Reg CF vs Reg A+: Which Equity Crowdfunding Structure Should You Use?

Reg CF and Reg A+ are the two SEC-approved frameworks that let everyday investors buy equity in private companies. Reg CF caps raises at $5 million and works best for early-stage startups. Reg A+ allows raises up to $75 million and suits companies closer to an IPO. Understanding reg cf vs reg a plus matters because the structure determines your investment limits, the company's disclosure requirements, and your path to liquidity.

Both regulations emerged from the JOBS Act, but they serve different stages of company growth and attract different investor profiles. If you are browsing platforms like Republic, StartEngine, or Wefunder, you will encounter both types. Here is what separates them.

How Reg CF Works

Regulation Crowdfunding (Reg CF) lets companies raise up to $5 million in a 12-month period from both accredited and non-accredited investors. The SEC introduced it in 2016, then raised the cap from $1.07 million to $5 million in 2021.

Your personal investment limit depends on your income and net worth. If both figures fall below $124,000, you can invest the greater of $2,500 or 5% of the lesser of your income or net worth. If either exceeds $124,000, you can invest up to 10% of the lesser figure, capped at $124,000 per year across all Reg CF deals.

Companies filing under Reg CF must use an SEC-registered funding portal or broker-dealer. They file Form C with the SEC, which includes financial statements, a description of the business, and how they plan to use the funds. Companies raising over $1.235 million need audited financials. For a deeper dive, read our guide on what is Reg CF.

How Reg A+ Works

Reg A+ is sometimes called a "mini-IPO." It lets companies raise up to $75 million per year under Tier 2 (or $20 million under Tier 1). The filing process is heavier: companies submit an offering circular to the SEC, which must be qualified before sales begin. This process typically takes 3-6 months and costs $50,000-$300,000 in legal and accounting fees.

Tier 2 offerings require audited financial statements and ongoing reporting obligations, including annual, semiannual, and current event reports. In exchange, Tier 2 issuers get federal preemption of state securities laws, meaning they don't need to register in each state individually.

There are no investment limits for accredited investors. Non-accredited investors can invest up to 10% of the greater of their annual income or net worth per Tier 2 offering. Learn more about this framework in our Reg A+ overview.

Reg CF vs Reg A Plus: Key Differences Side by Side

Raise size. Reg CF maxes out at $5 million. Reg A+ Tier 2 allows up to $75 million. A startup raising a $500K seed round uses Reg CF. A growth-stage company raising $30 million to expand nationally uses Reg A+.

Cost to the company. A Reg CF filing costs $10,000-$50,000 in legal and compliance fees. A Reg A+ offering runs $50,000-$300,000 before marketing. This cost difference alone pushes most early-stage companies toward Reg CF.

Investor limits. Reg CF restricts how much you can invest annually across all offerings. Reg A+ only limits non-accredited investors per offering, with no aggregate cap.

Disclosure requirements. Reg CF companies file Form C and provide annual reports. Reg A+ Tier 2 companies file offering circulars and ongoing reports that look closer to what public companies produce.

Liquidity. Reg CF shares have a one-year holding period before resale. Reg A+ Tier 2 shares are freely tradable immediately, though finding a buyer for a private company's stock remains difficult in practice.

Timeline. A Reg CF raise can launch in 4-8 weeks. Reg A+ qualification takes 3-6 months at minimum.

Which Platforms Offer Each Type

Most major crowdfunding platforms support both structures, but their emphasis varies.

Republic runs both Reg CF and Reg A+ offerings. Their Reg CF deals tend to be early-stage tech and consumer startups raising $100K-$5M. Their Reg A+ offerings feature more established companies.

StartEngine has processed more Reg A+ offerings than most competitors. They also operate a secondary market (StartEngine Secondary) where investors can trade shares from completed offerings, addressing the liquidity gap.

Wefunder focuses heavily on Reg CF. They have funded over 2,000 companies and emphasize community-driven investing where founders interact directly with backers.

When Reg CF Makes More Sense for Investors

Reg CF works well when you want to back founders early, invest small amounts ($100-$1,000), and build a diversified portfolio across many startups. The lower company costs mean more of the capital raised goes to the business rather than lawyers.

The downside: less disclosure means less information for your due diligence. Financial statements may be unaudited for raises under $1.235 million. You are betting more on the team and idea than on proven financials.

When Reg A+ Makes More Sense for Investors

Reg A+ suits investors looking for larger, more established companies with audited financials and SEC-qualified offering documents. If you want to invest $10,000+ in a single company, Reg A+ removes the per-investor caps that Reg CF imposes.

The stronger disclosure requirements give you more data to work with. Ongoing reporting obligations mean you get updates after you invest, not just during the raise.

Risks in Both Structures

Both reg cf vs reg a plus offerings carry high failure risk. Startups fail at rates above 60% regardless of the fundraising regulation. The SEC filing does not mean the SEC endorses the investment.

Valuations in crowdfunding rounds often run higher than what professional venture capitalists pay. A company raising at a $20 million valuation on a crowdfunding platform might only command a $10 million valuation from a VC, because VCs negotiate harder and demand preferred shares with protective provisions.

Dilution is another concern. Early crowdfunding investors often get common stock or SAFEs (Simple Agreements for Future Equity) that convert at later rounds, sometimes at less favorable terms than later institutional investors receive.

How to Choose Between Them

If you are an investor, you don't always get to choose; the company picks the regulation. But you can filter your deal flow:

• Prefer Reg A+ when you want audited financials, larger companies, and potentially tradable shares.
• Prefer Reg CF when you want early access, lower minimums, and are comfortable with less disclosure.
• Diversify across both. Spread $5,000 across 20 Reg CF deals at $250 each, and concentrate $5,000 across 2-3 Reg A+ deals for more established bets.

Frequently Asked Questions

Can I invest in both Reg CF and Reg A+ offerings at the same time?

Yes. The investment limits are separate. Your Reg CF annual cap applies across all Reg CF offerings combined. Your Reg A+ Tier 2 limit applies per offering. You can invest in as many of each as you want, subject to those respective caps. Most active crowdfunding investors participate in both.

Which has better investor protections, Reg CF or Reg A+?

Reg A+ offers stronger protections. Companies must file SEC-qualified offering circulars with audited financials and submit ongoing reports. Reg CF requires less disclosure, especially for smaller raises. However, neither provides the full protections of a public stock offering under a traditional IPO.

How long do I have to hold shares bought through Reg CF?

Reg CF shares have a mandatory 12-month holding period before you can resell them, with limited exceptions like sales back to the issuer or to accredited investors. After 12 months, you can sell freely, but finding a buyer for private company shares remains the real challenge.

Are Reg A+ investments less risky than Reg CF investments?

Not necessarily. Reg A+ companies are often larger and more established, but that doesn't guarantee success. The higher disclosure standards help you evaluate the risk better, but the underlying investment can still lose your entire principal. Company stage matters more than the regulation used.

Do I need to be accredited to invest in Reg CF or Reg A+?

No. Both regulations specifically allow non-accredited investors to participate. That is the entire point of these frameworks. Investment limits apply to non-accredited investors in both cases, but the minimums on platforms like Republic and Wefunder start as low as $50-$100.

What happens if a Reg CF or Reg A+ company goes bankrupt?

You lose your investment. Crowdfunding investors typically hold common stock or SAFEs, which sit at the bottom of the capital stack. In bankruptcy, creditors and preferred shareholders get paid first. Common shareholders receive whatever remains, which is usually nothing.

ModernAlts is an independent research platform. Nothing in this article constitutes investment, legal, or tax advice. Alternative investments involve risk including possible loss of principal.