so many raisers use accredited investors only.

The non-accredited limit is 35 non-accredited purchasers in any 90-day period. Each of those purchasers must be sophisticated, either alone or together with a purchaser representative. Selling to any of them brings in the disclosure that Rule 502(b) requires, including financial statements. Who is counted follows Rule 501(e), and other offerings can be integrated with this one, which means they are counted together. Many sponsors avoid non-accredited purchasers entirely.

There is no minimum waiting period and no number of touches that creates a relationship. What matters is quality: you learned about the person's finances, experience and goals, and you can show when. A web form, a business card, a LinkedIn connection or a shared meetup is not a relationship with you on its own. Knowing someone socially is not, by itself, enough either.

In practice this route has two stages. In public you meet people and teach, without naming a live deal. In private you get to know each person one to one and keep a dated note of what you learned. Only a deal that begins after that relationship exists goes to them. Relationships that begin before an offering are the ones a 506(b) offering relies on, and they have to be real.

Under Rule 506(c), you may promote your offering publicly, which can reach beyond your network. Every investor must be accredited, and you must take reasonable steps to verify that before accepting their money. People you know who are not accredited cannot invest in a 506(c) offering.

The online route works only if the offering is structured as 506(c) from the start. Ads, public posts about a deal, open webinars and cold messages all count as general solicitation when they promote an investment, and labelling them "educational" does not change that if they feed an offering.

An offering can switch from 506(b) to 506(c) before any sales are made, with an amended Form D and every purchaser meeting the 506(c) conditions. You cannot go back to 506(b) once you have advertised. People you reached by advertising can join a later 506(b) offering only if a real relationship forms before that later offering begins, so record where each contact came from.

Meeting people face to face builds trust faster than anything else. Events, investor clubs, professional associations and dinners are all places to do it. The posture that works is curiosity: ask about the other person, give before you ask, and tell people what your firm does in general terms when they ask.

The rule for events and meetings: "Meet people and start relationships. Do not discuss your specific offering with anyone you do not already have a substantive relationship with, unless you are raising under 506(c)." Remember that the relationship has to be one that began before the offering.

That holds even in a private, one to one conversation at an event. Regulation D has no "testing the waters" allowance, and gauging interest in a specific deal from someone you have no relationship with can itself be an offer. If someone asks about a live 506(b) deal, say you cannot discuss specifics there and suggest getting to know each other first. Never accept money against a soft commitment.

These routes are not ranked. Many sponsors combine them: they build relationships in person and through their network for a 506(b) raise, and plan a separate 506(c) offering if they want to promote publicly. Other exemptions also exist, each with its own conditions.

You decide which exemption fits your raise, with your securities attorney, and you document how each relationship formed. That decision belongs to the issuer, not to a tool or a template.

This article is general education, not legal advice. Before you share any deal, speak with your own securities attorney about which exemption fits your raise and how your relationships formed. The rules discussed here are in Regulation D: Rule 502(c), https://www.law.cornell.edu/cfr/text/17/230.502, and Rule 506, https://www.law.cornell.edu/cfr/text/17/230.506. SEC staff interpretations on general solicitation and relationships are at https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/securities-act-rules.