The Ultimate Guide to Regulation A+ (Reg A): Unleash the Power of Retail Capital

Introduction

Regulation A+ (Reg A) has emerged as a powerful tool for businesses seeking capital, providing a streamlined and cost-effective way for companies to raise from both accredited and non-accredited investors. Since its inception in 2012, Reg A has democratized access to capital, enabling companies to raise significant funds through digital public offerings.

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This comprehensive guide will walk you through the intricacies of Reg A: its regulations, its advantages over other offering types, and a strategic roadmap for launching a successful offering. We'll also highlight how DealMaker, a leading Reg A platform, can streamline your capital journey and empower you to reach a wider investor audience.

What is Regulation A+?

Regulation A+, or Reg A, is a securities exemption that allows eligible companies to raise up to $75 million per 12-month period through a public offering. Unlike traditional IPOs, which are often reserved for larger companies, Reg A offers a more accessible and cost-effective path for smaller and mid-sized businesses to raise substantial capital.

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Regulation A+ offers two distinct tiers for companies looking to raise capital. Companies offering securities under Regulation A must adhere to specific requirements and limitations when raising funds. Reg A is divided into two tiers:

• Tier 1: Allows companies to raise up to $20 million within a 12-month period.
• Tier 2: Allows companies to raise up to $75 million within a 12-month period (but has more stringent requirements than Tier 1).

Regulation A+ Tiers

Regulation A+ offers two distinct tiers for companies looking to raise capital, each with its own set of requirements and benefits.

• Tier 1: This tier allows companies to raise up to $20 million within a 12-month period. It is ideal for smaller companies or those seeking a more straightforward regulatory process. Tier 1 offerings are subject to state securities regulators’ review, but they do not require ongoing reporting to the SEC after the offering is complete.
• Tier 2: This tier permits companies to raise up to $75 million within a 12-month period. While Tier 2 offerings come with more stringent requirements, such as providing audited financial statements and ongoing reporting to the SEC, they offer the advantage of preemption from state securities laws, simplifying the process of raising capital across multiple states.

Choosing the right tier depends on your company’s capital needs and willingness to comply with the associated regulatory requirements. Both tiers provide a flexible and efficient way to raise capital, making Regulation A a versatile tool for businesses of various sizes.

Key Advantages of Reg A

Reg A offers several compelling benefits for businesses seeking capital:

• Access to a Broader Investor Base: Unlike traditional private placements, which are limited to accredited investors, Reg A allows you to raise funds from both accredited and non-accredited investors, significantly expanding your potential investor pool.
• Reduced Regulatory Burden: Compared to traditional IPOs, Reg A offerings have a less burdensome regulatory process, making it a more accessible option for smaller companies.
• Marketing and Branding: A Reg A offering can serve as a powerful marketing tool, raising your company's profile and attracting new customers and partners.
• Testing the Waters: Reg A allows you to "test the waters" by soliciting investor interest before filing your offering statement, giving you valuable insights into market demand.

Who Can Use Reg A?

Reg A is suitable for a variety of businesses, including:

• Established Companies: Companies with a proven track record and a strong growth potential.
• Consumer-Facing Brands: Companies with a strong brand presence and a loyal customer base.
• High-Growth Startups: Startups with innovative products or services and a compelling growth story.
• Real Estate Developers: Developers seeking to raise capital for real estate projects.
• Publicly-Traded Companies: Pubcos can raise a fresh infusion of capital using Reg A—all while fortifying their brand communities.

To be eligible for Reg A, your company must meet certain requirements, such as being a U.S. or Canadian company and providing audited financial statements.

• Bad Actor Checks: Ensure that no disqualifying events have occurred.

Additionally, under the Investment Company Act of 1940, there are limitations and exemptions for issuers that are not required to be registered. This act excludes certain types of issuers from being classified as investment companies.

Eligibility and Requirements

To be eligible for a Regulation A+ offering, companies must meet specific criteria and prepare thoroughly. Here are the key requirements:

• Geographic Eligibility: Your company must be based in the U.S. or Canada.
• Bad Actor Checks: Companies must pass “bad actor” checks to ensure that individuals involved have not been charged with securities fraud or other disqualifying events.
• Offering Document Preparation: You need to prepare an offering document, known as an offering circular, which includes detailed financial statements, business descriptions, and information about executive officers.
• Filing with the SEC: File a Form 1-A with the Securities and Exchange Commission (SEC) to initiate the offering process.
• Professional Support: Engage legal counsel, independent auditors, accountants, and underwriters to ensure compliance and accuracy in your offering documents.

Additionally, companies must adhere to ongoing reporting requirements, including filing annual and quarterly reports with the SEC. These steps ensure transparency and build investor confidence, paving the way for a successful Regulation A offering.

How Does Reg A Work?

The Reg A process typically involves the following steps:

1. Pre-Process Work: Make sure you have a comprehensive business plan, financial projections, and funding goals laid out. Regulation A serves as an exemption from registration under the Securities Act, which establishes the requirements and provisions for securities offerings.
2. Prepare Your Offering: Develop your offering circular (Form 1-A), which includes detailed information about your company, the offering, and any risks involved.
3. Testing the Waters (Optional): Before or after filing Form 1-A, you can gauge investor interest with a reservation campaign, also known as testing the waters.
4. File Form 1-A with the SEC.
5. SEC Review: The SEC will then review your Form 1-A. They may request additional information or revisions.
6. Qualification: Once the SEC qualifies your offering, you can begin marketing your offering to potential investors.
7. Marketing and Fundraising: Market your offering through various channels, including your website, social media, email marketing, and digital advertising.
8. Closing: Once you reach your maximum raise goal or the deadline for your offering, close the offering and issue securities to your investors.
9. Ongoing Reporting: Provide annual, semi-annual, and current reports to the SEC to keep investors informed about your company’s performance.

Navigating Reg A Regulations

Complying with Reg A regulations is crucial for the success and legality of your offering. Here are some key regulatory considerations:

• Disclosure Requirements: You must provide clear, comprehensive, and accurate information about your company, the offering, and the risks involved in your offering circular.
• Financial Statements: You must provide audited financial statements for Tier 2 offerings and reviewed or audited financial statements for Tier 1 offerings.
• Ongoing Reporting: You are required to file ongoing reports with the SEC, including annual, semi-annual, and current reports. Additionally, companies must comply with the regulatory requirements under the Securities Exchange Act of 1934, which includes filing periodic reports and adhering to specific conditions to avoid disqualification from certain exemptions.
• Blue Sky Laws: Depending on the tier of your offering and the states in which you offer securities, you may need to comply with state-level “blue sky” securities laws.

DealMaker’s platform simplifies regulatory compliance with 1:1 expert guidance throughout your raise.

Post-Offering Reporting Requirements

• Annual Reports (Form 1-K): Companies under Tier 2 must file an annual report on Form 1-K. This annual report is crucial for maintaining transparency and providing structured financial disclosure to investors.

Best Practices for a Successful Reg A Offering

To maximize your chances of success with a Reg A offering, consider these best practices:

• Assemble a Strong Team: Work with experienced professionals, including lawyers, accountants, and marketing experts who specialize in Reg A offerings.
• Craft a Compelling Story: Develop a compelling narrative that showcases your company’s vision, mission, and growth potential.
• Create High-Quality Marketing Materials: Develop a professional-looking website, investor presentation, and video to promote your offering.
• Regulation A offerings can include various financial instruments such as equity securities, debt securities, and convertible notes, which are essential for compliance with regulatory requirements.
• Engage with Investors: Actively engage with potential investors through various channels, such as social media, webinars, and investor events.
• Build Momentum Early: Secure commitments from early investors and leverage your existing network to generate interest in your offering.
• Utilize a Broker-Dealer: While a broker-dealer is not technically required for Reg A, using one can greatly reduce the issuer’s regulatory burden.

Post-Offering Reporting Requirements

After completing a Regulation A+ offering, companies must continue to meet specific reporting obligations to maintain transparency and accountability. These include:

• Annual Reports (Form 1-K): These reports provide comprehensive financial information and updates on the company’s business activities, ensuring investors are well-informed.
• Quarterly Reports (Form 1-SA): These reports offer regular financial updates and business developments, keeping investors in the loop on a more frequent basis.
• Current Reports (Form 1-U): These reports disclose significant events that affect the company’s financial condition or operations, such as major acquisitions or changes in executive leadership.

In addition to these reporting requirements, companies must comply with investment limitations, which restrict the amount non-accredited investors can invest in a Regulation A+ offering. Maintaining an existing trading market for your securities is also crucial, as it allows investors to buy and sell securities on a national securities exchange, providing liquidity and fostering investor confidence.

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By adhering to these post-offering reporting requirements, companies can ensure ongoing compliance with the SEC and maintain a transparent relationship with their investors, ultimately supporting long-term success and growth.

How DealMaker Can Help

DealMaker is the leading platform for Reg A offerings, empowering founders and operators to raise capital efficiently and on their own terms. Our platform’s hub of tools and services support you throughout the entire Reg A process.

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Here's how DealMaker can help you:

• Compliance: Built by leading capital markets lawyers, our platform is designed to ensure your offering meets all regulatory requirements.
• Technology: Our user-friendly platform streamlines the entire raise process, from marketing your offering to payment processing to managing investor communications.
• Marketing: Our marketing experts can help you develop a customized marketing strategy to reach your target audience and drive conversion.
• Investor Relations: Our IR tools enable you to build and nurture a robust, engaged community.
• Customer Support: Our dedicated CS team offers unparalleled concierge service to every DealMaker customer, and is available to provide guidance and support throughout your Reg A journey.

Conclusion

Regulation A+ empowers businesses to raise up to $75 million per year from their customers, followers, and fans—a transformative opportunity that can drive growth, increase brand awareness, and create meaningful 1:1 relationships between companies and their communities. Reg A securities, often referred to as the 'Mini IPO,' offer the advantage of raising capital with a less intensive qualification process than a traditional IPO, promoting liquidity for investors and reducing risk through shorter investment timelines.

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By understanding the regulations, following best practices, and choosing a trusted platform like DealMaker to power your offering, you can unlock the full potential of Reg A and propel your business to new heights.

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Don’t miss out on this opportunity to tap into a wider investor pool and fuel your company’s growth. Contact DealMaker today to learn more about how we can support your Reg A journey and help you raise the capital you need to succeed.

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