Rules are that issues to normal shareholders require tons of legal disclosure, prospectuses etc etc. To make sure people know what they are buying.
A 'sophisticated' investor offer needs none of that - much quicker and easier to raise capital. It is assumed that these investors can make up their own minds, less risk to the company.
That's why they are the first stop when raising money - cheaper and quicker.
if you only want to raise $10m, why give $1m to the lawyers for legal fees??
