Updated August 2019

What is Regulation A?

 

For the last 80 years, private companies could only raise capital from accredited investors, the wealthiest 2% of Americans. On April 5, 2012, President Obama signed a landmark piece of legislation called The JOBS Act, allowing entrepreneurs to go to the crowd and publicly advertise their capital raises. On June 19, 2015, three years after the JOBS Act was signed, Title IV (Regulation A+) of the JOBS Act went into effect, allowing private early-stage companies to raise money from all Americans. Startups can now use a Mini-IPO under Reg A+ to turn their customers into investors.

Reg A+ is a type of offering which allows private companies to raise up to $50 Million from the public. Companies looking to raise capital via Reg A+ will first need to file with the SEC and get qualification before launching their offering. The costs associated with a Reg A+ offering are much lower than a traditional IPO and the ongoing disclosure requirements are much less burdensome, effectively making a Reg A+ offering a mini-IPO.

Step 1: Preparing the Reg A Offering

Once a company decides to pursue a Mini-IPO, Prime Crowdfunding will work with them to get regulatory qualification. This process involves drafting offering documents and receiving the go-ahead from the SEC.

How it works for the company

After a company has decided to pursue a mini-IPO, they will need to draft a Form 1-A with the help of Prime Crowdfunding and obtain reviewed or audited financials. After filing the Form 1-A, Prime Crowdfunding will work with the company to respond to any comments from the regulators and then file the final offering circular after receiving the final go-ahead from the SEC.

 

How it works for investors

The company and Prime Crowdfunding will keep you updated on the progress of the offering. You should use this time to learn more about investing in private companies and to familiarize yourself with the Prime Crowdfunding platform. The Prime Crowdfunding blog is a valuable source of articles and information about investing in private companies.

Step 2: Launch the Campaign

Once regulatory qualification has been received, the company may launch its mini-IPO. Prime Crowdfunding's online platform has been engineered to seamlessly accept investments online, including verifying investor identities, performing anti-money-laundering checks on investors, facilitating investment document execution, funds transfer and regulatory compliance.

How it works for the company

Throughout the Reg A+ offering, Prime Crowdfunding will work in tandem with the company to effectively market the campaign, manage investor relations, and facilitate online investments at sale. Prime Crowdfunding will work with the company to market its fundraise by employing a three-tiered strategy to promote the round to and accept investments from:

  1. The company's customers and the Prime Crowdfunding investor network to build initial momentum and excitement.

  2. The early-adopters, the company's extended network and affinity groups.

  3. The public through robust press, advertising, and digital campaigns.

 
How it works for the investor

The company's Prime Crowdfunding profile presents comprehensive information about the company to let potential investors make an informative investment decision. Potential investors should read this information carefully. The Prime Crowdfunding platform allows investors to confirm their identity, sign legal documents, and transfer funds online.

Step 3: Closing the Round

Prime Crowdfunding will manage the entire closing process and ensure that all legal and regulatory obligations are met. The funds from the investors will be transferred to the company upon completion of the offering. Additionally, the platform provides messaging and managing tools for the company and investors to collaborate online before and after closing the round.

 
How it works for the company

While no investments can be closed during this 21 day period, this is the crucial start of your fundraise. The most successful fundraises start strong and end strong. They are able to show fundraising traction early by engaging their customer base and personal networks.

 
How it works for the investor

Investors can still make an investment in the company during the 21 days, but it will not be closed upon even if the minimum offering amount has been reached. Any funds drawn will be held in escrow and all investors will be able to cancel their investment and have funds returned to them if they wish.

Information on other regulations and exemptions:

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