The JOBS Act - Regulation A+
Registration & Exemptions Explained by Startup Expert
What is Regulation A+?
Regulation A (Section 401 of JOBS Act)
This exemption allows startup companies to advertise and raise capital from non-accredited investors. Regulation A+ is considered a mini-IPO or (small IPO). Regulation A+ provides ample capital fundraising for startups who don't want the onerous restrictions of formally registering with the SEC for a public offering.
Who does Reg A impact?
Mostly startups and new investors.
Why did Congress pass Reg A+ for startups?
The legislative intent of Reg A+ was to lessen the requirements and financial strain on startups who need to raise venture capital.
Speech and Transcript about the SEC's Regulation A+ Rules and Exemptions:
Regulation A and the JOBS Act. Regulation A is what just promulgated the rules behind it. At its core, Regulation A is a mini IPO, pre-IPO. If you're a startup and raising money and you're not quite ready for the public markets, you can do what's called a regulation circular offering. This offering gives you an opportunity to raise significant amounts of money without having to go through all the listing requirements that you would have to do if you listed on NASDAQ, the New York Stock Exchange, or one of the public markets. One of the kickers behind Regulation A and what makes it a little more difficult is that the numbers and the financials have to be audited, so that is cost prohibitive for some startups. You can't just do unaudited statements, Profit/Loss statements, balance sheets, and whatnot, you have to do this mini IPO process, raising 10, maybe 20 million dollars. You've got to make sure that the retail investors, the non-accredited investors have audited financial statements.
The three key things behind Regulation A or the JOBS Act are one, this targets non-accredited investors, number two is it's called a mini IPO, so you can raise a more significant amount of money without having to list publicly or on the stock market. The third thing is that it allows for retail investors the first time to get in on startups. There are some risks involved and there's a lot of discussion here, because Regulation A is very new, on how this will impact the industry. Will this be the rise and fall of the venture capital firms? That's still to be determined.
Learn how startups can raise venture capital with the JOBS Act: