“JOBS Act 2.0”: Venture Capital Raising in the U.S. Now Better Than Before!
The U.S. is becoming much more competitive with Europe in venture capital raising since the U.S. Securities & Exchange Commission (“SEC”) announced on November 2, 2020, that they are amending the securities regulations to now allow for higher maximum offering amounts under the JOBS Act in all categories. Effectively, the new rules are making venture capital raising more easily obtainable and accessible to investors, SME’s and entrepreneurs alike!
The new rules allow not only entrepreneurs to raise $5 million in a 12-month period through crowdfunding, but they are also allowed to raise in a 12-month period a maximum of:
a.) $75 million through RegA+ (Tier I);
b.) $22.5 million through RegA+ (Tier II) in secondary offerings; and
c.) $10 million through Reg D, Rule 504.
However, higher offering caps is not the only change being made. It is much easier for businesses to reach their goal using Regulation CF (“crowdfunding”) because now the investment limits for investors are:
a.) being removed for accredited investors; and
b.) using the greater of their annual income OR net worth when calculating the investment limits for non-accredited investors.
Moreover, the SEC is extending for 18 months the existing temporary relief providing an exemption from certain Regulation Crowdfunding financial statement review requirements for issuers offering $250,000 or less of securities in reliance on the exemption within a 12-month period. In addition, investors will be able to use certain special purpose vehicles to invest in crowdfunding offerings.
If you are planning on using Reg D to raise capital you will now find there are new and easier “test the water” rules that are similar to Reg A, and permits an issuer to use generic solicitation of interest materials to “test-the-waters” for an exempt offer of securities prior to determining which exemption it will use for the sale of the securities.
If you are an entrepreneur living outside the U.S. and would like to raise venture capital in the U.S. for your business venture inside or outside of the U.S., contact our experienced U.S. securities lawyers at Emily@eaglaw.co, for a consultation.