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What are Tier 1 and Tier 2 Regulation A Plus offerings?

What are Tier 1 versus Tier 2 offerings?

Regulation A Plus allows for two kinds of offerings, Tier 1 and Tier 2.

Tier 1 allows companies to raise up to $20 million per year from individual “Main Street” investors, and of course from accredited investors worldwide. It is more difficult to make a Tier 1 offering because the company must satisfy the Blue Sky investing regulations of each state that investors reside in. We hope that the states will work out an arrangement by which they work together to make the Tier 1 offering more practical. Here is a site that lists the State by State filing requirements so you can check your States out. The other big issue is that some States are very slow to accept filings and some are very demanding and have a high hurdle (like California in particular) with merit review in which the State decides if a company offering is a good risk.

Tier 2 allows companies to raise up to $50 million* per year, and companies using Tier 2 do not need to satisfy state registration requirements to raise capital. The downsides of Tier 2 are the up front audit and the post-offering reporting requirements.

Up till now, most companies have chosen Tier 2. The acceptance of cryptocurrency payments presents the potential for companies to raise capital from investors worldwide which may allow them to successfully raise capital from non-US investors. This opens up the possibility for companies to use Tier 1 for it’s simplicity, and only accept investors from some US States that have simple/efficient Blue Sky filing programs. Tier 1 doesn't require an audit prior to the Reg A+ SEC filing, the post-offering reporting requirements are significantly reduced (no audit and no 6 monthly profit and revenue reporting) and the investors are not limited as to how much they can invest.

*For some types of businesses that can segment their market by geographic regions, it is possible to make multiple simultaneous offerings for one entity.For example, a company might 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. Get advice from your securities attorney on this.

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