For the past 80 years only accredited investors, meaning individuals who make over $200,000 in income or who have $1 million in assets (excluding their primary residence), have been able to invest in startups in America. That has changed today with the implementation of Title IV of the JOBS Act which represents one of the biggest changes in the financial service industry. Additionally, this will likely have a positive impact on our economy as 65% of the net new jobs are created by small businesses, while 1 million jobsare cut each year by large corporations.
The team of startup investing marketplace, Onevest.
Regulation A+ is a newly revamped securities regulation that companies can rely on to raise up to $50 million from accredited and non-accredited investors alike. In traditional funding (Regulation D, Rule 506 (b) / (c) offerings) companies are either limited to having up to 35 non-accredited investors in their round or completely banned from onboarding non-accredited investors altogether. Accredited investors make up less than 1% of the US population, meaning 99% of people previously couldn’t invest in startups even if they understood the risk and had the liquid capital to deploy.
Regulation A has been around for years, but has not been widely used mainly because of the way the rules were written, making raising capital quite inefficient. In fact, the Securities and Exchange Commission (SEC) estimated only 26 offerings were conducted annually and they were capped at an upper funding limit of $5 million. Whereas now, with Regulation A+, companies can raise up to $20 million on Tier 1 and up to $50 million on Tier 2, which changes the game.