How RegA+ Helps Pre-Revenue Companies

by | Wednesday January 26, 2022
How RegA+ Helps Pre-Revenue Companies

For many pre-revenue companies, especially started by first-time entrepreneurs, capital comes from sources like personal savings, credit card debt, friends, or family. However, when it comes to raising a significant amount of capital for growth, they might not have the market validation needed to secure funding from traditional sources. With Regulation A+ equity crowdfunding, these companies can realize incredible access to capital, in turn helping the company grow so that it can create jobs and return money back into local economies. Since passing as part of the JOBS Act in 2012, Reg A+ has raised billions, assisting pre-revenue companies in reaching their business goals while scaling their company for the future.

 

Raise Millions as a Pre-Revenue Company with Reg A+

 

RegA+ can help pre-revenue companies raise up to $75 million from accredited and unaccredited investors. This is powerful because it allows smaller companies to leverage their loyal fans to raise capital and make these loyal followers part of your company as investors. This has expanded opportunities for many private companies by allowing them to raise millions in capital while keeping control of significant decisions.

 

One of these opportunities is a larger pool of investors that can be tapped with Reg A+. Pre-revenue companies can often find it challenging to raise money from venture capital or private equity, so raising money from a wider assortment of investors can be helpful. Reg A+ allows companies to keep control of major decisions, helping pre-revenue companies remain competitive and flexible while keeping to their vision of company operations.

 

Reg A+ makes it more accessible than ever to raise capital for your organization by allowing a company to raise capital without going public. This means that the company can avoid the costs and regulatory requirements of being publicly traded while accessing similar benefits. Plus, investors under Reg A+ are still protected by the transparency and compliance requirements, giving them confidence in their ability to invest and help pre-revenue companies scale their company in a way they may not have been able to if faced with the hurdles of going public.

 

Increasing the Amount of Successful Capital Raises 

 

A pre-revenue company is typically in the early stages of development and hasn’t generated any revenue yet. This means the company is at a higher risk of failure since it has yet to establish a track record of success. For this reason, other capital raising methods such as angel investing and venture capital might be impractical for pre-revenue companies. RegA+ is an excellent way for pre-revenue companies to raise capital because the cost of compliance is considerably less.

 

Plus, companies raising capital through Regulation A+ can also attract investors by offering liquidity options through a secondary market. Unlike traditional private investments, where the only chance of a return is when the company goes public or has an exit, a secondary market allows investors to monetize their investments if there is interest in the shares so they can sell. This is a compelling possibility for investors that pre-revenue companies should utilize when constructing their offering. 

 

A company looking to raise money through Reg A+ must first file a Form 1-A with the SEC. This document includes important information about the company, including its business plan and financial projections. After filing form 1-A, the company will need to wait for SEC approval. This can take months, and this is a great time to focus on your community and prime potential investors. Once the SEC has approved the company’s filing, it will be able to start raising money from investors. 

 

Finding the right investors and investment opportunities can be difficult as a pre-revenue company. However, with Reg A+, you can increase your potential for capital raising success. Reg A+ allows companies to offer securities to the general public and accredited investors, widening the pool of potential investors.

Join the all-in-one platform empowering private capital markets.

Free forever, KoreConX makes it easy for participants in private capital markets to manage their investment portfolios, raise capital, and meet global compliance standards along every step of the way.

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Join the All-In-One Platform empowering private capital markets.

Free forever, KoreConX makes it easy for participants in private capital markets to manage their investment portfolios, raise capital, and meet global compliance standards along every step of the way.