Freddy and Fabrizio, co-founders of F&F Inc. want to raise capital to franchise their local retail chain, eventually on a national level. They’re discussing the benefits of following Regulation A+ vs Regulation CF. Here’s how they see each scenario affecting F&F.
Freddy: So Fabrizio, Reg A+ gives us optional access to public markets. The benefits are that we can raise up to $75 million and the reporting requirements are much softer than an IPO. Plus, we can raise money from non-accredited investors with lower fees and free-trading shares if we decide to go public later. I like that.
Fabrizio: I hear you Freddy, but with Reg CF, we can use the new online equity crowdfunding to raise $5 million with fewer legal and reporting requirements and the technology to reach a lot of people. Plus, non-accredited investors can also invest in F&F.
Freddy: True, but you’re thinking too small. With Reg A+ we can also do crowdfunding if we want AND get access to a broker-dealer. We already have three locations and 127 investors. We need a lot more room for growth and need to raise at least $30 million so Reg CF can’t work.
Fabrizio: Remind me again why you like Reg A+.
Freddy: Tier II, allows us to raise up to $75 million and requires SEC reporting. That will allow us to launch our stores on both coasts.
Fabrizio: So, more regulatory oversight but more appropriate for larger fundraising?
Freddy: Yes, and we can remain a private non-traded company for now. How do we get started?
Fabrizio: I will reach out to Equity Track for their Cloudraise® platform. They allow us to manage the campaign from our own website.