What is Regulation A+ (Reg A)?
Regulation A+ (or Reg A for short) is a exemption from registration for public offerings. It allows eligible companies in the US and Canada to raise capital from non-accredited investors via general solicitation as well as accredited investors. Regulation A+ has two offering tiers, the more commonly used Tier II allowing companies to raise up to $75M in a 12 month period
What is Regulation Crowdfunding (Reg CF)?
Regulation Crowdfunding (Reg CF) is a framework established by the SEC that allows small businesses and startups to raise capital from a large number of investors through online crowdfunding platforms. Under Reg CF, issuers can raise up to $5 million in a 12-month period, and non-accredited investors can participate with certain investment limits based on their income or net worth. Issuers must use SEC-registered intermediaries (funding portals or broker-dealers) to conduct their campaigns and comply with disclosure requirements, including financial statements and information about the company's business and management. This regulation democratizes investment opportunities while providing investor protections through regulated platforms and transparent processes. Regulation Crowdfunding offerings must be completed by a US entity. International organizations may be able to raise capital via a US subsidiary with bonafide US operations.
What is a Special Purpose Vehicle (SPV) and why should I use one?
Regulation Crowdfunding (CF) allows for the use of a Crowdfunding SPV, which pools investors in an offering into a single entity. In this way, an SPV can help keep a company’s cap table organized as all investors will fill into a “single line item”. SPVs also help with avoiding the requirements of becoming an Exchange Act reporting company.
What is Testing The Waters (TTW)?
Companies who are interested in raising money online can “test the waters” and gauge the interest of potential investors, allowing them to make non-binding commitments. This can be done through pre-launch campaigns, gathering feedback via surveys, sharing prototypes, conducting soft launches, engaging with communities on social media, and performing market research. These steps help companies understand potential demand, refine their ideas, and increase the likelihood of a successful crowdfunding campaign by ensuring genuine interest from potential investors.
How is a Community Round different from Kickstarter?
Backers on Kickstarter and other traditional crowdfunding platforms make donations to companies they support. In equity crowdfunding, their purchases represent actual securities, meaning they are literally invested in the company’s success (and might share in the upside if the company is ultimately successful)