Capital raise support
First raises stall in diligence far more often than they stall in the pitch. This engagement builds the record before anyone asks to see it.
By the time a term sheet is on the table, the things that decide how the round goes have already happened. How equity was issued. Whether the minutes exist. Whether the financial statements describe a business an investor can underwrite. Correcting any of that inside a diligence window is slow, expensive, and visible to the people across the table.
The work here is unglamorous and it is the difference between a round that closes on schedule and one that drifts. Mr. Sheehan priced deals at Merrill Lynch and a private capital group before he practiced law, so the materials are built to be read by the person on the other side.
What the engagement covers
Cap table reconciliation
We trace every share to a board consent, a subscription and an exemption. Under G.S. 78A-56 a purchaser in an unregistered, unexempt offering may tender the security back and recover the price paid, with interest, costs and reasonable attorneys' fees, less income received, within two years of the sale. Rule 506 offerings require a notice filing with the Securities Division; where filings were missed, we identify the remaining options.
Corporate record cleanup
We reconstruct and ratify minutes and written consents so the actions taken over the company's life have a record behind them. We bring annual reports and registrations current in North Carolina and in each state where the company has operated without qualifying. A corporation that has been administratively dissolved cannot produce a clean certificate from the Secretary of State, and an investor asks for one early.
Diligence-grade data room
The index is built before anything is uploaded. Documents are organized to match the request list an investor will send, versioned so one agreement does not appear in three forms, and released in stages as the conversation gets serious. Privileged material, such as legal opinions and assessments of live disputes, is identified and held back. Access is logged, so the company knows later who read what.
Diligence question bank
Every company has a handful of questions it would rather not be asked: customer concentration, a related-party lease, contractors who look like employees, a claim settled on a handshake. We write each one up in advance with a plain answer and the document that supports it, so the same answer comes from every person in the room.
Investor narrative and financial appendix
Behind the deck sits a document: what the business does, why the numbers moved, what carries the forecast. We reconcile management accounts to the tax returns and show normalizing adjustments rather than burying them. Projections are labeled as projections: G.S. 78A-8 makes it unlawful, in the offer or sale of a security, to state an untrue material fact or to omit one needed to keep the statements made from misleading.
The offering document set
What an investor signs is a package, not a single agreement: the disclosure document, the subscription agreement carrying each side’s representations, and — on a priced round — the investor rights agreement that fixes information rights, pro rata rights, rights of first refusal, co-sale and drag-along. Earlier rounds usually run on a SAFE or a convertible note instead, where the terms that matter are the valuation cap, the discount, and what happens at maturity if no round has priced. Where a disclosure document is prepared, the risk factors are drafted against the business as it actually is, because that document is the record if a purchaser later says something material was left out.
Term sheet and investor document review
Most of a term sheet is not binding. Exclusivity and confidentiality are the usual exceptions, binding from signature, but that turns on the binding-effect provision in the particular sheet, so we read it before it is initialed. The economics depend on whether the preference participates, how anti-dilution is calculated, who controls the board, and which decisions need investor consent. We translate each into what it does at an exit.
Management rehearsal
We run a mock session the way the meeting will run: the same questions, in the same order, with follow-ups. It shows who should answer what, where two founders describe the business differently, and which subject makes someone defensive. The point is not a script but a management team that has heard the hard question before.
The exemption the round sits under
Section 5 of the Securities Act of 1933 is the starting point and it is unforgiving: every offer and every sale of a security must be registered with the SEC unless an exemption covers it. Registration is the default, not the exception. Most private companies never register — they raise inside an exemption — but the exemption has to be identified before the first conversation with an investor, not reconstructed afterwards, because several of the conditions are things you can only satisfy prospectively.
Section 4(a)(2) exempts transactions by an issuer not involving any public offering, and its edges are drawn by case law rather than by a checklist. Regulation D sits inside it as a safe harbor: meet the stated conditions and the exemption is available without having to argue about where the edge is. Which rule you raise under turns almost entirely on one question — whether you intend to advertise the round.
Rule 506(b) — no advertising
No cap on the amount raised and no cap on the number of accredited investors, plus up to 35 non-accredited purchasers who are sophisticated enough to evaluate the investment. The trade is that there can be no general solicitation or general advertising: no public posts about the round, no pitch to a room you did not already have a relationship with, no press. If a single non-accredited purchaser comes into the round, Rule 502(b) requires you to deliver substantial disclosure to them, broadly the kind of information a Regulation A offering carries, and anything you gave the accredited investors has to go to them as well. That requirement is why most 506(b) rounds end up all-accredited by choice.
Rule 506(c) — advertising permitted
No cap on the amount and you may solicit publicly. Two conditions come with it. Every purchaser must actually be accredited — there is no 35-purchaser allowance — and the issuer must take reasonable steps to verify that status. Collecting a tick-box in which the investor certifies themselves is not enough on its own under this rule, which is the point founders most often get wrong when they decide to announce a raise.
Rule 504 — small offerings
Up to $10 million in any twelve-month period. It is narrower than it looks: unlike Rule 506, a Rule 504 offering is not a covered security, so it does not displace state registration requirements and each state where you sell has to be cleared on its own terms. For most raises that makes it more work than 506, not less.
Form D and the North Carolina notice filing
Form D is filed with the SEC no later than 15 calendar days after the first sale in the offering. North Carolina cannot require a Rule 506 offering to register with the State, because it is a covered security, but it does require a notice filing: under 18 NCAC 06A .1211 the issuer files Form D and a consent to service of process with the Securities Division and pays the fee set under G.S. 78A-31(b), no later than 15 days after the first sale in this State. Every other state where a purchaser sits has its own version, on its own clock.
Bad actor disqualification
Rule 506(d) takes the exemption away entirely if a covered person has a disqualifying event in their history — certain criminal convictions, court injunctions, regulatory orders and SEC disciplinary orders. Covered persons reach well past the founders: directors, executive officers, 20% beneficial owners, promoters, and anyone paid to solicit investors. The inquiry has to be made and documented before the raise, because the disqualification operates whether or not anyone knew.
Who you are allowed to sell to
Accredited investor is defined in Rule 501(a), and for an individual there are two long-standing routes. Income: more than $200,000 in each of the two most recent years, or more than $300,000 jointly with a spouse or spousal equivalent, with a reasonable expectation of reaching the same level in the current year. Net worth: more than $1 million, alone or with a spouse, excluding the value of the primary residence. Neither figure has been indexed to inflation since the definition was written, which is why the population it captures keeps growing.
Since the 2020 amendments the definition is no longer purely financial. Individuals holding a Series 7, Series 65 or Series 82 license in good standing qualify on that basis alone, as do knowledgeable employees of a private fund investing in that fund. On the entity side it reaches entities owning more than $5 million in investments and family offices with more than $5 million under management, alongside the banks, registered advisers and other institutions already listed.
Under Rule 506(b) you may take an investor’s word for their status where nothing you know contradicts it. Under Rule 506(c) you may not. Rule 506(c)(2)(ii) sets out a non-exclusive list of methods that count as reasonable steps: reviewing tax returns or W-2s for the two most recent years together with a written representation about the current year, for income; reviewing bank, brokerage or appraisal statements dated within the prior three months together with a consumer report and a written representation as to liabilities, for net worth; or written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney or a certified public accountant.
There is a fourth route that has changed how a lot of rounds are run. In a no-action letter issued on 12 March 2025, the SEC staff concurred that an issuer takes reasonable steps where it requires a minimum investment of at least $200,000 from a natural person or at least $1,000,000 from an entity, obtains a written representation that the purchaser is accredited and that the minimum was not financed by a third party for the purpose of making the investment, and has no actual knowledge to the contrary. For a round with a genuinely high minimum, that is materially less intrusive than asking investors for tax returns — but it depends on the minimum being real and on the representations being taken properly.
Getting this wrong is not a paperwork problem. Sell into a failed exemption and the sale was an unregistered sale of a security, which puts the purchaser in a position to demand their money back — under G.S. 78A-56 in North Carolina, with interest, costs and reasonable attorneys’ fees, less income received, within two years of the sale.
How the engagement runs
- 01
Records and equity auditWhat exists, what is missing, what is wrong.
- 02
Gap remediationDocuments drafted and executed to close the gaps.
- 03
Materials buildData room, narrative, appendix, question bank.
- 04
Rehearsal and releaseManagement prepared, then the room opens.
Common questions
Do you introduce investors or place securities?
No. This is preparation and counsel, not brokerage. The firm does not place securities or introduce investors for compensation. Who you raise from is your decision; being ready for the conversation is what we handle.
Do we have to register with the SEC to raise money?
Registration is the default under Section 5 of the Securities Act, so the question is really which exemption you are raising inside. For most private companies that is Rule 506 of Regulation D, which carries no cap on the amount raised. What it does carry is conditions — on who may buy, on whether you can advertise, and on what has to be filed and when — and those are decided before the raise starts, not after.
Can we post about the round publicly?
Only under Rule 506(c), and it changes the rest of the offering. Every purchaser then has to be accredited and you have to take reasonable steps to verify it rather than accept a self-certification. Advertising a round that was structured as a 506(b) is the common way a working exemption gets broken, and it is usually done by someone who did not know the raise was a 506(b).
Can we take money from friends and family who are not accredited?
Under Rule 506(b), up to 35 non-accredited purchasers, and each has to be sophisticated enough to evaluate the investment. The cost is that Rule 502(b) then requires substantial disclosure to be delivered to them, and everything shown to the accredited investors has to be shown to them too. That is a real drafting exercise, so the question is whether the check is worth it. Often it is not, and the answer is to keep the round accredited-only.
We already have a term sheet. Is it too late?
No, but the clock is real. Come in as early as you can. Plenty of this work can be compressed, and knowing which gaps actually threaten the close — versus which are cosmetic — is most of the value when time is short.
Should we be raising equity at all?
Worth asking properly. Owners with real revenue often have credit options they have never priced, and dilution should be a decision made against an alternative rather than a default. That analysis sits in the pro formas work and usually takes about a week.
What if diligence turns up something bad?
Better that it turns up now, with time to fix or disclose it, than in week three of a thirty-day window. Finding it is the point.
Companies with revenue and no prior institutional round, twelve months or less from raising — or already inside a diligence window and finding gaps.
Scoped and fixed for the readiness build. Deal counsel on a live transaction is quoted separately.
A scoped call on what this actually needs, before anything is drafted.
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