Regulation A is a public offering of securities. Even though it is not a full blown IPO, it still takes a substantial amount of time to prepare and to have a successful offering. At CrowdCheck, we have been approached by a handful of companies that are excited about Regulation A and want to start selling to investors in a month. That’s great we say. We then ask, have you engaged an accountant? No. Do you know what you want to offer investors? No. Have you converted from an LLC to a C Corporation? No.
You get the idea.
A typical timeline for a Regulation A offering requires about two months of lead time. During that time, your accountants and lawyers can work concurrently to audit and begin preparing the offering circular, respectively. However, the offering circular cannot be completed until the financial statements of the company have been finalized (this information is required for the Management’s Discussion & Analysis). If there is any major corporate housekeeping required, that may take some time as well.
That all gets you up to the point of your first filing with the SEC. After about 30 days, the SEC will issue its questions and comments that require responses from the company and amendments to the offering circular. It may take a few weeks to then file the amended offering materials with the SEC.
There may be some additional back and forth with the SEC over the next few weeks until the offering statement is finally qualified.
That is just the timeline. When it comes to the time commitment, be prepared to put some heavy lifting in yourself. While much of the language may be drafted by lawyers, and the numbers have been crunched by accountants, for all legal purposes, it is your language. And if that language does not convey an accurate statement about the company at the time of the offering, that may be grounds for liability.
A company’s executive officers will need to be involved along the way, signing off on language and information that will be used in the filings with the SEC and what is put in front of investors. After all, the executive officers are the persons who know the company best.
For many companies, this effort is worth it. Under Regulation A, small and early stage companies can raise the funds they are looking for from friends, family, and fans.