After the long hard slog of starting a company, building a team, and begging for investment, a prominent VC has finally invested in your Series A. Congrats on your financing! However, while you’re popping champagne after the deal closes, your lawyer is filing documents with the SEC on your behalf, and the press is reading through these filings to see if you’re worth reporting on. It’s in your best interest to make sure you understand how the Form D works, so you’re ready to handle the publicity before the news of your financing is made public.
What is a Form D?
When you do a Series A financing, you’re selling shares, aka securities. A sale of securities is either registered or exempt. Most early startup financings (Series Seed/A/B etc.) are exempt. A sale that isn’t exempt must be registered with the SEC. If the sale of securities is exempt, you must file a form letting the SEC know that your sale is exempt. Although the formal name of this filing is “Notice of Exempt Offering of Securities,” in the startup world it’s affectionately referred to as a “Form D.”
You must electronically file the Form D within 15 days after the first sale of securities in an offering (e.g. your first Series A closing).
Who Can See a Form D?
So who can see a Form D? Anyone who goes to the SEC's EDGAR search tool, types in your company name, and clicks on your company’s Form D. Anyone. It’s all public. Try it—type in a company that’s in the news for getting a Series A or Series B recently.
What is on a Form D?
The Form D asks you to list specifics about your fundraising. This includes listing (a) “The Total Offering Amount” (the amount you want raise), (b) “The Amount Sold” (the amount you actually raised), and (c) “The Total Remaining to be Sold” (the amount you failed to raise, but are still trying to raise).
They’ll also ask you to enter some information about your people, namely anyone who is considered a “Related Person.” Who counts as a “Related Person?” You don’t have to say who has invested in your company. However, you do have to list other people, such as your board members. And if a VC has invested a lot of money in your company, they’ll often put themselves on your company’s board. So, by listing who’s on your board, you’re essentially letting people know (whether you intend to or not) that a VC has invested a large amount of money in your company. The SEC also says to list “Executive Officers” or people “performing similar functions (title alone is not determinative).” Your lawyer will likely list your officers (president, secretary, treasurer) and maybe founders, too, just to be safe.
Preparing for a Form D
So how can you prepare for the fallout of a Form D filing? Before your Form D is filed, tell the people who should find out from you that your company got a financing (i.e., your mom) before they hear it from the press. You should also be ready for the press. This can be a great PR moment for you—an excellent opportunity to raise your company’s profile. Don’t squander it by not being ready.
While there’s no guarantee the press will be interested, they will be more likely to pick the story of your investment up when your investors are well respected in the investor community. You should be prepared with answers to common questions that the press will likely ask you about your financings:
- What is your company’s mission? What are you trying to do? (Your 60-second elevator pitch.)
- What angel investors / institutional investors invested in your financing round?
- How much money did you raise in total?
- What’s your origin story (who started it and why)?
- Who are your competitors? How are you different?
- How many clients do you have?
- How many employees do you have?
Alternatives to Form D
Most lawyers choose to file a Form D. But depending on how capital is raised, your lawyers might consider another exemption from registration. If you're not comfortable with your financing being made public within 15 days of closing, see if there are other exemptions that your lawyer could use—otherwise they might use Form D without considering your input.
Your lawyer will likely file a Form D for you with the SEC after you close your equity financing. Although they might not even tell you about this, there are implications for your business when they do this. The press will know about it immediately, and, if you have high-profile investors, the press may come calling. This could be your chance to shine. Good luck. Hey—congrats—you’re living every startup’s dream. And don’t forget to call your mom!
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