The Rules. And How Headwaters Fits In.
You don't need a costly prospectus or a public listing to raise capital. Corporate law, in most countries, provides specific exemptions that allow SMEs to make private offers to issue securities and raise funds directly from investors, compliantly and cost-effectively, provided the offers are made to the right people.
Private capital raising exemptions have existed for decades. The infrastructure to access them hasn't. Until Headwaters.
Five examples — and the list goes on:
USA — Rule 506(b) of Regulation D: up to 35 non-accredited investors, plus unlimited accredited investors, with no cap on funds raised and no general solicitation permitted.
Australia — Section 708 of the Corporations Act 2001: up to 20 retail investors in any 12-month period, not exceeding $2 million under that exemption. Plus unlimited sophisticated investors and no cap on funds raised.
New Zealand — Schedule 1 of the Financial Markets Conduct Act 2013: up to 20 retail investors in 12 months, not exceeding NZ$2 million. Plus unlimited sophisticated investors and no cap on funds raised.
United Kingdom — Financial Services and Markets Act 2000: exemptions for offers to fewer than 150 persons, or offers below £5 million, without requiring a formal prospectus. Plus unlimited qualified investors and no cap on funds raised.
Canada — National Instrument 45-106: multiple exemptions including the Private Issuer Exemption (up to 50 beneficial owners), the Family, Friends and Business Associates Exemption, and the Accredited Investor Exemption. Plus unlimited accredited investors and no cap on funds raised.
Offers can only be made to three categories of people:
1. People the company already knows.
Existing shareholders, long-standing contacts, and prior business relationships.
2. People with a genuine professional or business connection
Advisers, suppliers, clients, or industry peers where a real relationship already exists.
3. People who have clearly stated they are open to receiving private offers of this kind
This is precisely where Headwaters comes in.
Without meeting one of these three criteria, an offer would be non-compliant, even if well-intentioned.
Who Can Invest?
Each jurisdiction allows a limited number of retail or non-accredited investors to participate alongside an unlimited number of sophisticated and wholesale investors:
A Global Framework for Private Capital Raising
Across most developed economies, corporate and securities law recognises that not every capital raise requires a costly prospectus or public listing. Specific exemptions exist that allow private companies to issue securities and raise capital directly from investors, provided offers are made to the right people, under the right conditions.
While the precise rules vary by jurisdiction, the underlying principles are broadly consistent:
Offers must be private and targeted — made only to people the company already knows, those with a genuine professional or business connection, or those who have clearly indicated they are open to receiving private investment offers.
Investor eligibility matters — most jurisdictions distinguish between sophisticated, accredited, or wholesale investors and retail or non-accredited investors, with different conditions applying to each.
Disclosure obligations apply — issuers are generally required to provide sufficient information for investors to make informed decisions, even without a formal prospectus.
Numerical and monetary thresholds exist — most jurisdictions limit the number of retail or non-accredited investors who can participate in any given offer within a defined period.
Headwaters is designed to operate within these frameworks, providing the compliant private market infrastructure that makes these exemptions genuinely accessible to SMEs for the first time.
Issuers and investors should always seek independent legal advice regarding the specific regulatory requirements applicable in their jurisdiction.
Where Headwaters fits in
Headwaters enable SMEs to raise capital privately and in a structured, compliant way. It replaces fragmented, ad-hoc capital raising with a consistent listing environment that supports both new capital issuance and secondary ownership transactions.
By registering on Headwaters, investors are clearly stating they are open to receiving private offers of this kind, satisfying the third investor criterion. While issuers can make every offer to issue securities, compliant from the outset.
For founders, this is significant. It means Headwaters isn't just a marketplace - it's the compliance infrastructure that makes a wide, legitimate investor reach possible in the first place.
Your equity could be your most valuable asset. Do you know what it's worth?
Most founders give away too much, too early, simply because they never modelled it. The Headwaters Capital Planner shows you exactly how ownership evolves across every round of funding, what your shares could be worth at each stage, and how to structure your capital before you invite a single investor in.
Get it right from the start.
