Regulation A+ (commonly called “Reg A+”) is a U.S. Securities and Exchange Commission (SEC) exemption that allows private companies to raise capital from the public without going through a traditional IPO. Often referred to as a “mini-IPO,” it provides startups and emerging growth companies a way to reach a wide pool of investors—including non-accredited individuals—while offering retail investors a chance to invest earlier in a company’s life cycle.
Legal Foundation and Purpose
Reg A+ was established as part of the 2012 Jumpstart Our Business Startups (JOBS) Act, with the goal of increasing access to capital for small and medium-sized businesses. It modernized the older Regulation A framework by expanding the fundraising cap and allowing for broader investor participation.
This exemption is attractive because it reduces the regulatory burden and cost associated with a full IPO, while still requiring companies to disclose key financial and business information through SEC filings.
Two Tiers of Offerings
Reg A+ is divided into two tiers, each with its own rules:
- Tier 1: Allows a company to raise up to $20 million in a 12-month period. These offerings are subject to both SEC and individual state review (also known as “blue sky” laws). Financial statements are required but don’t need to be audited.
- Tier 2: Allows companies to raise up to $75 million in a 12-month period. SEC review is required, but companies are exempt from individual state reviews, making national offerings easier. Companies must provide audited financials and submit ongoing reports, including semi-annual updates and annual filings.
Investor Participation
Reg A+ is notable for being accessible to both accredited and non-accredited investors. Under Tier 2, however, non-accredited investors are limited to investing no more than 10% of their annual income or net worth (whichever is greater), unless the investment is made through a registered broker-dealer or investment advisor.
This makes Reg A+ an appealing entry point for retail investors who want exposure to private companies without needing high net worth or specialized qualifications.
Benefits to Investors
- Early-Stage Access: Investors can buy into companies earlier than traditional IPO participants.
- Transparent Process: Companies must file offering circulars and financials with the SEC, improving transparency.
- Low Minimums: Many Reg A+ offerings have minimum investments under $1,000.
- Diversification: Offers an additional asset class for portfolio diversification.
Risks and Considerations
While Reg A+ opens new doors, it also carries notable risks:
- Illiquidity: Shares are generally not publicly traded, so selling may be difficult or delayed.
- Company Stage: Many issuers are early-stage or pre-revenue, increasing the risk of failure.
- Dilution: Future funding rounds may dilute early investors’ shares.
Regulation A+ offers a practical bridge between private equity and public markets, letting average investors participate in promising growth-stage companies. With lower barriers to entry, transparent disclosures, and the potential for early value capture, Reg A+ is reshaping the landscape of private investing—making it more inclusive and dynamic than ever before.
