Broadly speaking, VC firms (and the funds they advise) must pursue a venture capital strategy and meet certain requirements in order to avoid registration with the SEC, under one or more "exemptions" to registration. 

Registering with the SEC brings a host of additional reporting, compliance, and governance requirements (and costs/burden) to a fund vehicle's investment advisor (often the same person/entity as the fund manager(s)) - hence funds try to avoid this at all costs unless/until their strategy requires this. 

If one of these requirements is believed to be breached, then an analysis must be done to determine what exemptions the fund currently falls under, or if its investment advisor must register with the SEC (if it is not already registered). This can be a complex and nuanced analysis - we strongly recommend consulting an experienced fund attorney for assistance. 

For more information, you may find the following articles generally helpful: