Building the Raise: Targeting, Materials, Diligence and Intermediaries

A well-run raise starts with a clean cap table, current financials, a runway-based amount and a plan for proceeds, and targets investors whose stage, sector and check size fit. Because FINRA Regulatory Notice 23-08 (May 9, 2023) expects broker-dealers to investigate the issuer, its management, its claims and its use of proceeds independently, the data room should be built to answer those questions. Anyone paid transaction-based compensation to find investors may need to be a registered broker-dealer, and using an unregistered one risks rescission and future-raise problems.

Get ready before you get in the room

SEC small-business staff summarize readiness with the acronym CAPITAL ^[1]. Investors expect a cap table that clearly shows ownership and financial statements ready to convey the company's position ^[1]. The amount you ask for should reflect a calculated runway based on projected expenses, and you should be able to say how the proceeds will be spent ^[1]. Line up attorneys and accountants experienced in capital raising, expect the process to consume senior leadership time, and be ready to explain how investors will eventually get their capital back ^[1].

Investor targeting

Investor types differ by stage and check size. SEC staff describe friends-and-family deals as typically around $10,000 to $50,000, angel syndicates as pooling about $200,000 to $400,000 per deal, and venture funds as investing from Series A through a public offering ^[2]. Staff also note that angels invested over $17.9 billion in early-stage companies in 2024 ^[2]. For later rounds, staff suggest asking whether an investor specializes in your industry and stage, whether your target amount fits their typical check, and what they offer beyond money, because later-stage investors often want board seats and more strategic involvement ^[7]. Whatever the round is called, it must still be structured to fit an exemption ^[2][7].

Materials and the offering approach

Materials usually include a pitch deck, a financial model and a term sheet, and when a FINRA member firm sells a private placement, FINRA's filing requirements can reach private placement memoranda and related documents ^[3]. How those materials are distributed depends on the exemption: in a Rule 506(b) raise, outreach should stay within investors with whom the company or its broker-dealer or adviser has a pre-existing, substantive relationship ^[5]. Sophisticated investors often demand representations about past securities-law compliance or a legal opinion, so problems in earlier rounds can derail the current one ^[6].

Sequencing offerings

Raises that overlap, such as a SAFE round still open when a priced round begins, raise the question of integration: whether separate offerings should be treated as one, which can cause the combined offering to fail the conditions of each exemption ^[8]. Rule 152 provides non-exclusive safe harbors, including one where the first offering ends 30 days or more before the second begins, subject to conditions when the first offering used general solicitation ^[8]. Planning the calendar of a raise is therefore a compliance step, not only a fundraising one.

Building a data room for diligence

FINRA Regulatory Notice 23-08, published May 9, 2023, reminds broker-dealers that recommending a private placement requires a reasonable investigation of the issuer and the securities, grounded in Regulation Best Interest, FINRA Rule 2111 and the antifraud provisions ^[3]. FINRA also notes that most Regulation D offerings are sold without a broker-dealer and only about 20% involve intermediaries ^[3]. When a member firm is involved, the notice says it should, at a minimum, investigate the issuer and management, business prospects, assets, the claims being made and the intended use of proceeds ^[3].

• Regulatory and litigation history of the issuer, management and material affiliates, including bad-actor compliance under Rule 506(d)–(e) ^[3].
• New material developments during the offering, such as pending proceedings or regulatory inquiries ^[3].
• Related-party transactions or payments involving offering proceeds, and whether they create conflicts ^[3].
• Representations of past performance, checked for cherry-picking ^[3].
• Primary documents, such as the contracts or permits a memorandum describes, so claims can be independently verified ^[3].

FINRA says a firm should not rely solely on issuer representations, should critically review third-party diligence reports with attention to who hired the preparer, and should be wary of issuer timelines that leave too little time for a reasonable investigation ^[3]. A data room organized around these topics, with primary documents rather than summaries, shortens diligence for any serious investor, not only broker-dealers.

Intermediaries vs. finders

A broker is any person engaged in the business of buying or selling securities for the account of others, and finding investors for companies or funding rounds is among the activities that can require broker-dealer registration ^[4]. Signs that someone is acting as a broker include taking part in solicitation, negotiation or execution and receiving compensation based on the size or outcome of the transaction ^[4]. Brokers generally must register with the SEC and join FINRA, and their status can be checked on FINRA BrokerCheck or Investor.gov ^[4]. A company that uses an unregistered broker risks civil or criminal lawsuits, rescission and future capital-raising problems ^[4]. Rescission can force a company to return investors' money plus interest, which is hard if the money has already been spent ^[6].

Key terms

Cap table

A record of who owns what in the company, including options and convertible instruments.

Runway

How long the company can operate on its cash, used to size the raise.

Data room

An organized, access-controlled repository of documents that investors and intermediaries review in diligence.

Reasonable investigation

The diligence a broker-dealer must perform on an issuer and its securities before recommending a private placement.

Red flag

A fact that signals possible problems and requires further inquiry before a recommendation.

Broker-dealer

A firm in the business of effecting securities transactions; generally must register with the SEC and join FINRA.

Finder

An informal term for someone who introduces investors; transaction-based pay can make a finder an unregistered broker.

Rescission

Unwinding a sale so the company returns investors' money, plus interest, after a securities-law violation.

Check your understanding

Sources

1. [1]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “Ready to Raise CAPITAL,” June 12, 2024 (last reviewed August 8, 2025).
2. [2]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “Early-Stage Investors,” June 12, 2024.
3. [3]FINRA, “Regulatory Notice 23-08: FINRA Reminds Members of Their Obligations When Selling Private Placements,” May 9, 2023.
4. [4]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “Broker-Dealers,” September 4, 2024 (last reviewed April 24, 2026).
5. [5]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “General Solicitation,” June 12, 2024 (last reviewed April 24, 2026).
6. [6]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “Consequences of Noncompliance,” June 12, 2024 (last reviewed April 24, 2026).
7. [7]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “Raising Later-Stage Capital,” September 4, 2024 (last reviewed April 24, 2026).
8. [8]U.S. Securities and Exchange Commission, Capital-Raising Building Blocks, “Integration,” September 4, 2024 (last reviewed April 24, 2026).

Educational content only — not legal, tax, or investment advice, or an offer to sell or a solicitation of an offer to buy any security. Rules and data are described as of November 2026 and may change. Securities offered through Umergence LLC, Member FINRA/SIPC.