Marketing and solicitation guidelines

What is considered as general solicitation?

When you choose to market your fund or deals via internet ads, seminars and meetings it is considered as general solicitation. If you wish to refrain from general solicitation you should avoid advertising and broadcasting your fund to people you are not well acquainted with. 

 

However, if you communicate with people with whom you share a substantial pre-existing relationship, it is not considered as general solicitation. For instance, if you reach out to your Syndicate backers on the Lilypads platform or pitch your fund to your network, it would not be a general solicitation.

What are the guidelines of 506(b) and 506 (c)?

The funds that come under the 506 (b) guidelines are not allowed to engage in general solicitation or general advertising of partnership interest in that fund.

 

Unlike the 506 (b) counterparts the 506 ( c ) Funds like Venture Funds have the discretion to engage in general solicitation.

 

What happens on the occasion of unintentional general solicitation?

Sometimes in the case of an unintentional general solicitation, you can flip your fund from 506 (b) to 506 ( c ).

 

In such cases, the Investors who had closed into your fund before the general solicitation, will not face any additional reassessment. However, the Investors who have closed into your fund after the general solicitation has occurred, must provide additional information to confirm their accredited status.

How should I advertise my funds?

The advertisement for your fund must contain accurate information regarding your fund’s terms. Therefore the investors must get well acquainted with every pertinent detail of your fund.

 

You can advertise your funds through a wide range of options including social media campaigns, news reports and write-ups, seminars, and so on.

 

 

Can I mention past deals?

Lilypads advises you to refrain from discussing the performance and returns of your past deals with the investors. If you choose to include all past deals, the selection of examples should be based on non performance based criteria.

 

If you choose to include historical years anyway you should mention a disclosure along the following lines:

 

“This list is only partial and these investments are not representative of the entire portfolio. Most early-stage investments fail. A complete list of past investments is available upon request.”

What are some of the rules which require my attention?
    • Do not use third-party quotes and testimonials for endorsing your investment advice.

     

    • Maintain uniformity and consistency across all the disclosures and materials that you provide on the Lilypads platform.

     

    • You must substantiate the factual claims in your offering with accurate documentation and evidence.

     

    • Do not make disingenuous or misleading statements and omissions for promoting your fund to the LPs. As this is a securities offering, any false statement would subject you to stringent enforcement actions by the SEC.

This help page and the information contained herein is provided for informational and discussion purposes only and is not intended to be a recommendation for any investment or other advice of any kind, and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction.

Investing in venture capital funds is inherently risky and illiquid. It involves a high degree of risk and is suitable only for sophisticated and qualified investors.