For the last 80 years, private companies could only raise capital from accredited investors, the wealthiest 2% of Americans. On April 5, 2012, President Obama signed a landmark piece of legislation called The JOBS Act, allowing entrepreneurs to go to the crowd and publicly advertise their capital raises. On June 19, 2015, three years after the JOBS Act was signed, Title IV (Regulation A+) of the JOBS Act went into effect, allowing private early-stage companies to raise money from all Americans. Startups can now use a Mini-IPO under Reg A+ to turn their customers into investors.
Reg A+ is a type of offering which allows private companies to raise up to $50 Million from the public. Companies looking to raise capital via Reg A+ will first need to file with the SEC and get qualification before launching their offering. The costs associated with a Reg A+ offering are much lower than a traditional IPO and the ongoing disclosure requirements are much less burdensome, effectively making a Reg A+ offering a mini-IPO.
Before committing to a mini-IPO, companies are permitted to test the waters. This enables companies to easily gauge the likely success of a Reg A offering and make an informed decision on whether or not to proceed with an offering.
Testing the waters is completely free on SeedInvest – the process is simple and in no way obligates a company to actually launch a Reg A+ offering. SeedInvest will work with the company to create a "testing the waters" profile on SeedInvest. Then the company may invite their customers to express interest in investing, while SeedInvest reaches out to its investor base.
Indications of interest are non-binding and involve no obligation of any kind. SeedInvest allows users to indicate interest by choosing the amount they are interested in investing and entering their email address to receive updates.
Once a company decides to pursue a Mini-IPO, SeedInvest will work with them to get regulatory qualification. This process involves drafting offering documents and receiving the go-ahead from the SEC.
After a company has decided to pursue a mini-IPO, they will need to draft a Form 1-A with the help of SeedInvest and obtain reviewed or audited financials. After filing the Form 1-A, SeedInvest will work with the company to respond to any comments from the regulators and then file the final offering circular after receiving the final go-ahead from the SEC.
The company and SeedInvest will keep you updated on the progress of the offering. You should use this time to learn more about investing in private companies and to familiarize yourself with the SeedInvest platform. The SeedInvest blog is a valuable source of articles and information about investing in private companies.
Once regulatory qualification has been received, the company may launch its mini-IPO. SeedInvest's online platform has been engineered to seamlessly accept investments online, including verifying investor identities, performing anti-money-laundering checks on investors, facilitating investment document execution, funds transfer and regulatory compliance.
Throughout the Reg A+ offering, SeedInvest will work in tandem with the company to effectively market the campaign, manage investor relations, and facilitate online investments at sale. SeedInvest will work with the company to market its fundraise by employing a three-tiered strategy to promote the round to and accept investments from:
- The company's customers and the SeedInvest investor network to build initial momentum and excitement.
- The early-adopters, the company's extended network and affinity groups.
- The public through robust press, advertising, and digital campaigns.
The company's SeedInvest profile presents comprehensive information about the company to let potential investors make an informative investment decision. Potential investors should read this information carefully. The SeedInvest platform allows investors to confirm their identity, sign legal documents, and transfer funds online.
SeedInvest will manage the entire closing process and ensure that all legal and regulatory obligations are met. The funds from the investors will be transferred to the company upon completion of the offering. Additionally, the platform provides messaging and managing tools for the company and investors to collaborate online before and after closing the round.