Emerging growth and early-stage companies seeking capital used to focus on angel investors, wealthy people eyeing the next big thing, or venture capital firms willing to invest early.
In “Tribe Capital Plans Challenge to AngelList,” published on October 2nd, The Information* describes a new $360 million venture fund called Firstlook that will allow qualified individuals to co-invest in start-ups underwritten and managed by Tribe.
But (calling all entrepreneurs!) a better funding mechanism already exists.
RegA+ enables emerging companies to raise up to $50 million from anyone and everyone, regardless of wealth, income, or investing experience. This enables customers to become shareholders and potentially influencers, too. For founders, employees, and seed investors, what’s better than customers (who later become investors) affirming your great idea? And what about the potentially thousands of other individuals who buy into your mission (read invest and become shareholders)?
It’s also less cumbersome. RegA+ requires various legal filings, a streamlined audit (light compared to going public), a fintech firm to digitally process investors and accept investments into escrow (including self-directed IRAs), and usually a RegA+-specialized broker-dealer to ensure investments are coming from real people and not criminals.
Companies can host a RegA+ offering on a dedicated platform—which can cost them up to 8% of capital raised, plus warrants—or they can (hello, way smarter!) conduct the whole offering on their own website. The latter means minimal fees and eliminates competition from other offerings(found on platforms), and supplies a direct connection to their own audience and other interested investors.
RegA+ provides start-ups with cost-effective capital from investors who really believe in them—and it doesn’t require that founders share control with impatient venture capitalists. Investors of all ages and income levels can now get in on what used to only be for venture funds and wealthy angel investors. The 1% now has real competition in fueling entrepreneurs and American innovation. High-quality “deal flow” is coming to Main Street.
Firms like ours enable issuers (companies raising money) to speak to their audiences directly about investing and, through data, help them locate and communicate with investors who have a high probability to show interest. That interest may turn them into customers, who may become investors, who may then turn into influencers. Taken together, we can raise a serious amount of capital at more efficient percentages of most other capital raise forms.
We think Reg A+ is the wave of the future for America’s emerging growth companies, and this new process—not somebody’s fund—ought to get the first look from entrepreneurs.