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In 2012, the Jumpstart Our Business Startups (JOBS Act) prompted new ways of raising growth capital which was again furthered by the introduction of general solicitation in 2013 under SEC Regulation D. Amendment of SEC rules have also led to introduction of Regulation A+ rules which have added extra ways of raising growth capital with the most notable being IPO-Lite option for non-accredited investors.


The cost of going public when using full IPO has become very costly and onerous when compared with full IPO. The total cost of legal services, filing, auditing, reporting, and other costs when using IPO-Lite under Regulation A+ ranges from high five to low six figures while similar services cost over a million dollars when using full IPO. The time taken to prepare an IPO-Lite also still takes time although the disclosure requirements are less compared with full IPO.


Filing and Reporting

Filing and Reporting


Under new Regulation A+ rules, private companies are allowed to raise capital from both accredited and non-accredited investors in either Tier 1 or Tier 2. In Tier 1, companies can raise up to $20 million and are supposed to register their offers in all states they are selling the offerings. In Tier 2, companies are allowed to raise up to $50 million and state registration is not required.


In terms of filing and reporting, Tier 2 requirements are generally stringent and time-consuming. Based on the preparation, filing and reporting requirements, Regulation A+ is not suitable for startup companies because these requirements would be very expensive and burdensome for them.  Thus, Regulation A+ is more beneficial to mature companies that are at their late stages of growth trajectory. These companies are more familiar and well-prepared to meet the Regulation A+ requirements.

Regulation A+ is a great option for private companies to raise growth capital to fund their projects

Companies must follow five stages when conducting Regulation A+ offering. Stage one is getting ready by preparing the structure of the company and ensuring everything is in order. Stage two is testing the waters which entails promoting the offering so as to get feedback and interest indication before starting the actual process. Stage three is filing with the SEC depending on whether you are using Tier 1 or 2. The SEC has the mandate to qualify or disqualify the offering. Stage four is conducting the offering which entails selling the offering’s securities to interested investors. The fifth and last stage is filing ongoing reports after closing the offering. It entails providing crucial information to stakeholders on the progress of the investment such as financial reports, event reports, etc.


Therefore, Regulation A+ is a great option for private companies to raise growth capital to fund their projects. It is also a good option for established private companies looking for growth capital without necessarily having to go public fully but still provide their investors with liquidity.




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