A new report from NextGen Crowdfunding, authored by NextGen Chief Strategy Officer Richard Swart, reviews all Reg A+ filed since June 2015 up until June of 2016. NextGen analyzed 131 companies that have taken advantage of updated rules established by the JOBS Act of 2012. The new securities exemption created a two-tier rule where companies could select a Tier 1 offer and raise up to $20 million or a Tier II offer and raise up to $50 million.
The NextGen report is said to be the first to establish an industry benchmark on how the new regulations are being used by companies nationwide. The Reg A+ rules allow both accredited and non-accredited investors to fund startups raising up to $50 million through online investments of as little as a few hundred dollars.
Some of the key takeaways from the report include:
- The number of individual companies filing under Reg A+ totaled 131 – 13 of the 144 filings were duplicates. Of these, 129 of them are U.S. companies and two are from Canada.
- Reg A+ companies span various industries, including finance and real estate (48 companies, which is 36% of the filings), services (30 companies, 22.6%) and manufacturing (23 companies, 17.3%)
- Many more mature companies are participating in Reg A+; the oldest firm has been operating for 37 years and 22 of the 133 firms have been in business for 10 years or longer
- Many Reg A+ filings are coming from the largest states around the country, including California (34 firms), New York (9 firms), Illinois (7 firms), Florida (14 firms), and Texas (7 firms) – with little participation from firms in the Southern states (16 firms in total from the region)
- 54 companies filed under Tier 1, which allows them to raise up to $20 million
- 77 companies filed under Tier 2, which allows them to raise up to $50 million but requires a financial audit
- 79 of the 131 companies reported no revenue and were early stage firms
Swart, a well-known advocate of alternative finance, explained;
“The new Reg A+ regulations have opened new opportunities for companies looking for alternative funding options. The wide distribution of firms involved across industries is a positive sign. It’s a strong indication that these new rules are attractive to business owners and investors alike.”
The Reg A+ sector is still very much in its infancy as issuers, platforms and support professionals learn to leverage the new rules.
NextGen is a platform that tracks both Reg A+ and Reg CF (Title III) investment crowdfunding campaigns. The platform has launched a dashboard to monitor funding progress for issuers utilizing these two exemptions. NextGen has also hosted several “Ignition” events to help educate potential investors about the opportunities to invest in crowdfunding companies.