Freddy and Fabrizio, co-founders of F&F Inc. want to raise capital to franchise their local retail chain, eventually on a national level. They’re discussing the benefits of following Regulation A+ vs Regulation CF. Here’s how they see each scenario affecting F&F.
|Regulation A+||Regulation CF|
|Definition||Allows companies to raise up to $75 million through a public securities offering||Allows companies to raise up to $5 million through online equity crowdfunding|
|Access to Public Markets||Optional access to public markets||No access to public markets|
|Investor Types||Can raise money from both accredited and non-accredited investors||Can raise money from both accredited and non-accredited investors|
|Reporting Requirements||Requires SEC reporting (Tier II)||Fewer legal and reporting requirements|
|Crowdfunding Option||Can combine crowdfunding with Regulation A+ offering||Solely focused on online equity crowdfunding|
|Broker-Dealer Access||Can access a broker-dealer||No specific provision for broker-dealer access, only a registered funding portal is available|
|Fundraising Limit||Maximum fundraising limit is $75 million through Tier 2 and $20 million through Tier 1||Maximum fundraising limit is $5 million|
|Regulatory Oversight||More regulatory oversight compared to Regulation CF||Less regulatory oversight compared to Regulation A+|
|Company Structure||Can choose to remain a private non-traded company or go public on NASDAQ, NYSE, OTC||Can choose to remain a private non-traded company|
|Recommended for||Suitable for larger fundraising needs and companies wanting public market access||Suitable for smaller fundraising needs and companies wanting to leverage crowdfunding|
Freddy: So Fabrizio, Reg A+ gives us optional access to public markets. The benefits are that we can raise up to $75 million and the reporting requirements are much softer than an IPO. Plus, we can raise money from non-accredited investors with lower fees and free-trading shares if we decide to go public later. I like that.
Fabrizio: I hear you Freddy, but with Reg CF, we can use the new online equity crowdfunding to raise $5 million with fewer legal and reporting requirements and the technology to reach a lot of people. Plus, non-accredited investors can also invest in F&F.
Freddy: True, but you’re thinking too small. With Reg A+ we can also do crowdfunding if we want AND get access to a broker-dealer. We already have three locations and 127 investors. We need a lot more room for growth and need to raise at least $30 million so Reg CF can’t work.
Fabrizio: Remind me again why you like Reg A+.
Freddy: Tier II, allows us to raise up to $75 million and requires SEC reporting. That will allow us to launch our stores on both coasts.
Fabrizio: So, more regulatory oversight but more appropriate for larger fundraising?
Freddy: Yes, and we can remain a private non-traded company for now. How do we get started?
Fabrizio: I will reach out to Equity Track for their Cloudraise® platform. They allow us to manage the campaign from our own website.
Freddy: East Coast, here we come!