The Difference Between Tier 1 and Tier 2 of Regulation A+

What Is the Difference Between Tier 1 and Tier 2 of Regulation A+?

Regulation A+ (Reg A+) is an incredibly powerful method for raising capital, however, in order to get the most out of your raise, it is crucial to select the correct tier for you. While both tiers have benefits and drawbacks, tier II generally provides the greatest flexibility and opportunity for companies looking to raise capital.

A common misconception we see is that tier I is more flexible than tier II. This is an assumption that many issuers arrive at after learning that tier I does not require a broker-dealer or ongoing reporting. While the ability to forego a broker-dealer and ongoing reporting does simplify the process somewhat, there are several key differences that ultimately make tier II the more attractive option— comprising 73% of all Reg A+ raises.

• Offering Limit: Under tier II you can raise up to $75 M in a 12 month period - significantly higher than the tier I limit of $20 M per 12 month period.
  
• Blue Sky Exemption: Under tier II, issuers are not subject to Blue Sky regulations and can raise from ALL states. Under tier I, issuers are subject to Blue Sky regulations that require registration with each individual state from which investments will be accepted. This state-by-state registration process requires the payment of in-state fees for each state registered in as well as a state-by-state review of all offering documents.
  
• Ongoing Reporting: Tier I holds the advantage here, under which issuers are generally not subject to ongoing reporting obligations. There are financial obligations under Tier II that require issuers to file financial reports with the SEC.

Which Tier Is Right for My Raise?

Planning to raise from only one or two states? In this case, tier I may be a good option for you. However, this is not typically the case as the goal of most issuers is to make their raise available to as many investors as possible. Remember, the advantage of Reg A+ is that it allows you to raise and advertise to a much broader pool of investors—  non-accredited and accredited. Issuers looking to leverage the full benefits of Reg A+ opt for tier II—  raising from any investor, in any location, up to the full $75 M.