With the SEC increasing the maximum offering amount under Regulation A from $50M to $75M in late 2020, companies race to take advantage of the increased limits.
June 14, 2022 from San Diego, California: Funded, a California-based marketing firm focused on Regulation A capital raises is working to streamline the Reg A process for issuers. Reg A can be a difficult process for companies to utilize as the process for SEC qualification is tedious and, once qualified, running a successful marketing campaign to find investors is something that requires deep knowledge and experience. With that said, companies who are able to navigate the regulatory process and execute a solid marketing campaign are raising significant capital while avoiding many of the pitfalls of traditional capital raise formats. As issuers aim to surpass $2B raised via Reg A in 2022, the industry is seeing an increasing number of companies jump on the bandwagon.
What is Regulation A?
Regulation A (also referred to Regulation A+) is a form of equity crowdfunding that allows businesses to advertise, sell and issue securities in their company to both non-accredited and accredited investors. Under Reg A, businesses can raise up to $75M in a 12-month period.
What are the Benefits of Regulation A for Companies?
Three key benefits of utilizing Reg A include:
- Maintain Control of the Company – Simply put, companies using Reg A typically see a larger number of shareholders in their company who all own smaller pieces of the pie. With this type of investor base, founding members of the company are able to maintain control without giving up controlling voting rights. This can be a huge benefit for founders as it reduces the amount of investor pressure and influence they will see as they work to grow the company.
- Develop a Base of Loyal Brand Advocates – A successful Reg A campaign will result in thousands, sometimes tens of thousands of shareholders in a company. With a captive base of shareholders, companies have a massive opportunity in front of them in turning this investor base into extremely loyal brand advocates. These investors will often make multiple investments as the company grows, refer friends/family to invest and even become customers of the brand itself.
- Providing Additional Growth Opportunities – One aspect of Reg A that is rarely discussed is the other types of opportunities that may arise as a result of the large volume of advertising. With a large volume of Reg A advertising deployed, this often leads to things such as joint ventures and strategic partnerships that can add immense value for early-stage companies.
Regulation A Capital Raised By Year
With the first Reg A+ campaign going live in June of 2015, the industry has taken some time to establish itself. Reg A is still very new and we are in the early stages of this industry as a whole. Here is a look at capital raised by year under Reg A:
- 2015 (partial year) = $9.6M
- 2016 = $229M
- 2017 = $430M
- 2018 = $736M
- 2019 = $1.04B
- 2020 = $1.4B (estimated)
- 2021 = $1.85B (estimated)
It is important to note that the SEC has not yet released final numbers for the calendar years of 2020 or 2021. Estimates are based largely on a report released by the SEC highlighting that $1.7B of capital was raised via Reg A between July 1, 2020 to June 30, 2021.
Funded provides end-to-end marketing and advertising solutions for Reg A, Reg D 506(c), Reg S and Reg CF capital raises. Funded has a proven track record of planning and executing marketing and advertising campaigns for both equity crowdfunding raises and private placement offerings. In addition, Funded has an extensive partner network that connects issuers with all of the key resources necessary for their capital raise. To learn more about Funded, visit: www.funded.capital.
- U.S. Securities and Exchange Commission. (2021, December). Annual Report For Fiscal Year 2021.
- U.S. Securities and Exchange Commission. (2020, March). Regulation A Lookback Study and Offering Limit Review Analysis.
- Regulation A. (2015, August). In Wikipedia. https://en.wikipedia.org/wiki/Regulation_A