How do you raise capital as a Reg-CF?

Introduction

While the Reg CF is a great way to raise capital, you must know what you're doing. We'll cover everything from how much you can raise to how many investors can invest, plus filing costs and more!

What is the Reg A+ crowdfunding exemption?

Reg A+ is a new crowdfunding exemption that allows companies to raise capital from non-accredited investors. The maximum amount of capital you can raise under this exemption is $50 million in a 12-month period, or $20 million if you're an emerging growth company.

Reg A+ requires some additional reporting and disclosure requirements compared with traditional private placements, but it does not require audited financial statements or other extensive documentation like the S-1 or F-1 filings required for IPOs.

How many investors can I accept?

The maximum number of investors you can accept is 2,000. You are also limited to raising up to $1 million in capital through Reg CF offerings.

So who qualifies as an accredited investor? The definition of accredited investor varies among different jurisdictions but they generally include:

  • Individuals with a net worth over $1 million (excluding their primary residence) or whose income exceeds $200,000 for the past two years ($300k if married).
  • Corporations with over $5 million in assets (or annual revenues of at least $50k).

How much can I raise?

The maximum amount you can raise in 12 months is $5,000,000. This limit applies to all offerings you make in that period, regardless of whether they are registered with the SEC or conducted under Regulation A+.

You may have heard that the SEC has increased the caps on Reg A+ offerings from $50 million to $75 million per year and from $20 million to $50 million in any rolling 12-month period. However, this change only affects new issuers who have not previously sold securities under either Regulation A+ or Tier 2/Tier 3 of Title III Crowdfunding (also known as Title II).

What are the filing costs?

The filing fee for Reg CF is $5,000, which you can pay in installments. If you're raising less than $1 million, the entire filing fee may be paid out of your own pocket (you don't have to use a funding portal).

If you're raising more than $1 million, however--and most companies do--you'll need to pay the difference between your total raise and what would be covered by investors' funds; this means that some portion of your raise will go directly toward paying fees rather than being invested into growing your business or organization.

What is the review process?

The review process is a good thing. It's not a bad thing, and it's not a waste of time. The review process is a necessary part of the process, so don't be discouraged by it!

The SEC requires an independent accountant and attorney to review all Reg CF filings before they can be approved for funding. This means that you'll need to hire an accounting firm and law firm in order to get your Reg CF up and running--and those aren't cheap services (but don't worry--we'll show you how!).

When will my offering be reviewed?

When will my offering be reviewed?

Depending on how many applications they receive, it can take a few weeks for your Reg A+ offering to be reviewed.

The Reg CF is a great way to raise capital but you have to know what you're doing.

The Reg CF is a great way to raise capital but you have to know what you're doing.

  • You need to understand the rules and regulations of the program.
  • You will need to do your homework and make sure that your business meets all the requirements of the Reg CF program before applying for funding.
  • Be prepared for a long process, it can take months before you get approved or rejected by the SEC (Securities Exchange Commission).
  • You will also need to be prepared for some risk as there are no guarantees when it comes down to raising capital from investors on crowdfunding platforms like StartEngine Capital's platform or SeedInvest's platform!

Final Thoughts

The Reg CF is a great way to raise capital, but you have to know what you're doing. If you don't have the right team or experience with this type of funding, then it could be very risky. Make sure that before launching your Reg CF offering, you have done all of your homework and are ready for investors to come in at any time!

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