Regulation A+, often referred to as Reg A+, is a significant advancement in securities law that allows companies to raise up to $75 million from the public annually. This exemption from traditional IPO requirements was established under Title IV of the JOBS Act and has been in effect since June 2015. Here's a detailed analysis of why Reg A+ is considered a great option for companies looking to raise capital:
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Access to a Broader Investor Base: Reg A+ opens the door for both accredited and non-accredited investors worldwide to participate in offerings. This democratizes investment opportunities and allows companies to tap into a larger pool of potential investors.
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Marketing and Branding Opportunities: The process of a Reg A+ offering includes marketing the investment opportunity to a wide audience. This not only serves the purpose of raising capital but also acts as a powerful marketing tool for the company itself, potentially increasing its customer base and brand recognition.
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Cost-Effectiveness: Compared to traditional IPOs, Reg A+ offerings can be more cost-effective due to streamlined regulations and reduced legal and accounting expenses. This makes it an attractive option for emerging companies that are mindful of cost management.
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Simpler Reporting Requirements: Post-offering, companies that have utilized Reg A+ have less burdensome ongoing reporting requirements compared to those that have gone through a traditional IPO. This can save time and resources for the company.
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Potential for Liquidity: While not all Reg A+ offerings result in immediate liquidity, there is the potential for shares to be traded on secondary markets or through alternative trading systems, providing an exit strategy for investors.
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Flexibility in Offer Structure: Companies can choose the type of securities they want to offer (e.g., equity, debt, convertible notes) and have control over aspects such as valuation, offering size, and pricing.
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Investor Engagement: Reg A+ allows companies to engage directly with their investors, fostering a community of supporters who have a vested interest in the company's success.
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Early Liquidity for Founders and Investors: In some cases, Reg A+ can provide earlier liquidity options for founders and investors compared to traditional venture capital or private equity funding routes.
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Integrated Services: Platforms like Manhattan Street Capital coordinate with all the required service providers to offer an integrated service, streamlining the process for companies.
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Expert Guidance: Advisors like Rod Turner offer their expertise in navigating the Reg A+ process, which can be invaluable for companies new to public fundraising.
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Potential for Institutional Interest: The qualification of a Reg A+ offering by the SEC can be viewed positively by institutional investors and strategic partners, potentially leading to more significant investment rounds.
In summary, Reg A+ is a powerful tool for companies seeking to raise capital. It offers a unique blend of accessibility, cost efficiency, and strategic marketing benefits, making it an increasingly popular choice for growth-stage companies and startups. However, it's important to note that while Reg A+ has many advantages, it is not without its challenges and complexities. Companies should carefully consider their options and seek expert advice when considering a Reg A+ offering.
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Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
