What is Regulation A+?

Regulation A+ is a securities offerings exemption that allows U.S. and Canadian companies to raise up to $50M over a 12-month period from anyone in the world, regardless of their accreditation status. Since Title IV of the JOBS Act, also known as Regulation A+, came into law in 2015, we have facilitated more than 17 Regulation A+ offerings, including the largest crowdfunded Regulation A+ raise in SeedInvest history, $20M for NowRx.

How Do I Know if Regulation A+ is Right for My Company?

We’ve compiled some of the most common questions we get from founders like you about Regulation A+. Review our answers to see if this type of fundraise is right for your company’s needs!

Q: Can I raise between $5-50M without sacrificing strategic control to outside investors?
A: A common concern for founders seeking outside capital is maintaining control over their company, but fundraising from a larger, more diverse investor base can help mitigate this risk. Unlike traditional VC, retail investors, while afforded standard investor rights, don’t sit on the company’s board. Existing investors also benefit from more capital to advance the business’ growth, without dealing with more board members.

Q: My company is past the initial growth and development stage. Is a startup investing platform still right for us?
A: Regulation A+ is best suited to Growth Stage companies that have proven product market fit and traction.

Q: I am looking to list our shares in the next 1-2 years. How can I do so at a fraction of the time, cost, and energy of a traditional IPO?
A: Like a traditional initial public offering (IPO), Regulation A+ allows companies to offer shares to the general public, not just accredited investors. Companies must first file with the SEC, however conducting a Regulation A+ offering is faster than an IPO, the associated fees are much lower and the ongoing disclosure requirements are much less burdensome. Additionally, the issued shares are not restricted, so they can later be listed on a public exchange.

Q: Do you have a large, loyal customer base who could be leveraged as investors and brand ambassadors?
A: A Regulation A+ fundraise gives new and existing customers the opportunity to purchase a company’s stock, a means of drawing capital from investors and brand evangelists. These stockholders may be more aligned with the business, more invested in its success, incentivized to support it, and to encourage others to do the same.

Q: Will I need to devote marketing dollars to my Regulation A+ raise?
A: Companies with established advertising expenses can direct some towards capital raising, in addition to business development and customer acquisition costs, thereby publicizing the raise with ease via an existing marketing channel.

Q: Why will a Regulation A+ offering appeal to investors?
A: Some investors view the lack of liquidity as a less appealing aspect of early-stage investing, but Regulation A+ may provide early investors partial liquidity by allowing existing shareholders to resell their securities. Companies also benefit by bringing in new investors, while simultaneously rewarding early adopters.

Q: How does democratizing access to alternative investments through Regulation A+ fit into the broader Venture Capital landscape for entrepreneurs?
A: The JOBS Act opened up investing to 240+ million Americans who previously could not invest. This made it possible for everyone to participate in venture investing, typically done by venture capitalists and angel investors, and share in the potential for outsized returns. [1] Crowdfunding makes sense for even serial entrepreneurs, as it is a vehicle for smaller, retail investors to participate in startup investing, making it fairer and more equitable for everyone.

SeedInvest is a community of 440K+ investors, but we do more than simply help founders raise money. To see if SeedInvest is the right partner for you, email venture@seedinvest.com. Learn more about the Regulation A+ offering process on our Blog.

 

[1] Past performance is no guarantee of future results. In addition, early-stage startup investing has a higher rate of failure, volatility, and less liquidity than other investments alternatives. Only those prepared for extreme volatility, a lack of liquidity, and the risk of losing their entire investment should invest in early-stage startup investments. While it is important to diversify amongst multiple startup opportunities, we do not recommend you allocate more than 10% of your entire investment portfolio to alternative assets in order to ensure you maintain a well-diversified portfolio across multiple asset classes.

This post was written by Alice Hankin on September 17, 2020

Is Regulation A+ Right for My Growing Startup’s Next Raise?

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