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Summarize Title IV Regulation A+ for me

Summarize Title IV - Title 4 Regulation A+ for me.

Summary of Regulation A+ Title IV

Traditionally, investing in startups and other growth-stage companies has been the privilege of the wealthiest Americans. Accredited investors (people making $200,000 or more for two most recent years, or with a net worth of $1 million) were the only ones allowed by the Securities Exchange Commission to invest in startups. Investing is starting to see greater democratization, however.

In 2012, President Obama signed the American JOBS Act into law, which had 10 provisions to improve the working outlook and overall financial opportunities for Americans. Title IV of the JOBS Act, also referred to as Regulation A+, allows companies that want to raise between $3 million and $50 million* to do so from anyone – regardless of assets and income levels.

This particular portion of the JOBS Act was enacted in June of 2015 and it is still gaining momentum. When the intricacies of the act are boiled down, it is a pretty simple concept. Investing in companies in the TestTheWaters(TM) phase is no longer just for the rich and already-affluent. Any person in the world can invest their money in a company they believe in, and see the potential financial rewards of that investment.

What is Title IV of the JOBS Act?

Title IV allows startups and later stage pre IPO companies to use equity crowdfunding platforms to raise as much as $50M* from both accredited and non-accredited investors.

Title IV is broken up into two tiers, Tier 1 and Tier 2. Tier 1 allows you to raise up to $20M while Tier 2 allows you to raise up to $50M*. Check out the key differences between the two tiers below.

Tier 1 - Raise up to $20M 

  • Anyone can invest worldwide
  • Company can publicly advertise
  • Financials required
  • Must satisfy Blue Sky laws in each US state that investors live in
  • No limit on investment amount by main street investors

Tier 2 - Raise up to $50M*

  • Anyone can invest, worldwide
  • Company can publicly advertise
  • No state registration required
  • Requires Audited Financials
  • Non-accredited investors are limited to 10% of income/net worth per year

Can anyone invest?

Yes, now anyone can invest in startups if they fundraise under the Title IV Regulation A+ exemption.

Do I need to verify my investor status?

No, but If you are an accredited investor you will have more flexibility about how much you can invest.

What steps do I need to take with the SEC if I want to raise capital using Regulation A+?

See the steps below for Tier 1 and Tier 2 of Title IV:

Tier 1

  1. File a disclosure document and get qualification from the SEC
  2. Have your financials reviewed
  3. Must register for Blue Sky laws in all states investors invest from

Tier 2

  1. File a disclosure document and get qualification from the SEC
  2. Provide audited Financials
  3. Disclosure requirements: annual, semi-annual and current reports

What restrictions are there for non-accredited investors investing in Reg A+ deals?

For Tier 1, the investor has no restrictions on the amount they invest.

For Tier 2, non-accredited investors have caps on how much they can invest. They can invest a maximum of 10% of their annual income/net worth per year, depending on which is greater.

Regulation A+ vs IPO

There are advantages for private, growth-stage companies who file a Regulation A+ offering as opposed to a traditional Initial Public Offering. The first is that the investor pool is vastly greater, and even though those investors may not have the same type of cash set aside for investing, there are so many more that the financial potential is greater. Some other advantages to companies seeking out Reg A+ funding include:

  • Faster capital. Startups don’t need to spend as much time trying to win over large investors and can focus instead on getting the company ready for the next level. Since Regulation A+ options are still being realized by the people who are now able to tap this investment potential, there is enthusiasm and momentum that is certainly to the advantage of the startups and growth-stage companies.
  • Retaining control. Instead of large amounts of capital being raised from a few sources, Reg A+ funding collects smaller amounts from a bigger pool of investors. This means that no single investor will own enough shares to have a controlling stake in what the company does, meaning that the startup can continue to operate as it pleases.
  • Brand enthusiasts. Word-of-mouth marketing is still considered the most powerful of all promotion, whether it happens in-person or through online means like social media. Main street investors are committing hard-earned money and have more of an incentive to see a return on it. They are more likely to evangelize the brands they have invested in which means a much wider marketing reach than if the company was spreading the word on its own.
  • Brand testers. Just as the investors will want to tell other people about the brand, they will also likely want to test out the products or services themselves. This can lead to feedback that improves what the company offers to the public.

Why you should not choose Regulation A+

If your company needs to raise less than $4 million, then Reg A+ is not cost effective, compared to other methods like Title II Equity CrowdFunding. For larger capital raises Reg A+ comes into its own and can be the most cost-effective method for raising sizable amounts of capital because of the ability for companies to market to all investors through all marketing channels and methods.

A company that specializes in selling products or services to other businesses would also not usually be a strong fit for Reg A+ offerings at this stage - although that will change as Reg A+ becomes better known and accepted. Consumers are the ones who will be excited about investing in growth companies with products that they like or want to own, so companies that are consumer-facing will fare best in Regulation A+ offerings for the next year.

A company that does not have a strong user base or following could also struggle to raise the necessary funds in a Reg A+ setup, but this is not always a deal-breaker.

*For businesses that can segment their market by geographic regions, it is possible to make multiple simultaneous offerings for one entity.

A company can establish say six regions of the US and raise capital for each region simultaneously using a dedicated Reg A+ for each region. In this example, the maximum per year would be 6x50 = $300 million per year.

See Related FAQs:

DOES MANHATTAN STREET CAPITAL DO TITLE II OR TITLE III EQUITY CROWDFUNDING?