The user-friendly way for entrepreneurs to secure capital


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Teera Konakan | Getty Images

Capital often makes the difference between success and failure in business.

According to the Small Business Administration, the average entrepreneur needs $ 10,000 to start a successful small business, with start-up costs including everything from materials and services to employee salaries and rent on business premises. Yet for many, the funds to turn an idea into reality and start a business are simply not available.

For established businesses, similar financial headaches can kick in quite quickly. Many can reach the proverbial glass ceiling within a few years, and without additional funds to easily grow their businesses, the overall potential is severely limited.

In such circumstances, investing can be the holy grail. Indeed, for small and medium-sized enterprises (SMEs) looking to take the next vital step, Regulation A + (Reg A +) presents itself as an extremely attractive option.

The “Mini IPO”

Simply put, Reg A + is a type of offering that allows a business to raise capital from accredited and non-accredited investors.

Dubbed the “Mini IPO”, it is a set of rules designed to ease the regulatory burden associated with financing SMEs by allowing them to conduct an offer in which they can offer and sell securities to the public without having to follow. a time-consuming procedure. and costly SEC registration process.

In that sense, Reg A + has transformed the funding outlook for countless companies that do not have access to venture capital funding and otherwise would not have considered pursuing a traditional IPO in their current state. Thanks to Reg A +, these companies have had the opportunity to raise capital from smaller investors.

While the maximum amount a business can raise through Reg A + per year is $ 75 million, it falls into two tiers. At the first level, you can collect up to $ 20 million. This level allows for public advertising, the ability to secure investments on a global scale, it is subject to financial and Blue Sky laws and there is no limit on individual investments. At level two, you can collect up to $ 75 million. This level allows for public advertising, the ability to secure investments globally, audited financial statements, no state registration is required, and unaccredited investors are limited to 10% of annual income.

Related: SEC: Startups Can Now Raise $ 50 Million in ‘Mini IPO’

Why should a business do a Reg A +?

Indeed, the most obvious reason an organization might sue Reg A + is that it can provide much-needed capital. Yet beyond the financial side of things, such an offer can offer a plethora of other benefits.

For many businesses, Reg A + can be a great marketing technique, attracting customers, fans, clients and followers as well as traditional investors by supporting a business in its mission to grow.

With Reg A + open to unaccredited investors, this is one way a business can build loyalty in these relationships and the increased support of an army of business ambassadors, who are more likely to become advocates. shrewdness of the business when investing.

Likewise, investment rounds are a good way to attract media and press, creating a kind of snowball effect while also boosting brand awareness.

The efficiency is also to be noted. Other ways to raise up to $ 75 million can be tedious and difficult to find, often involving arguments with individual VCs and other potential investors. In Reg A +, however, the company in question can more easily invite potential investors of all kinds, while still maintaining greater control over how many stocks they are willing to part with.

Testing the waters

Indeed, for any business, a Reg A + is a monumental milestone in its progression. Getting it right, therefore, is of paramount importance. Fortunately, the Securities and Exchange Commission (SEC) which dictates the rules centered on Reg A ensured that this could be achieved with proper planning and preparation.

Any issuer considering a Reg A + is urged to “test the waters” by soliciting potential investors and the public through advertising.

Essentially, testing the water allows a business to get a feel for the level of interest investors might have in a business before committing significant funds and resources to the process. The SEC explains, “All issuers will be allowed to assess the market’s interest in a possible initial public offering or other registered securities through discussions with certain institutional investors before or after filing a registration statement. . “

Evaluating sentiment in this manner greatly reduces the risk involved in any offer. It is a means by which a business can gain key insights and draw informed conclusions about potential outcomes before proceeding.

Related: The rise of retail investors as powerful new traders

Getting the most from your Reg A +

To make the most of the available opportunity and truly ensure the success of a Reg A +, the advertising process must be executed effectively. Marketing is therefore vital. With good planning, a business can ensure that it grabs the attention of investors by delivering the right messages, in the right way, at the right time.

Consider the Reg A + marketing funnel. The goal is to grab the attention of potential investors, educate them about your organization – its market potential, values, goals and aspirations – and potentially secure investments.

To achieve this, every communication must be relevant and relevant to deliver value, while these core messages must also reach the right people with optimal frequency.

A public relations (PR) specialist with investor relations expertise can provide key knowledge and support, helping you tap the right variation of marketing channels (be it email, social media, media traditional or other), maximize your Reg A + ‘s exposure to potential investors and transform your advertising efforts.

By optimizing advertising efforts with a dedicated, logical strategic marketing plan, businesses will be able to test the waters as effectively as possible while gauging, galvanizing and sustaining investor attention. This is because without such planning, a Reg A + is much less likely to lead to the desired capital-centric outcome.

Related: Launches IPO

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