SEC Regulations That Allow Startups to Raise Capital: Reg A+, Reg D, and More

The SEC provides several exemptions that allow startups to raise capital without a full registered offering. The most accessible for companies wanting to raise meaningful amounts, and potentially go public in the process, is Regulation A+.

The Main SEC Exemptions for Startup Capital Raising

Three regulatory frameworks cover the vast majority of startup capital raises:

• Regulation A+ allows companies to raise up to $75 million per year from both accredited and non-accredited investors. It functions as a streamlined public offering, sometimes called a "Mini-IPO", without the complexity of a traditional S-1 registration.

• Regulation D covers private placements. Rule 506(b) allows raises from accredited investors plus up to 35 sophisticated non-accredited investors, with no general solicitation. Rule 506(c) permits general solicitation and advertising, but every investor must be verified as accredited.

• Regulation Crowdfunding (Reg CF) caps raises at $5 million over a 12-month period and requires a single registered platform.

Each path has different investor eligibility rules, disclosure requirements, and practical limitations. Which one fits depends heavily on how much capital you need and how widely you want to market.

Why Reg A+ Is the Strongest Path for Many Startups

Reg A+ stands apart because it lets a startup raise serious capital, up to $75 million, from the general public, not just wealthy accredited investors. That opens the investor pool enormously. It also allows the company to go public, either to the OTCQB, OTCQX, or, with two years of operating history and PCAOB audits, directly to NASDAQ or NYSE.

A new startup can go public to the OTCQB or OTCQX and list on an Alternative Trading System via Reg A+. To list on NASDAQ or NYSE, a startup must have two years of operating history, and PCAOB audits from the quarter before listing are also required.

In a Reg A+ Direct Listing to NASDAQ or NYSE, no shares are sold during the listing itself, share sales take place as capital is raised, prior to the Direct Listing. Once the listing is complete, there is immediate liquidity; the extent of that liquidity depends on how well-marketed the company is and how compelling the investment story is to the public.

Reg D: Faster But More Restricted

• Reg D 506(c) is often faster to launch than Reg A+ because it doesn't require SEC review or qualification. Companies can begin soliciting immediately after filing a Form D notice. The significant trade-off: every investor must be a verified accredited investor, which eliminates most of the general public from participating.
• Reg D 506(b) allows up to 35 non-accredited but sophisticated investors alongside accredited investors, but prohibits general solicitation entirely, meaning no public advertising, no social media campaigns, no broad outreach.

For a startup that needs to raise capital quickly from a defined network of high-net-worth individuals, Reg D can work well. But if the goal is a broad public raise or going public, Reg D hits a ceiling fast. Manhattan Street Capital accepts both Reg D 506(c) and Reg D 506(b) offerings on its platform, giving issuers flexibility based on their stage and investor network.

The Real Costs of a Reg A+ Offering, No Vague Reassurances

This is where founders need straight talk. A Reg A+ offering is not cheap to execute successfully, and any platform that implies otherwise is doing you a disservice.

The first service provider you need is the auditor. A two-year US GAAP audit for an early-stage company typically runs $25,000 to $40,000. After that comes the securities attorney, who prepares your Form 1-A filing. Then you engage the marketing agency; that order matters, because you cannot file without the audit, and you cannot market effectively without a qualified offering.

After SEC Qualification, ongoing advertising costs are usually sizable. The exact amount depends on your capital target and how efficient your marketing turns out to be. Count on real budget here, not a token spend. There are also ongoing SEC reporting costs and continued marketing expenses that persist throughout and after the offering.

The average time from filing to SEC Qualification is approximately 50 days, though the SEC has qualified some offerings in a matter of days. Plan for the full 12 months as the typical duration for a cost-effective Reg A+ capital raise.

Service Providers You'll Need, and the Right Order to Engage Them

Getting the sequence wrong creates delays and wasted spend. Here is the correct order:

1. Auditor, provides the required two-year US GAAP financial statements; without this, you cannot file

2. Securities attorney, prepares and files Form 1-A with the SEC and handles legal compliance

3. Marketing agency, develops and executes investor outreach once Qualification is in sight

After that, a transfer agent becomes essential for managing large numbers of investors cleanly. Broker-dealers are generally not recommended for Reg A+ offerings. The reason is practical: when a broker-dealer is involved, FINRA is always involved too, and FINRA severely limits the advertising an issuer can conduct to attract investors. That restriction makes raising capital substantially more difficult, and FINRA's slow pace frequently delays SEC Qualification. The only situation where a broker-dealer makes sense is a Reg A+ IPO to NASDAQ or NYSE in a strong IPO market, where underwriters can genuinely add value.

TestTheWaters: Gauge Investor Interest Before Filing

Before committing to the full Reg A+ process, the SEC allows issuers to solicit non-binding indications of interest from potential investors; this is called "Testing the Waters." It's a legitimate way to assess demand before you've incurred the full cost of an offering.

MSC's TestTheWaters™ service is structured at $10,000 per month for two months. That gives you real market feedback on whether investors are interested in your company at your target valuation, before you've paid for audits, legal work, or ongoing marketing. It's not a guarantee of success, but it is a much smarter way to validate an offering than spending six figures and discovering problems after filing.

Key Statistics at a Glance

Canadian Companies and Cross-Border Raises

Reg A+ is available to Canadian companies raising capital from US investors. The process mirrors what a US startup goes through, Form 1-A, SEC Qualification, audited financials under US GAAP, but the cross-border legal and audit nuances require experienced service providers familiar with both jurisdictions. Manhattan Street Capital is happy to assist and host Reg A+ offerings for Canadian companies and introduces them to the appropriate auditors and securities attorneys with the right experience.

Secondary Markets and Liquidity After Your Raise

Raising capital is one milestone. Giving early investors a path to liquidity is another. Reg A+ creates a natural bridge to secondary markets, the OTCQB, OTCQX, ATS-type venues, and the major exchanges. MSC introduces corporate clients to these secondary markets as appropriate, depending on the company's stage and listing requirements.

For companies targeting NASDAQ or NYSE through a Direct Listing, the preparation for that listing happens in parallel with the capital raise, not after it. The liquidity that follows listing is real but variable: it depends directly on how well-known and well-marketed the company is, and how genuinely interesting the investment proposition is to public investors.

Rod Turner, a capital-raising advisor and consultant whose services are available to MSC clients, works through these secondary market strategies with issuers as part of the broader process, not as an afterthought.

Ready to raise growth capital?

You've got real options here: Reg A+, Reg D, and the rest. Once you know which one fits, here's what working with Manhattan Street Capital actually looks like:

1. Get the right structure confirmed. Talk to us about whether Reg A+, Reg D (506(b)/506(c)), or Reg S is the right fit for your raise. We've chosen not to offer Reg CF, our focus is on the offerings that give growth companies the most workable economics and the broadest reach, in the U.S. and internationally.

2. Get a realistic plan, not just a listing page. We give you upfront, honest guidance on the timelines and the ongoing advertising and marketing spend a raise actually requires, since many platforms understate this. We work with you and your marketing agency to make that spend as efficient as possible.

3. Get the sequence right. We coordinate your full team of specialists so you're not left stitching the process together yourself, introducing and helping you manage auditors (usually the first provider you'll need), securities attorneys, specialized marketing agencies, transfer agents to handle large numbers of investors smoothly, escrow providers, and other specialists as needed.

4. Launch on infrastructure built to handle it. We handle the back-end software, investor experience, analytics and marketing integration, AML checks, and accreditation verification, all while keeping legal, audit, marketing, and investor communications moving in sync.

5. Keep more of what you raise. In Reg A+ offerings, a broker-dealer is optional, and using one often adds cost and slows things down since FINRA review tends to be slow and can restrict advertising. The main exception is an IPO uplist to NASDAQ/NYSE in a strong market, where underwriters can add real value. We also don't charge percentage fees, unlike many competitors whose overall economics get materially more expensive once marketing spend is included.

What to expect: SEC qualification often takes around 60 days after filing, sometimes as fast as two weeks, and a cost-effective Reg A+ raise typically runs about 12 months after qualification to reach full funding.

Ready to get started? Email us at [email protected] and Manhattan Street Capital will walk you through the next steps