Rethinking Public Company Crowdfunding for Capital Formation

Introduction: Rethinking Public Company Crowdfunding for Capital Formation

Equity crowdfunding has traditionally been associated with startups, but its role in public company finance is expanding rapidly. 

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As a founder, you're likely familiar with the traditional pathways to raising capital, but the landscape is shifting in ways that could fundamentally change how you approach funding for your company. 

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The democratization of investment opportunities through crowdfunding platforms has created new possibilities that extend far beyond the startup phase.

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Over recent decades, the rise of retail investors has significantly transformed public markets and capital formation strategies, positioning retail shareholders as strategic stakeholders in company growth and value creation. 

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This shift represents more than just a trend; it's a fundamental restructuring of how companies and investors interact. 

Founders who understand and leverage this change are finding new ways to build sustainable, community-driven businesses that benefit from both capital infusion and customer loyalty.

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What began as a niche fundraising method is now a viable strategic tool for both private and public companies seeking growth capital. 

The evolution has been remarkable, with companies raising tens of millions of dollars while building engaged investor communities that double as brand ambassadors. 

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This dual benefit of capital and community is particularly attractive for consumer-facing companies that can convert their most passionate customers into actual shareholders.

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Regulation A+ and related exemptions have reshaped how companies can access retail investors, offering flexible paths to raise tens of millions without the burdens of a traditional IPO. 

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These regulatory frameworks have opened doors that were previously closed to all but the largest corporations. For founders navigating the complex world of capital formation, understanding these exemptions isn't just helpful; it's essential for making informed decisions about your company's financial future.

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Public company crowdfunding also enables companies to engage their audiences and shareholders, fostering deeper participation and brand loyalty during capital raising initiatives. 

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This engagement goes beyond traditional investor relations, creating a sense of ownership and involvement that can transform casual customers into devoted advocates. 

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When your shareholders are also your customers, they have a vested interest in not just using your product but actively promoting it within their networks.

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More companies are choosing crowdfunding not as a last resort, but as a deliberate growth strategy. 

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The benefits of public company crowdfunding include access to new sources of capital and broader investment opportunities, especially within the legal framework established by the JOBS Act. 

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Forward-thinking founders are recognizing that crowdfunding offers advantages that traditional funding methods simply cannot match, particularly when it comes to building a diverse, engaged shareholder base that can support the company through multiple growth phases.

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From early-stage success stories to public market entrants raising follow-on capital through Reg A+, crowdfunding has proven adaptable and effective. 

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The flexibility of these funding mechanisms means that whether you're preparing for an IPO or already trading publicly, there's likely a crowdfunding strategy that can support your capital needs while strengthening your relationship with your community of supporters.

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The Evolution of Public Company Crowdfunding

There is a common misconception that equity crowdfunding is only a valid funding route for startups and private companies. 

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This outdated view fails to recognize the sophisticated financial instruments and regulatory frameworks that have emerged over the past decade. 

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As a founder, understanding the full spectrum of crowdfunding opportunities can open doors to capital that you might not have considered, particularly if your company is already public or preparing to go public.

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However, recent regulatory changes now allow a broader range of individuals to invest in public companies through crowdfunding, expanding investment opportunities for retail investors. 

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These changes represent a fundamental shift in how public markets operate, breaking down barriers that once separated institutional and retail investors. 

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The democratization of investment opportunities means that your company can now tap into a vast pool of potential shareholders who were previously excluded from participating in public offerings.

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While smaller companies are more frequent users of equity crowdfunding, this should not discourage public companies from exploring this alternative funding route. 

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In fact, larger companies often have advantages in crowdfunding campaigns, including established brand recognition, proven business models, and existing customer bases that can be converted into investor communities. 

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The key is understanding how to leverage these advantages effectively within the crowdfunding framework.

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Entrepreneurs often evaluate whether equity crowdfunding is the right path for their business, taking into account regulatory requirements and their growth objectives. 

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This evaluation process should consider not just immediate capital needs but also long-term strategic goals. 

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Does your company benefit from having a broad base of engaged shareholders? Would your customers value the opportunity to invest in your success? 

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These questions are crucial for determining whether crowdfunding aligns with your overall business strategy.

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Public companies can find success in crowdfunding and private companies may find that their crowdfunding rounds power them towards a publicly traded future. 

The journey from private to public doesn't have to follow the traditional IPO path. 

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Many companies are discovering that building a strong retail investor base through crowdfunding creates momentum and validation that makes the eventual transition to public markets smoother and more successful.

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Historical context: From Startups to Established Companies

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Many of your favourite companies started with crowdfunding to raise money, gauge market interest, validate their products, and raise capital to propel them in their journey to publicly traded companies. 

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These success stories demonstrate that crowdfunding isn't just about raising capital; it's about building a movement around your brand and creating a community of stakeholders who are invested in your success both financially and emotionally.

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Peloton

A key example is Peloton which was founded in 2012 with the help of a $400,000 seed round from angel investors. 

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The company's journey illustrates how crowdfunding can serve as a crucial stepping stone in a larger funding strategy. 

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What started as a concept for bringing fitness classes into people's homes became a global phenomenon, partly because early crowdfunding efforts helped validate the market demand and build a passionate community of early adopters.

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It only gained traction from there with the test model proving their concept and bringing in another $3.5M in funding followed by a crowdfunding round of over $300,000. 

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This progression shows how crowdfunding can complement traditional funding sources, providing not just capital but also market validation and customer engagement. 

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The crowdfunding campaign served as proof of concept that helped attract larger institutional investors in subsequent rounds.

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Now, they are a fitness powerhouse and have continued to grow after going public in 2017 and obtaining a market cap of $12.2B by 2022. 

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The Peloton story demonstrates that crowdfunding can be the foundation for building a billion-dollar company. 

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Their early crowdfunding supporters became brand evangelists who helped spread the word about Peloton's innovative approach to fitness, creating a network effect that traditional funding alone might not have achieved.

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Monogram Technologies

Monogram Orthopedics represents a landmark success story in the journey from startup crowdfunding to public markets. 

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Their experience offers valuable lessons for founders considering alternative paths to public markets. 

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The company's innovative approach to orthopedic surgery technology needed patient capital and supporters who understood the long-term vision, making crowdfunding an ideal fit.

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When they were unable to acquire sufficient institutional funding, they turned to their community. After various crowdfunding campaigns across different platforms, they completed a Regulation A+ raise in 2023 of over $15M backed by over $500 investors. 

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This pivot to crowdfunding wasn't a sign of weakness but rather a strategic decision to build a broader base of support. 

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The diversity of their investor base, spanning from medical professionals to technology enthusiasts, created a unique ecosystem of stakeholders who could contribute more than just capital.

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This was the push they needed and on May 18, 2023, Monogram successfully listed on NASDAQ under the ticker symbol "MGRM," demonstrating that the path of crowdfunding to public listing provides a viable alternative to traditional institutional fundraising. 

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Their success story is particularly inspiring for founders in specialized industries who may struggle to find traditional investors who understand their technology or market opportunity. 

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By going directly to potential users and supporters, Monogram built a shareholder base that truly understood and believed in their mission.

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Regulatory changes enabling public company participation

The landscape for raising capital was fundamentally reshaped by the 2012 JOBS Act, which modernized securities laws and created flexible new pathways for companies, including those already public. 

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This legislation represents one of the most significant changes to securities law since the 1930s, opening doors that had been closed for generations. 

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For founders, understanding these changes isn't just about compliance; it's about recognizing new opportunities to fund growth and engage with investors in ways that were previously impossible.

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The Securities and Exchange Commission (SEC), also referred to as the exchange commission, oversees these regulatory pathways and exemptions. 

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Working within the SEC framework requires careful attention to detail, but the benefits of compliance far outweigh the challenges. 

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The commission has shown a willingness to adapt regulations to meet the needs of modern capital markets, creating opportunities for innovative companies to access funding in new ways.

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Two crowdfunding exemptions were born here, but only Regulation A+ is available for public companies which enables companies to conduct a "mini-IPO" and raise from non-accredited investors. 

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Investment companies are excluded from participating in Regulation A+ offerings. This distinction is crucial for founders to understand, as it determines which funding pathways are available based on your company's current status and structure.

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Regulation A+ offerings require companies to meet specific disclosure requirements as part of the SEC review process. 

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These requirements, while rigorous, actually benefit both companies and investors by ensuring transparency and accountability. 

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Smart founders recognize that the discipline required for Reg A+ compliance can strengthen their overall business operations and investor relations practices.

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For situations demanding more speed and discretion, public companies can turn to Regulation D which allows companies to raise an unlimited amount from accredited investors. 

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The flexibility to choose between different regulatory frameworks gives founders options to match their funding strategy to their specific needs and timeline. 

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Understanding when to use each exemption is a crucial skill for modern company leaders.

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Regulation D is used for private offerings in the private market, allowing companies to raise funds from accredited investors who must meet certain income and net-worth thresholds to qualify. 

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While more restrictive in terms of who can invest, Regulation D offers speed and flexibility that can be crucial for time-sensitive opportunities. 

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The ability to raise unlimited amounts also makes it attractive for larger funding rounds.

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This is not a form of crowdfunding, but rather a "private placement" most often executed as a PIPE (Private Investment in Public Equity) transaction. 

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Understanding the distinction between crowdfunding and private placements helps founders choose the right tool for their specific situation. While both can be valuable, they serve different strategic purposes and attract different types of investors.

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Public companies often go this route when they need to secure a significant amount of capital quickly from a small group of sophisticated, accredited investors, bypassing the lengthy process of a traditional public offering to fund an acquisition or a time-sensitive project. 

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The speed advantage of Regulation D can be crucial when opportunity knocks, allowing companies to move quickly on strategic initiatives without the delays associated with traditional public offerings.

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Pre-IPO Example: RadIntel AI building toward NASDAQ

RAD AI's journey from crowdfunding to preparing for public markets demonstrates a compelling pre-IPO success story, with the company's valuation increasing from $5M to $85M in 3 years. 

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This remarkable growth trajectory shows what's possible when companies combine innovative technology with strategic use of crowdfunding. 

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Their approach offers a blueprint for other founders looking to build value while maintaining control over their funding destiny.

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The AI-powered marketing platform has raised over $35M through multiple crowdfunding rounds, attracting over 6,500 investors including VCs, Fortune 1000 executives, and employees from Google, Amazon, YouTube, and Meta. 

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This diverse investor base brings more than just capital; it brings expertise, connections, and credibility that can accelerate growth. 

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The quality of their investor community demonstrates that crowdfunding can attract sophisticated investors alongside retail participants.

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RAD AI has already announced their intended NASDAQ ticker symbol "$RADI" and showcased their technology at the New York Stock Exchange, positioning themselves for a public offering. 

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These strategic moves show how companies can use the momentum from crowdfunding to build toward traditional public markets. 

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By telegraphing their intentions early and building excitement around their eventual listing, they're creating demand that should serve them well when they do go public.

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Their valuation trajectory shows consistent growth, reaching $33M by August 2023 before climbing to their current $85M valuation. 

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This steady appreciation demonstrates that crowdfunding rounds can support genuine value creation, not just hype. Investors who participated in early rounds have seen significant returns, creating positive word-of-mouth that helps fuel subsequent raises.

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With Fortune 1000 clients including Hasbro, Omnicom, and L'Oréal, RAD AI has established significant enterprise traction, making them an exemplary case study of how companies can leverage direct-to-investor capital raising to build momentum toward traditional public markets while maintaining control over their growth trajectory and investor relationships. 

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Their success with major enterprise clients validates their business model and technology, showing that crowdfunded companies can compete at the highest levels of business.

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Models of Public Company Crowdfunding

Secondary Offerings Through Regulation A+: Expanding Access for Public Companies

As more companies seek alternatives to traditional capital markets, Regulation A+ has emerged as a flexible and efficient way for public companies to raise additional capital through secondary offerings. 

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This evolution represents a significant shift in how public companies think about funding growth. No longer limited to traditional secondary offerings with their high costs and institutional focus, companies can now access capital in ways that align with their strategic goals and shareholder base.

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While secondary offerings are commonly used by public issuers to fund expansion, pay down debt, or support operations, they have traditionally been conducted via S-1 filings and investment bank underwritings, which can be costly and inaccessible to smaller firms. 

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The traditional approach often leaves smaller public companies in a difficult position, needing capital but unable to justify the costs and complexity of a full secondary offering. 

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This gap in the market is exactly what Regulation A+ addresses.

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Regulation A+ Tier 2 offerings allow public companies to raise up to $75 million per year from both accredited and non-accredited investors, without the need for a full SEC registration. 

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This democratization of access means that companies can tap into their natural constituencies, including customers, employees, and community supporters who may not meet accredited investor thresholds. 

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The ability to include non-accredited investors transforms the dynamics of capital raising, creating opportunities for broader participation and engagement.

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The SEC maintains active enforcement of Regulation A+ requirements to ensure transparency and investor protection. 

This regulatory oversight should be viewed as a feature, not a bug. It provides confidence to investors and helps maintain market integrity, which ultimately benefits companies using these exemptions. 

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Founders who embrace the transparency requirements often find that it strengthens their overall investor relations and corporate governance practices.

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Why Reg A+ is an attractive option for public companies seeking growth capital extends beyond simple cost savings. The strategic benefits can transform how companies interact with their stakeholder communities:

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Hybrid Models Combining Institutional and Retail

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As companies seek more control over how they access public markets, hybrid models that combine institutional and retail capital are gaining traction, especially through direct listings with a capital raise. 

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These innovative approaches represent the next evolution in capital markets, blending the best aspects of traditional and modern funding methods. For founders who want to maintain control while accessing diverse capital sources, hybrid models offer compelling advantages.

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These models allow companies to go public or raise follow-on capital without relying entirely on traditional IPO underwriters, while still engaging both large investors and the general public at the same time. 

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The simultaneous engagement of different investor types creates a more balanced and stable shareholder base. Institutional investors provide validation and large capital commitments, while retail investors bring enthusiasm and long-term loyalty.

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In 2021, the SEC approved a key rule change allowing companies on the Nasdaq to raise new capital as part of a direct listing. 

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This regulatory evolution opened new possibilities for companies seeking public market access. 

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The rule change recognized that the traditional IPO process, while time-tested, doesn't serve all companies equally well, particularly those with strong retail followings or unique business models.

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This new structure lets companies issue new shares into the market during the opening auction alongside existing shareholders who may be selling stock. 

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The flexibility to combine primary and secondary shares in a single transaction creates efficiency and reduces complexity. 

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Companies can raise growth capital while also providing liquidity to early investors and employees, addressing multiple objectives in one transaction.

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Unlike a traditional IPO, which typically limits access to institutional investors and comes with high underwriting fees, this hybrid approach promotes broader access and price transparency. 

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The democratization of access means that retail investors can participate from day one at the same price as institutions. 

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This equal treatment creates goodwill and can lead to a more engaged and loyal shareholder base that supports the company through various market conditions.

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From a strategic standpoint, these models offer several advantages for public companies that forward-thinking founders should consider:

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whiteAs hybrid models continue to evolve, they are offering public companies a more efficient, transparent, and inclusive path to capital formation. 

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The innovation happening in this space suggests that we're only beginning to see the possibilities. 

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Companies that embrace these new models early may find themselves with competitive advantages in accessing capital and building engaged shareholder communities.

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In a market increasingly shaped by retail participation and digital access, combining institutional and public capital may represent the next chapter in modern fundraising strategy. 

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The convergence of technology, regulation, and changing investor preferences creates an environment where hybrid models can thrive. 

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Founders who understand and leverage these trends position their companies for success in the evolving capital markets landscape.

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Traditional vs. Crowdfunded Capital Raises

When it comes to raising capital through public markets, the financial landscape has dramatically shifted. As a founder, understanding these shifts isn't just academic; it's essential for making informed decisions about your company's financial future. 

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The choice between traditional and crowdfunded approaches can significantly impact not just your immediate capital raise but also your long-term relationship with investors and the market.

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There is a clear trend of companies moving away from traditional IPOs toward more flexible crowdfunding options, such as Regulation A+ offerings, as they seek alternatives that better fit their needs. 

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This trend reflects a broader recognition that one-size-fits-all solutions rarely work in today's diverse business environment. 

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Companies are increasingly choosing funding methods that align with their unique circumstances, growth trajectories, and stakeholder communities.

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Unlike the dominance of traditional institutions in public offerings, retail investors are now playing a much larger role in public company crowdfunding, reshaping the balance of influence in these markets. 

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This democratization of investment represents a fundamental shift in power dynamics. Retail investors bring different perspectives, motivations, and behaviors compared to institutional investors, creating both opportunities and challenges for companies navigating this new landscape.

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Traditional IPOs, once the gold standard for companies seeking major funding, now face stiff competition from Regulation A+ offerings, a modernized pathway that promises lower costs and faster execution. 

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The competition isn't just about cost and speed; it's about fundamentally different approaches to building shareholder value and engagement. 

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While traditional IPOs still have their place, particularly for very large offerings, many companies are finding that alternative approaches better serve their needs.

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Both traditional IPOs and Regulation A+ can be considered forms of public offering, but they differ significantly in terms of process, cost, and accessibility. 

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Understanding these differences is crucial for making the right choice for your company. The decision impacts everything from the timeline of your raise to the composition of your shareholder base to your ongoing compliance obligations.

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The decision for many companies ultimately comes down to choosing between the route that has been established and trusted versus a new upcoming strategy that may be more time and cost efficient, but is not as well-tested. 

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This tension between tradition and innovation plays out in boardrooms across the country as companies weigh their options. The key is to look beyond conventional wisdom and evaluate which approach best serves your company's specific goals and circumstances.

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Traditional IPO Costs Remain Stubbornly High

Despite modern advances, the cost structure of a traditional initial public offering (IPO), also known as an initial public offering, remains steep. Underwriting fees still account for 4–7% of gross proceeds. 

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These percentages might seem reasonable until you calculate the actual dollar amounts involved. The fee structure has remained remarkably consistent over decades, suggesting that traditional investment banking has been resistant to the disruption affecting other industries.

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For a $100M IPO, this translates to $4–7M in fees, though billion-dollar deals may negotiate closer to 3.5%. These fees represent money that could otherwise be used for growth, innovation, or strengthening the balance sheet. 

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For many companies, particularly those in capital-intensive industries or with ambitious growth plans, every million matters. 

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The opportunity cost of these fees extends beyond the immediate cash impact to what that capital could have achieved if deployed in the business.

Legal and accounting expenses add further weight to the cost burden. These professional services are essential for navigating the complex IPO process, but their costs can quickly spiral beyond initial estimates:

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Legal fees range from $700K to $1.5M depending on complexity. These costs cover everything from drafting registration statements to negotiating underwriting agreements to ensuring compliance with securities laws. The complexity of modern regulations means that even straightforward IPOs require extensive legal support, driving costs higher and extending timelines.

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PCAOB-standard audits cost $500K to $1.2M, often exceeding expectations for 43% of companies. The rigorous auditing standards required for public companies represent a significant step up from typical private company audits. Many companies underestimate not just the cost but also the time and internal resources required to complete these audits successfully.

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Hidden costs can be even more disruptive. The 12–18 month timeline demands intense executive focus with much of CEO/CFO time being consumed by IPO prep. 

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This opportunity cost is rarely quantified but can be substantial. When your senior leadership is focused on roadshows and regulatory filings, they're not focused on running and growing the business. 

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This distraction can lead to missed opportunities and slowed growth at exactly the time when companies should be accelerating.

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Most of the focus goes to setting up and executing the listing without accounting for ongoing costs and the results are 60% of public firms spending over $1M per year just to maintain their listing. 

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These ongoing costs include everything from increased audit fees to board compensation to investor relations expenses. 

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For many companies, the cumulative cost of being public through traditional means can consume a significant portion of their operating budget, reducing funds available for growth investments.

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Reg A+ emerges as the cost-effective alternative

Regulation A+ Tier 2 offerings present a dramatically different cost profile.SEC filing fees start at just $153.10 per million dollars of offering amount. 

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This represents a tiny fraction of traditional IPO costs, immediately freeing up capital for business growth rather than transaction expenses. 

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The low filing fees reflect the SEC's recognition that smaller offerings need a more accessible cost structure to be viable.

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Legal fees typically range from $50,000 to $250,000 for standard offerings. This represents an 83-93% reduction compared to IPO legal costs. 

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The reduced legal complexity of Reg A+ offerings translates directly into cost savings. While still requiring professional legal support, the streamlined process and reduced documentation requirements mean that companies can achieve compliance without breaking the bank.

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The audit requirements for Reg A+ are less onerous, requiring only US GAAP standards rather than full PCAOB audits. 

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This difference might seem technical, but it has profound cost implications. Companies can often use their existing auditors and financial systems rather than undertaking the expensive upgrades required for PCAOB compliance. 

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The reduced audit burden also means faster execution and less disruption to ongoing operations.

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This audit has costs starting as low as $2,000 for a new startup, but increases over time with business complexity. Even for more complex businesses, audit costs typically remain well below those required for traditional public offerings. 

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The scalability of audit costs with business complexity means that companies aren't forced to pay for unnecessary sophistication, keeping expenses aligned with actual needs.

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One key advantage of Reg A+ is that it enables a wider range of investors, including retail investors, to participate in public company investments, making it easier for more people to access private market opportunities. 

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This democratization of access creates value beyond just the capital raised. When your customers and community members can invest in your company, you're building a deeper relationship that can pay dividends in customer loyalty and brand advocacy for years to come.

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Marketing costs can be the opposite, starting higher but falling as your business grows and gains traction. Unlike traditional IPOs where marketing is handled by investment bankers through roadshows, Reg A+ offerings require companies to drive their own investor interest. 

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This self-directed approach can initially seem daunting but ultimately gives companies more control over their message and investor base.

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Smart companies view marketing expenses as investments in building a long-term investor community rather than just transaction costs. The content and relationships built during a Reg A+ campaign continue to provide value long after the offering closes.

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Platform fees vary significantly among providers. DealMaker offers custom pricing with a technology-focused approach, while other companies often offer flat fees. 

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The choice of platform can significantly impact both the cost and success of your offering. 

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Technology-forward platforms like DealMaker provide tools and automation that can reduce other costs while improving the investor experience, making them valuable partners in the capital raising process.

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Technology and Platform Requirements

Executing a successful Regulation A+ offering requires more than legal filings and marketing, it also demands the right technology infrastructure. 

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In today's digital-first world, the technology stack you choose can make the difference between a smooth, successful raise and a frustrating experience for both your team and potential investors. 

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The right technology doesn't just facilitate transactions; it builds relationships and creates positive experiences that can benefit your company long after the

offering closes.

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Companies can leverage resources such as educational materials and technology tools to enhance shareholder engagement and communication. 

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Modern investors expect a seamless digital experience, from initial discovery through investment completion and ongoing shareholder communications. Meeting these expectations requires thoughtful selection and integration of various technology components that work together to create a cohesive investor journey.

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From selecting a fundraising platform to automating compliance and managing investor communications, the tools a company uses can significantly impact both efficiency and investor trust. 

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Technology choices send signals about your company's sophistication and attention to detail. A smooth, professional technology experience builds confidence, while a clunky or disjointed experience can raise doubts about your company's capabilities. 

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This is particularly important when targeting retail investors who may be less forgiving of poor user experiences than institutional investors.

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Choosing Between White-Label and Marketplace Platforms

One of the first decisions in a Reg A+ raise is selecting between a white-label platform and a marketplace platform. 

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This choice has profound implications for how you present your offering and interact with investors. Understanding the trade-offs between these approaches helps ensure you select the option that best aligns with your strategic goals and brand identity.

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DealMaker follows the white label approach and enables tighter alignment with your company's identity and provides greater flexibility in data collection, analytics, and future re-engagement. 

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The white-label model recognizes that your investor relations don't end when the offering closes. 

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By owning the platform and data, you can continue to engage with investors, provide updates, and potentially conduct future offerings to the same audience. This long-term view of investor relationships can create significant value over time.

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For companies aiming to raise capital directly from their customer base or investor community, a white-label solution often offers a more integrated and brand-safe path, especially for issuers looking to run multiple campaigns or establish long-term investor relationships. 

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The ability to maintain consistent branding and messaging across all investor touchpoints strengthens your company's professional image. 

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Additionally, the data ownership and insights available through white-label platforms can inform future marketing and investor relations strategies.

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Integration with Investor Relations Tools

An often-overlooked component of a Reg A+ tech stack is how well the platform integrates with investor relations (IR) tools. 

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In today's connected world, investors expect ongoing communication and engagement, not just during the offering but throughout their investment journey. 

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The ability to seamlessly transition from capital raising to ongoing investor relations can significantly impact long-term shareholder satisfaction and support.

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Robust IR systems are essential for managing communication, tracking investor behavior, and maintaining transparency throughout the fundraising lifecycle. 

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Modern investors, particularly retail investors, expect regular updates and easy access to information about their investments. 

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Meeting these expectations requires sophisticated tools that can handle everything from mass communications to individual investor inquiries while maintaining compliance with securities regulations.

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Key IR tools should include:

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Ensuring your fundraising platform integrates with or includes these IR functions can streamline operations and foster trust with both institutional and retail investors. 

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Integration eliminates data silos and ensures that all investor information flows seamlessly between systems. 

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This connectivity is crucial for maintaining accurate records, providing consistent communication, and building the kind of sophisticated investor relations program that public companies need.

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Compliance and Reporting Automation

Given the regulatory oversight required for Reg A+ Tier 2 offerings, compliance automation is critical. The ongoing reporting requirements for Reg A+ issuers, while less burdensome than full public company requirements, still demand attention to detail and consistent execution. 

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Manual compliance processes are not only time-consuming but also prone to errors that can result in regulatory issues and damage to your company's reputation.

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Issuers must meet ongoing obligations including semiannual reporting, audit readiness, and investor verification (KYC/AML). These requirements protect both companies and investors but can become overwhelming without proper systems in place. 

The key to managing compliance efficiently is automation that reduces manual work while ensuring nothing falls through the cracks.

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A strong compliance automation layer helps companies manage these requirements efficiently and accurately. 

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Modern compliance tools can track deadlines, automate routine filings, and ensure that all necessary documentation is properly maintained. 

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This systematic approach to compliance not only reduces risk but also demonstrates to investors and regulators that your company takes its obligations seriously.

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Specific benefits of compliance automation include the ability to monitor for real-time risks that could impact your offering or ongoing compliance status. 

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Automated monitoring can flag potential issues before they become serious problems, allowing for proactive management rather than reactive scrambling. 

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This early warning system is particularly valuable for growing companies where rapid changes can inadvertently create compliance challenges.

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Staying audit-ready with centralized documentation ensures that when auditors or regulators come calling, you're prepared. 

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A well-organized digital repository of all compliance-related documents saves time and reduces stress during audit periods. It also demonstrates the kind of operational excellence that investors value in public companies.

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Maintaining reporting schedules without manual tracking eliminates the risk of missed deadlines that can result in penalties or loss of exemption status. 

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Automated reminders and workflows ensure that reports are prepared and filed on time, every time. This reliability builds trust with regulators and investors while freeing your team to focus on growing the business rather than managing calendars.

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Ensuring access control and data security across stakeholders protects sensitive information while enabling appropriate access. 

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Modern compliance platforms provide granular control over who can see and modify different types of information, maintaining security without impeding necessary access. 

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This balance is crucial for companies that need to share information with various parties while maintaining confidentiality and control.

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As outlined by Sprinto, modern compliance tools reduce error, save time, and help companies scale without being bogged down by manual oversight. 

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The return on investment in compliance automation extends beyond just cost savings to include reduced risk, improved investor confidence, and the ability to scale operations without proportionally scaling compliance staff.

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By integrating compliance software with your platform, you can manage ongoing SEC requirements more efficiently and reduce the risk of costly oversights post-raise. 

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The integration ensures that compliance is built into your processes rather than bolted on as an afterthought. 

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This embedded approach to compliance creates a culture of transparency and accountability that serves public companies well throughout their lifecycle.

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Future Trends in Public Company Crowdfunding

As Regulation A+ matures, public company crowdfunding is no longer just a novel idea, it's rapidly becoming a mainstream capital-raising strategy. 

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The evolution we've seen over the past decade is just the beginning. As more companies successfully use these tools and regulations continue to evolve, we can expect accelerating adoption and innovation in how companies access public capital.

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Market participants can expect further regulatory changes that are likely to impact the stock market, potentially increasing retail investment activity and influencing overall market growth. 

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These changes reflect a growing recognition that traditional capital markets structures, designed in an era of paper certificates and human traders, need updating for the digital age. 

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The democratization of investing through technology and regulatory reform is creating new opportunities for both companies and investors.

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From regulatory shifts to emerging technologies like blockchain, several key trends are shaping the future of how companies access public capital outside the traditional IPO. 

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Understanding these trends helps founders position their companies to take advantage of emerging opportunities while avoiding potential pitfalls. 

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The companies that succeed in the next decade will be those that adapt quickly to changing market dynamics and investor expectations.

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Regulatory Evolution: Increased Limits and Growing Participation

In 2021, the SEC raised the Regulation A+ Tier 2 limit from $50 million to $75 million annually, a significant change that expanded the pool of companies able to use this exemption for meaningful growth-stage fundraising. 

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This 50% increase recognized that modern companies need access to larger amounts of capital to compete effectively. The change also acknowledged that the previous limits, set years earlier, hadn't kept pace with inflation and the growing capital needs of scaling businesses.

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This increase has allowed later-stage private companies and existing public companies to leverage Reg A+ without immediately transitioning into a traditional IPO process. 

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The higher limits make Reg A+ viable for a broader range of companies, including those that might have previously felt forced into premature IPOs or expensive private equity rounds. 

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The flexibility to raise substantial capital while maintaining the benefits of Reg A+ has opened new strategic options for growing companies.

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However, larger companies can be held back by the $75M cap, especially public companies which can discourage the use of Reg A offerings. 

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For companies with major expansion plans or significant capital needs, even $75 million may not be sufficient. This limitation creates a gap between what Reg A+ offers and what traditional public offerings provide, leaving some companies in an awkward middle ground where neither option perfectly fits their needs.

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DealMaker is at the forefront of the push to raise this cap again with CEO Rebecca Kacaba testifying before congress regarding capital markets reform and raising the Reg A cap. 

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This advocacy recognizes that arbitrary limits on capital raising don't serve the interests of companies or investors. 

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As businesses scale and capital needs grow, regulatory frameworks need to evolve accordingly. The push for higher limits reflects a broader effort to modernize securities regulations for the 21st century economy.

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Blockchain and Tokenization: Unlocking Liquidity and Efficiency

Parallel to regulatory evolution, blockchain and tokenization are expected to transform how Reg A+ securities are issued, held, and traded. 

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The convergence of traditional securities law with blockchain technology promises to create new efficiencies and opportunities that were previously impossible. 

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This technological evolution could be as significant as the regulatory changes that created Reg A+ in the first place.

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The World Economic Forum projects that tokenization could represent a $16 trillion opportunity by 2030, making assets, including Reg A+ shares, more divisible, liquid, and programmable. This projection reflects the transformative potential of representing traditional assets as digital tokens. 

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The benefits extend beyond just technical efficiency to include new possibilities for how securities are structured, traded, and managed.

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Tokenized securities could allow companies to settle trades faster with lower transaction costs. Traditional settlement processes, which can take days and involve multiple intermediaries, could be reduced to near-instantaneous transfers. 

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This efficiency not only reduces costs but also reduces risk and improves the overall market experience for all participants. The ability to trade 24/7 across global markets could fundamentally change how we think about liquidity and market access.

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Additional benefits include the ability to automate shareholder management, including dividends and voting. 

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Smart contracts could handle routine corporate actions automatically, reducing administrative burden and ensuring accuracy. 

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This automation could be particularly valuable for companies with large retail shareholder bases where manual processes become unwieldy and expensive.

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The potential to enable 24/7 trading on compliant alternative trading systems (ATS) could revolutionize market access. 

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Unlike traditional markets with limited hours, tokenized securities could trade continuously, providing liquidity when investors need it. This always-on market could be particularly attractive to global investors who currently face timezone challenges when trading US securities.

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As blockchain-based infrastructure matures and regulatory clarity improves, it's likely that Reg A+ offerings will increasingly leverage tokenization to enhance post-raise liquidity and investor engagement, particularly appealing to retail-heavy cap tables. 

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The combination of blockchain efficiency with Reg A+ accessibility could create a new paradigm for public company securities that better serves the needs of modern companies and investors.

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Future Regulation A+ Adoption Rates

Currently, using Reg A is often seen to be reserved for startups with many public companies choosing to continue down the traditional and safe path of IPOs. 

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This perception, while understandable given the relative newness of Reg A+, is increasingly out of step with reality. 

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As more established companies successfully use Reg A+ and share their experiences, the stigma associated with alternative funding methods is diminishing.

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This however has been changing over the past decade with 30% of companies who utilize Reg A, Reg CF, and/or, Reg D are either already public or become public afterwards. 

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This statistic reveals an important truth about modern capital markets: the lines between private and public, traditional and alternative, are blurring. Companies are using whatever tools best serve their needs, regardless of conventional categories.

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This signals that Reg A+ is no longer viewed solely as a startup funding tool, it's now being embraced by mature businesses as a strategic capital formation mechanism on the path to or within the public markets. 

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The flexibility and cost-effectiveness of Reg A+ make it attractive for companies at various stages of development.

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From pre-revenue startups to profitable public companies, the ability to access capital efficiently while building engaged shareholder communities has universal appeal.

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This number is only expected to rise in the coming years, especially if the Reg A cap is raised beyond $75M as it is being proven as a reliable funding source. 

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As success stories multiply and best practices become established, more companies will feel confident choosing Reg A+ over traditional alternatives. The network effects of successful offerings create a virtuous cycle where each success makes the next one more likely.

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Crowdfunding as a Long-Term Capital Strategy

The evolution of Regulation A+ and related tools has made it clear: crowdfunding is no longer just a stepping stone, it's a capital strategy in its own right. 

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This recognition represents a fundamental shift in how we think about public company finance. The tools and frameworks that emerged from the JOBS Act have matured into sophisticated instruments that serve companies throughout their lifecycle, not just at the early stages.

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For public companies, this means more than accessing retail investors; it means building aligned communities, raising flexible growth capital, and avoiding the high friction of traditional offerings. 

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The strategic value of having thousands of invested supporters extends far beyond the capital they provide. These investor-advocates can drive product adoption, provide market feedback, and create the kind of grassroots support that money alone cannot buy.

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With SEC data showing that 30% of Reg A+, CF, and D users are already public or become public afterward, the model is gaining lasting traction. 

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This adoption rate demonstrates that crowdfunding has moved from the experimental fringe to the mainstream of corporate finance. 

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As more companies share their success stories, the pace of adoption is likely to accelerate, creating a new normal in capital markets.

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As technology, regulation, and investor appetite continue to converge, the path to public capital is broadening, and crowdfunding is leading the charge. 

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The democratization of investing meets the democratization of capital raising in a way that benefits all participants. Companies get access to engaged capital, investors get access to opportunities previously reserved for institutions, and the overall market becomes more vibrant and inclusive.

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Whether through secondary Reg A+ offerings or hybrid models combining retail and institutional participation, companies now have more tools than ever to shape their fundraising future. 

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The flexibility to choose different approaches for different situations gives companies unprecedented control over their capital structure and investor base. 

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This optionality is particularly valuable in uncertain economic times when traditional funding sources may be constrained or unavailable.

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For companies ready to think beyond the IPO, public crowdfunding offers a faster, leaner, and more engaged route to capital. 

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And for the next wave of public-facing brands, it may become the default. As younger companies grow up with these tools available from the start, they may never consider traditional approaches, viewing them as relics of a less connected, less democratic era.

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The future belongs to companies that recognize capital raising as more than a financial transaction. It's an opportunity to build community, validate market demand, and create lasting relationships with the people who believe in your mission. 

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In this new paradigm, crowdfunding isn't just an alternative to traditional finance; it's a superior approach for companies that understand the power of aligned incentives and engaged communities.

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