How to Find Investors for a Startup

Friends and Family

For many startups, the earliest money comes from friends and family rather than professional investors. This is still a securities transaction if you're selling equity rather than taking a loan, so the same securities law framework described below generally applies, even at a small scale and even among people you know well.

Angel Investors

Angel investors are individuals, often with experience in your industry, who invest their own money in early-stage companies, typically in smaller amounts than a venture capital firm and often at an earlier stage. Many angel investors are accredited investors, meeting the SEC's income or net worth thresholds, though not every angel investor is required to be.

Venture Capital Firms

Venture capital firms invest pooled money from their own investors into startups they believe can grow quickly, usually in exchange for equity and often board involvement. Venture capital typically comes later than friends-and-family or angel money, once a startup has some traction, and it usually comes with more extensive due diligence and negotiated terms than an individual angel check.

Equity Crowdfunding

Regulation Crowdfunding, created under the JOBS Act, lets a company raise up to $5 million in a 12-month period from a broad pool of investors, including non-accredited investors, but only through an SEC-registered broker-dealer or funding portal, not directly from the company's own website. Non-accredited investors face their own investment limits under this framework, and securities purchased this way generally can't be resold for a year.

Understanding the Securities Law Framework

Selling a stake in your startup is selling a security under federal law, which means it either has to be registered with the SEC, a lengthy and expensive process generally reserved for public offerings, or sold under an exemption. Most private startup fundraising relies on Regulation D, specifically Rule 506(b) or Rule 506(c):

• Rule 506(b) lets you raise an unlimited amount of money from an unlimited number of accredited investors, plus up to 35 non-accredited investors in any 90-day period, but prohibits general solicitation or advertising the offering publicly.
• Rule 506(c) allows you to broadly solicit and advertise the offering, including publicly, but every investor must be an accredited investor, and the company must take reasonable steps to verify that status rather than simply accepting an investor's word for it.

Under either path, the SEC generally requires filing a Form D notice within 15 days of the first sale of securities, along with any state-level notice filings.

Matching the Path to How You'll Reach Investors

If you plan to raise quietly through your own network and warm introductions, Rule 506(b) fits without requiring you to verify every investor's accreditation as strictly. If you plan to publicize the raise more broadly, a pitch competition, a public post, or an open call for investors, Rule 506(c) or Regulation Crowdfunding are built for that, with their own added verification or platform requirements in exchange for the broader reach.

Building Your List of Prospective Investors

Beyond the type of investor, building an actual list means researching who invests in your industry and stage, asking for warm introductions rather than cold outreach where possible, and being realistic about which type of investor fits your startup's current size and traction. See how to pitch investors once you have a list and are ready to approach them.

Which Exemption Applies Is a Legal Question, Not a Marketing Choice

Whether your specific fundraising plan fits Rule 506(b), Rule 506(c), or Regulation Crowdfunding depends on exactly how you plan to solicit investors and who they are, not on which option sounds easiest. Get this right before you start reaching out, since the rules are about what you do before the money arrives, not something you can fix retroactively.

Taking Money From Non-Accredited Investors Adds Obligations

If you plan to accept money from non-accredited investors under Rule 506(b), additional disclosure requirements apply that don't apply to an all-accredited-investor raise. Understand these obligations before you accept a check from a non-accredited investor, even a friend or family member.

State Securities Laws Can Add Requirements

Federal exemptions like Regulation D generally preempt state registration requirements but still typically require a state notice filing. Confirm your state's specific notice filing requirement in addition to your federal Form D filing.

Giving Up Equity Is a Permanent Decision

Unlike a loan, equity you sell to an investor is generally not something you can simply buy back later on your own terms. Weigh how much of your company you're giving up, and on what terms, as carefully as you weigh which investor to approach.

This Is Not Legal Advice

Securities law carries real penalties for getting it wrong, including at the state level. Talk to a securities attorney before you solicit or accept any investment in your startup, especially before deciding which exemption your specific plans fit.