Raising money with Regulation A+ can get a little tricky unless you understand who all the players are. On a top level, Title III of the Jumpstart Our Business Startups Act (JOBS Act) established crowdfunding provisions that allow early-stage businesses to offer and sell securities. Then you have the SEC, who subsequently adopted Regulation Crowdfunding to implement the crowdfunding provisions of the JOBS Act. Next, the Financial Industry Regulatory Authority (FINRA) oversees the registration of crowdfunding portals and ensures that they comply with the federal securities laws and FINRA rules. Finally, broker-dealers and funding portals that are registered with the SEC and are FINRA members are permitted to offer and sell securities on behalf of issuers to the investing public using crowdfunding.
- Just like any other investment, you need to determine if you can handle the risk. Regulation A+ crowdfunding investments carry significant risk as you can lose some or all of your investment. Obviously, there are no guarantees that the company will succeed, when in fact many early-stage ventures fail often. Regulation A+ offerings are NOT for the risk-averse.
- Before investing, read through and understand all the marketing, financial information, and disclosures presented by the issuer. Ask questions and get many opinions from qualified individuals or those that you trust about the entire investment, from best case to worst case scenarios and see if that particular offering fits with your investment objectives.
- Crowdfunding is new and many consider it the “wild wild west”, meaning fraud is a distinct possibility. Check FINRA’s Funding Portals webpage, as Reg.A+ offerings must be conducted through a registered broker or funding portal. Use the resources available to you via a simple Google search to investigate the company itself and proceed with caution if you encounter red flags in any manner.
- But most importantly, you need to set clear, prioritized financial goals with detail steps on how to achieve your goals – including a price tag and a time-frame. Your investment approach is yours, and only you know what’s best for you. Basic investment strategies such as asset allocation and diversification can help you manage risk and hopefully steer you clear from any disasters.
As mentioned before, there are plenty of nuances involved with the entire Regulation A+ process. Whether you’re a company looking to use Reg.A to raise money or if you’re an investor looking to get into the game and need advice on proceeding, a talk with a reputable Regulation A+ consulting firm such as the “Reg.A+Funding Group” will probably save you both time and money.