The Jumpstart Our Business Startups Act (JOBS Act) was signed into law by president Barack Obama on April 5t, 2012. Legislation diminishes regulatory restrictions for startups like capital raising making it easier for them to get established. As stated in the bill, the purpose is “to increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies”. Title IV of JOBS Act or Regulation A+ allows startup and later stage companies to raise up to $50 million from accredited and non – accredited investors. Reg A had been extended in May 2018 by federal legislation and now allows public reporting companies to use it to raise capital.
There are two tiers of Regulation A:
Tier I offering:
- raise up to $20 million
- all investors are eligible
- no individual investment limits
- can be matrketed anywhere
- reviewed financials
- SEC and state qualifications required
- no ongoing disclosure
Tier II offering:
- raise up to $50 million
- all investors are eligible
- non-accredited investors are limited 5-10% of income/net worth per year
- can be marketed anywhere
- audited financials
- SEC approval required
- no state registration required
- annual, semiannual and current reports
Unique aspects of Regulation A are, no required minimu amount capital raise goal (unless listing on NASDAQ or NYSE), shorther documentation preparation time, lower legal and filing fees, total issuer process can take up to 20 weeks.
