A Regulation D Offering provides the fundamentals necessary for accommodating numerous investors much more successfully and efficiently than utilizing only a business plan. A business plan alone cannot provide the basic necessities needed for raising capital from investors effectively. Business plans typically confine businesses and entrepreneurs to locating one or two "super-wealthy" individuals with the capability of investing a substantial amount of capital. Even then - you still need to have in place the appropriate disclosure documentation, transaction structure, and investment documents to interact with those one or two investors properly and allow them to invest.For example - you are seeking $500,000 and you are using only a business plan to raise capital. I am an investor with $25,000 to invest - a fraction of the $500,000 that you ideally need for the company. The very first thing I will see as an investor is that I am not able to participate in your deal - I have only $25,000 and you are seeking $500,000. It is not readily apparent how I can help you. There is certainly no transaction structure in place that would allow me to invest into your deal. How much of the company would I get for the $25,000? In what form - debt, equity, common stock, membership units? What documents would I sign to actually issue you the investment check for $25,000? You certainly don't expect me to invest $25,000 on a handshake - do you?
Trying to find one big investor with the financial capability to capitalize your entire transaction is like finding a needle in a haystack. There are exponentially more investors available with $5,000 to $25,000 to invest than super-wealthy investors with $500,000. "Super-wealthy" investors are hard to access and, since they are taking the majority if the risk by being the only investor, typically demand a large amount of ownership and control for their investment. As stated earlier - even with just one or two investors you still need to have in place the legal capability to sell them securities, the appropriate disclosure documentation, and proper investment documents for them to sign outlining the terms and conditions of the investment. All things a Regulation D Offering provides.
A Regulation D Offering provides the legal framework, structure, and documentation that allows multiple individual investors to participate in the investment opportunity. A Regulation D Offering turns everyone into a potential investor. 99% of the private companies that are successful at raising funding do so by pooling together the investment of numerous smaller investors - only 1% raise the capital they need through one investor or venture capital firm. How do you like your odds?
