We provide real world, effective Regulation A Funding advisory services for startup, growth and acquisition financing

How to do a Regulation A Offering

As you probably are aware by now, Regulation A+ provides private companies with a new way to raise money from accredited and non-accredited investors. Now with SEC approval, Regulation A+ has transformed itself into an attractive way for companies to raise up to $50 million in growth capital after a “testing the waters” phase to determine how investors may respond to such a fundraising offering effort before putting together a formal offering circular. (which in itself is a huge money saver!)

regatogoLets briefly list the 5 step life cycle of an “IPOtogo” capital raise under SEC Regulation A+ of the JOBS Act:

Step 1: Get Ready: consult with a trusted and specialized securities lawyer or related advisor about getting your company structured and organized. This is the point when you should be contacting the Reg A+ Funding Group to get the ball rolling in the right direction.

Step 2: Test the Waters: Publicize your potential offering (using social media for example) to collect expressions of interest in a non-binding format. Rule 255 of the new Reg A+ allows for “testing the waters” which can last until your offering has been “qualified” for fundraising by the SEC. Compared to conducting the actual offering, the ‘Testing the Waters’ stage is relatively informal, but all your communications are still subject to anti-fraud law, so they can’t be misleading in any way.

Remember: During the “Testing the Waters” stage, you can’t accept money from any investors, and they must know that their initial interest in your deal does not commit them into actually buying your securities when you’ve reached that stage.

Step 3: Select the type of offering (either Tier 1 or Tier 2) for your capital raise and submit materials through EDGAR, the SEC’s online filing system. As soon as you file your paperwork with the SEC, you need to provide explicit reference to that filing.

Tier 1 is best for smaller companies that are looking for local investors. In a Tier 1 offering, you’ll be able to raise up to $20 million in capital. Your offering will be subject to “blue sky laws” which can be different from state to state.

You can raise more money with a Tier 2 (up to $50 million) and you won’t have to worry about any state reviews, but the reporting requirements (audited financials, ongoing reports, etc.) are much more stringent than for Tier 1 raises. This is why bigger companies tend to use Tier 2 since they can better afford the expense of audits and documentation.

Step 4: Conduct the Offering: Once your filing has been “qualified” by the SEC, work with a licensed broker-dealer to offer your securities to accredited and non-accredited investors. The filing for a Reg A+ offering is made on Form 1-A and your offering needs to be made public no fewer than 21 days after the SEC has qualified it.

The Offering basically includes information about the deal and the issuer, a mission statement about the business, and how the proceeds from the offering will be used by the company. In addition, you need to provide two years of financial statements (or since inception if less than 2 years) as well as all solicitation materials used during the “Testing the Waters” step.

Step 5: Filing Ongoing Reports: Depending on the type of offering (Tier 1 or Tier 2) you may need to continue filing ongoing reports with the SEC, including financial and current event reports. Hopefully, at this point, you have a successful raise and a company that has achieved its financial crowdfunding goals.

If you have any questions as to how to do a Regulation A Offering for your particular business, please do not hesitate to contact us for a no-obligation complementary consultation. Regulation A+ is here and it’s ready – it’s up to you now to use it for yourself!