Breaking News– If you are looking to raise up to $50 million read on. Passage of Title IV Reg A+ provisions of the JOBS ACT will give angel / accredited investors a needed break while supporting capital raising efforts for companies raising up to $50 million.
Reg A or Direct Public Offering (DPO) provisions have long been dismissed by companies raising capital due to the onerous nature of the blue sky or individual state approval process and the capital raise threshold of $5 million dollars.
Well, the SEC has just cleared the way in both instances – one provision more clearly than the other, but significantly shifting how business can raise capital from both accredited and unaccredited investors. Imagine no longer chasing venture or institutional capital and going straight to your customers, employees and the general public – a self-directed IPO.
Reg A+ pre-empts state securities laws that require registration in every state where the securities are to be sold for Tier 2 and replaces state review with a “coordinated review” process for Tier 1. Additionally, the $5 million threshold has been adjusted to $20 million for Tier 1 and up to $50 million for Tier 2 capital raises.
It is approximated that 92% of the investing public are unaccredited investors, yet most companies trying to raise capital are almost automatically sent on the hunt to find the 8% of accredited investors for funding. A review of numerous reports detail how few deals are financed through this community. Now the majority of businesses already left-out have tools to bridge that gap. And the icing on the cake is that unaccredited investors previously left sitting on the sidelines can now participate in the next big idea just like their accredited counterparts.
Founders, executive management and board directors’ responsible for seeking outside capital should get a clear understanding of this new regulation and assess its place in your capital formation strategy.