Raising significant growth capital is one of the greatest hurdles founders encounter after exhausting friends-and-family contributions and early seed funding. Venture capital is often difficult to secure, and traditional private placements under Regulation D restrict participation to accredited investors, narrowing the pool of potential backers. Regulation A (commonly referred to as "Regulation A+" or "Reg A+" following its expansion under the JOBS Act) provides a compelling alternative. This exemption enables companies to raise up to $75 million from both accredited and retail investors, all while facing fewer regulatory requirements than a traditional IPO. As a result, Regulation A+ has become a credible and scalable financing solution. With more than 1,400 qualified offerings raising approximately $9.4 billion to date, Reg A+ is increasingly relevant for companies seeking to expand their investor base, boost market visibility, or lay the groundwork for a future public listing.
The following overview offers an up-to-date introduction to Regulation A+, along with practical insights and best practices for prospective issuers seeking access to the U.S. capital markets.
1. Statutory Framework and Key Mechanics
Regulation A is divided into two tiers:
- Tier 1: permits up to $20 million in any 12-month period and subjects the offering to state registration requirements.
- Tier 2: permits up to $75 million, preempts state registration requirements, and requires audited financial statements plus ongoing reporting on Forms 1-K, 1-SA, and 1-U.
Both tiers allow general solicitation, advertising, and "testing the waters" communications before the offering statement is filed, which are powerful advantages for startups that need to gauge market appetite before investing heavily in legal and marketing expenses. However, Tier 2's preemption of state registration requirements makes it the more favorable avenue unless you intend to sell to investors within a single or few states.
2. Key Benefits
- Open participation. Both accredited and retail (subject to investment caps) can participate in Reg A+ offerings, dramatically expanding the potential investor pool.
- Marketing freedom. Issuers may publicly advertise across digital and traditional channels, building brand awareness in tandem with capital formation.
- Scalability. The $75 million ceiling rivals many late-stage private rounds and, if pending legislation raising the cap to $150 million becomes law, the exemption's usefulness will only grow.
3. Market Performance Over Ten Years
Since the SEC modernized Form 1-A in 2015, roughly 1,200 issuers have completed more than 1,400 qualified offerings, raising an aggregate $9.4 billion. While the average stated target is nearly $20 million, the median amount raised is $2.3 million. Further, equity securities dominate 95 percent of offerings, with debt-securities like convertible notes making up the remainder.
4. Tier 2 Market Share
Tier 2 offerings overwhelmingly dominate the Regulation A+ landscape, accounting for approximately 80–95% of all qualified offerings and the vast majority of capital raised under Reg A+. This strong preference for Tier 2 is driven by several key advantages:
- Higher fundraising limit: Tier 2 allows companies to raise up to $75 million in a 12-month period, compared to the $20 million cap under Tier 1. This higher ceiling makes Tier 2 suitable for companies seeking substantial growth capital.
- Federal preemption of state laws: Unlike Tier 1, which requires issuers to register or qualify their offering in every state where securities are sold, Tier 2 preempts most state securities registration requirements.
- Ongoing reporting requirements: While Tier 2 issuers must provide audited financial statements and file annual (Form 1-K), semi-annual (Form 1-SA), and current event (Form 1-U) reports with the SEC, these requirements are still less burdensome than complying with state securities law requirements.
Because of these benefits, Tier 2 has become the preferred path for most startups and emerging growth companies using Regulation A+. Tier 1, while still available, is rarely used due to the complexity and cost of complying with state securities regulation.
5. Issuer Demographics
According to a recent report by the SEC's Division of Economic and Risk Analysis, the typical Regulation A+ issuer is young and lean:
- Median Age of Issuer: 2 years
- Median Total Assets: $100,000
- Median Employees: 1
- Profitability and Revenue: 12% report positive net income, and just 37% report any revenue
- Industry participation: Financial-sector issuers, including holding companies, real-estate sponsors, and non-depository credit institutions, account for roughly 46 percent of the financing sought and 64 percent of the proceeds; business-services and technology firms form the next largest group, followed by chemicals and allied products
These low median revenue and asset figures highlight Reg A+'s accessibility to early-stage companies, but also the need for robust business planning and investor communications throughout any Reg A+ Offering.
5. Distribution, Marketing, and Liquidity
- Broker-dealer engagement: Slightly more than half of Tier 2 issuers hire a FINRA-member placement agent; the rest self-distribute while retaining a broker-dealer of record for escrow and compliance
Testing-the-waters: Roughly 37 percent use pre-filing materials to gauge investor interest
- Exchange listings: Only 2 to 4 percent secure a national-exchange listing, and about one-quarter quote on an OTC market. As such, most Regulation A+ securities are not actively traded, or are traded in thin, illiquid markets.
6. Multiple Offerings Strategy
About 33% of issuers raise capital in private placements under Regulation D, and 6% percent leverage Regulation Crowdfunding. Issuers should be aware, however, that conducting multiple-exempt offerings concurrently or close in time can raise significant regulatory concerns under the SEC's integration rules.
7. Practical Takeaways
- Fit for purpose. Regulation A+ serves companies that have outgrown rewards-based crowdfunding but are not yet ready for a full IPO.
- General solicitation. Effective marketing is the cornerstone of a successful Regulation A+ Offering. No matter how innovative your business or attractive your investment terms, investors cannot participate if they do not know about an offering.
- Budget realistically. Legal, accounting, marketing, escrow, and technology expenses frequently exceed $250,000; build these costs into the capital plan.
- Prepare for public-company discipline. Tier 2 issuers become quasi-public entities with ongoing reporting obligations—robust internal controls and timely investor communications are essential.
- Set liquidity expectations early. Secondary-market trading may be sporadic; educating investors on this reality builds trust and reduces post-closing friction.
- Leverage brand-building. The ability to advertise broadly can create a meaningful marketing halo around a consumer-facing business.
Positioning for a Successful Regulation A+ Offering
Regulation A+ has evolved from a niche exemption into a mainstream financing alternative capable of fueling the next stage of growth for startups and emerging companies. By understanding the mechanics, costs, and strategic advantages of Tier 2, startups and emerging companies can unlock a broader investor base and position their companies for long-term success
Originally published 24 June 2025
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
