Filing your Form
Do startups have to register with the SEC?
Incoming question to VentureSouth last week from an ecosystem partner: I was asked whether a start-up, looking for VC funding, is required to file with the SEC. Do you know if this is a requirement, and what are the criteria or situation that triggers this filing? Is there a document to fill out?
Yes. Yes, yes, yes. Oh yes.
Surprised? If you raise capital in the United States, you are regulated by the SEC.
Which form, and when/how, varies depending on what you’re doing, but the short answer is: you have to fill out forms with the SEC. Typically, within 15 days of taking your first investment.
And with the Attorneys-General in each state where you have investors!
Hopefully you reached this post BEFORE you raised money. If so, here’s a very quick set of tips to fill out forms correctly, but you need to some your own research on this. If not, call your securities attorney — a late SEC filing is better than no SEC filing.
(If you need a securities attorney, Morgan Malino linked here keeps us on the straight and narrow on these questions and we’re happy to connect you.)
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We aren’t providing all the nuances, details, processes, etc. here. We’re not your attorneys. We’ll keep it brief, and you can dig in further if you want.
If you sell equity in your company…
…or something similar to equity, like a convertible note or a SAFE…
…in the US…
You must “register” with the SEC.
That’s a grueling process. Fortunately, there are ways to be “exempt” from registering. Most companies become exempt. But to get that exemption, you should (i) follow fundraising rules correctly — see our posts here about private vs public fundraising and (ii) FILE A FORM D WITH THE SEC.
If you mess up (i) or (ii), you may upset the SEC — which is bad. Please don’t do that. The SEC has the power to bar you from using any exemption in future financings. If the SEC uses that power on you, then you will need to file a full-blow registration statement with every future financing.
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Filing a Form D is a pain, but it’s not hard.
You can DIY. Start here at the SEC website www.sec.gov and navigate to “EDGAR — Information for Filers” and then “Step 1 — Apply for EDGAR access.” From there, you can both “Apply for EDGAR Access” and “Generate Access Codes.” If you don’t have a CIK code, click “Apply for EDGAR Access.” You will need to download the “Form ID” and get it notarized to receive a CIK and a passphrase. It may take a few days for the SEC to issue your CIK, so start early! Once you have a CIK, you will then need to “Generate Access Codes” to receive a CCC and password. Once you have the CIK, CCC, and password, you are ready to file the Form D.
Navigate back to “EDGAR — Information for Filers” and then, under “Step 2 — Submit and manage your EDGAR filings,” click “Log in for … Regulation D.” Although you will need to identify directors and officers, most people would rather their home address not be made public in a Form D filing and prefer you use a c/o with the company address.
You are almost done. Cost (to this point) = a notarized document.
Or your attorney can do (some of) that. They are a little more expensive obviously, but will save you some frustration!
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Am I good now? Sadly, no, because securities offerings are also regulated by your state, and by the all the states in which your investors live. Every state (except Florida) requires that you file a copy of Form D with them if you are raising money from investors in the state. A Delaware company who is raising money from people in South Carolina and North Carolina? You need to file with the SEC, South Carolina, and North Carolina.
Luckily there’s a slick system that posts the Form D to the required states. Go here to start that process: https://www.efdnasaa.org/FORMD/Search The bad news? It costs between $50 and $1,500 PER STATE (South Carolina is $300, North Carolina is $350, and the website is a bargain $160 for a “portal fee”).
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Good luck with conducting a compliant fundraising!
