What is Regulation A?
Regulation A governs how private and public companies can raise a substantial amount of equity and debt capital from their friends, family, business network and the general public.
Many companies are using Regulation A to raise substantial amounts of capital. Under this regulation, a company prepares financial statements, files an information statement with the Securities and Exchange Commission and when qualified, can raise investment capital from the general public.
Since the government allows companies to use general solicitation to advertise their offerings and permits both accredited and non-accredited investors to participate in these offerings, there are limitations to how much a company can raise and how much each investor can invest. These limitations are designed to protect the general public but are less restrictive than the equity crowdfunding rules found in Regulation CF.
Companies that use Regulation A to raise capital typically spend more than $100,000 in accounting, audit, legal, regulatory and other expenses to comply with the various transparency, disclosure and reporting requirements.
Regulation A is a great way for certain companies to raise capital using general solicitation, from both accredited and non-accredited investors, whether they raise capital on their own or through a licensed broker/dealer.
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Regulation CF governs how equity and debt crowdfunding can be used by entrepreneurs seeking a relatively quick and cost effective way to raise capital from their own network and the general public.
The cost for a private company to go public varies based on many factors. Startups can go public for less than $125,000 while larger companies will certainly spend more.
It takes about eight months for a private company to go public in the United States. The process to go public in the United States is very defined. The broad strokes include organization (and sometimes reorganization), planning, preparation of financial statements, audit of those financial statements, drafting of a registration statement, review by the Securities and Exchange Commission, filing with FINRA for trading and then applying to the desired stock exchange.
Private companies decide to go public to raise capital and make it easier to recruit talent and complete acquisitions.
Investing is hard enough when presented with detailed information about a company and their team, product/service, strategy and financial results.