Regulation A+ is a Securities and Exchange Commission rule that allows eligible U.S. and Canadian companies to raise up to $75 million in a 12-month period through unregistered public stock offerings.

In effect since 2015, these so-called Reg A+ offerings are often called mini-IPOs (initial public offerings), but they also share many early-stage investing characteristics. They are open to both accredited and non-accredited investors.

Reg A+ is a more accessible and cost-effective path than an IPO for smaller and mid-sized businesses seeking to raise capital, and a more accessible choice than most early-stage investing options for anyone who wants to invest in startups.

‍Reg A+ offers two distinct tiers for companies looking to raise capital.

• Tier 1 allows a company to raise up to $20 million within a 12-month period, and there are no restrictions on who can invest in a Tier 1 Reg A+ offering.
• Tier 2 allows a company to raise up to $75 million within a 12-month period, but it restricts who can invest in a Tier 2 offering and has other requirements that are more stringent than in Tier 1.

The securities that may be offered under Regulation A+ are limited to equity securities, including warrants, debt securities, and debt securities that are convertible into or exchangeable into equity interests, including guarantees of such securities.

The Regulation A+ offering process is initiated when a company files an offering statement known as Form 1-A with the Securities and Exchange Commission. After SEC review, the Form 1-A offering statement is declared “qualified” by a “notice of qualification.” 

This is slightly different than when an IPO is undertaken, and the offering statement is declared “effective” by the SEC. After the SEC declares a Regulation A+ offering statement to be “qualified,” the offering company can start selling securities.

Some well-known companies that have successfully used Reg A+ to raise capital include: 

• BrewDog, a craft brewery widely considered to be the first Reg A+ unicorn
• FAT Brands, a franchiser with a portfolio of restaurant brands
• Myomo, a medical device maker developing robotics for people with neuromuscular conditions
•  XeroShoes, a minimalist footwear maker
• TerraCycle, a recycling and upcycling platform

Who Can Invest in Reg A+ Investment Opportunities?

Both accredited and non-accredited investors can participate in Reg A+ offerings, although there are variances depending on the tier. Other types of early-stage investing are typically limited to accredited investors, with the exception of crowdfunding.

To qualify as an accredited investor, an individual must either have a minimum annual salary of $200,000, or assets of more than $1 million, not including the individual’s primary residency. To qualify as an individual with a spouse, the minimum annual salary required is $300,000, or assets of at least $1 million, not including the couple’s primary residency.

Anyone can invest in a Tier 1 offering without restriction.

Tier 2 offerings are more restrictive for non-accredited investors. A non-accredited investor may invest no more than the greater amount of 10% of their annual income or net worth.

How is Reg A+ Investing Different Than Other Types of Early-Stage Investing?

There are several important differences between Reg A+ offerings, traditional IPOs, and other types of early-stage investing.

Most importantly, companies undertaking IPOs must register their shares with the SEC, while companies undertaking Reg A+ offerings don’t have to register shares.  

Reg A+ filing requirements are also less stringent than IPO filing requirements. To conduct these unregistered stock offerings under Reg A+, however, companies must file Offering Circulars, a form of disclosure statement that needs to be approved by the SEC for the offering to move forward.

While large companies that are already public can also undertake Reg A+ offerings, they are usually done by small and medium-sized businesses, which give the offerings an early-stage investing character.

Reg A+ offerings are less expensive and less complicated than IPOs, but more expensive and complex than private placements, where a company sells unregistered securities to select accredited investors rather than to the general public  

Reg A+ offerings can also be marketed to the general public, including non-accredited investors, while private placements cannot.

What Are the Benefits of Reg A+ Investing?

Another key difference and benefit of Reg A+ securities is that they are more liquid than private placement shares.

Reg A+ securities are not considered “restricted securities” under Securities Act Rule 144, and therefore people not affiliated with the issuing company can sell their shares without restriction.

There are also no investor lock-up periods as there are for IPOs.

How much liquidity depends on what the issuer company does after its Reg A+ offering. Reg A+ securities of companies already listed on the NASDAQ, New York Stock Exchange, and even over-the-counter markets offer good to excellent liquidity.

For private companies, Reg A+ liquidity is limited to specialized exchanges and broker-dealers that support Reg A+ share trading in the aftermarket.

An issuing company may also choose to offer its investors direct liquidity by defining in its Offering Circular what valuation method it will use and what other restrictions will apply. This type of liquidity is regulated.

Issuers can also make their Reg A+ shares eligible for trading throughout the year by filing quarterly management financials with the SEC. This opens up liquidity for insiders all year.

What Are the Risks of Reg A+ Investing?

The risks of investing in private companies offering Reg A+ securities are similar to those for making early-stage investments in private startup companies trying to raise capital.

Firstly, most of these private companies fail for a number of reasons: running out of money, competition, market conditions, macroeconomic factors and leadership mistakes among others.    

That’s why due diligence is crucial. Investors with the opportunity to put money into a startup should first rigorously vet the business. 

This includes understanding the product or service that’s being offered, whether or not there’s demand or a market for it, whether the business model is workable and scalable, and whether the management team has the competence to help the business achieve its goals.

How to Start Investing in Reg A+ Opportunities

There are several places where investors can find out about Regulation A+ stock offerings, including:

• Crowdfunding platforms such as StartEngine and MicroVentures. 
• Websites of companies such as DealMaker, RealtyMogul and Manhattan Street Capital, that provide software and advice to help companies manage their Reg A+ raises, and that list the offerings on their websites.
• Financial regulator resources such as SEC.gov, which provides statistics and information on Reg A+ offerings; the SEC’s EDGAR database where investors can search for a specific company’s Form 1-A offering statement, which is filed to start a Reg A+ offering; and the North American Securities Administrators Association, which also provides resources related to Reg A+ offerings. 
• Investment banks, which some companies use as placement agents to help with the investment. In such cases, Reg A+ offerings can be found on the bank’s website or  through one of its representatives.

Once an investor finds a platform with Reg A+ offerings and opens an account, they need to identify companies they may want to invest in. It’s also very important for investors to learn about and vet those companies, understanding their businesses and markets.   

Frequently Asked Questions

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