Venture capital · SEC

Would a Series A VC allow for a Reg A+ offering for the second round of funding?

D Worthington Founder at Loop Global

August 25th, 2015

Reg A+ is relatively new, so it's a shot in the dark. I am wanting to know if anyone has had experience with this. 
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Chris Murphy Director of Corporate and Legal Affairs at E2open

August 25th, 2015

There will always be specific situations where this is compelling, but generally, I don't think companies or investors would WANT to go the Reg A+ route when traditional funding is available on reasonable terms.  It is going to be more expensive both to raise the round and then to administer it ongoing.  Therefore, I think most are going to view it as a sign of weakness and less preferable route.  That said, if the more preferable routes are not available or come with unacceptable terms, I think anyone is happy to look at a new route for liquidity when it makes sense.

D Worthington Founder at Loop Global

August 25th, 2015

Thats what I was thinking. It would offer another exit strategy for the VC if they wanted to recoup initial investment + ROI via higher valuation. 

Thanks for the validation on my hunch. 

Michael Brill Technology startup exec focused on AI-driven products

August 25th, 2015

Interesting question. As you said, it's really quite new... but has huge potential. I would imagine that early stage investors will love it because it has the potential to give them partial (or even full) liquidity while still letting the remainder of their investment ride.

Later stage investors, not so much because (a) they will typically want to hold out for higher returns, and (b) it competes with them. But I can't quite think of a reason why an investor would discourage an offering out of course.

I'm sure some clever people will figure out how to get the filing and reporting costs way down, making it a source of capital to even smaller companies. Very exciting space to watch!!