Module 2 — Instruments and the Arithmetic · Lesson 2.4
The Public Routes: Regulation Crowdfunding and Regulation A
Raising from everyone, within limits — and what it costs
What you'll learn
- State the current offering limit and non-accredited investor limits under Regulation Crowdfunding
- Distinguish Regulation A's two tiers by offering size and investor limits
- Compare the cost and ongoing obligations of these routes with a Rule 506 round
- Decide when a community or customer raise is worth the extra work
Some companies have something a venture fund does not value but the public does: thousands of loyal customers, a local community, a product people want to own a piece of. For them the most valuable investors may not be accredited at all. US securities law allows that raise through two exemptions designed for it. They are smaller than Regulation D in practice — much smaller — and they cost more to run, but for the right company they turn customers into owners. As before, this is an overview, not legal advice; both exemptions have conditions counsel must confirm.
How small these markets are
Set expectations first. The SEC's Office of the Advocate for Small Business Capital Formation reported in January 2026 that, in the twelve months to June 2025, non-fund issuers raised about 1.2 billion dollars through Regulation A and about 235 million dollars through Regulation Crowdfunding — against about 378 billion through Rule 506(b) and 24 billion through Rule 506(c). These are real markets and the right channel for some companies, but they are a sliver of private capital formation. A company choosing one of them should be choosing it for the investors it reaches, not because it expects the route itself to bring money.
Regulation Crowdfunding
Regulation Crowdfunding, under Section 4(a)(6) of the Securities Act, lets an issuer sell securities to anyone, accredited or not, subject to limits. As the rule stands in October 2026, the aggregate amount an issuer may sell in reliance on the exemption in any twelve-month period is 5,000,000 dollars.
The limits on investors apply to those who are not accredited. A non-accredited investor may invest, across all crowdfunding issuers in a twelve-month period, the greater of 2,500 dollars or 5 percent of the greater of their annual income or net worth if either is below 124,000 dollars; or 10 percent of the greater of the two, up to 124,000 dollars, if both are at or above 124,000. Accredited investors are not subject to those caps.
The offering must be conducted through a single intermediary — a registered broker-dealer or funding portal — and exclusively on its platform. The issuer makes the disclosures Regulation Crowdfunding requires and files annual reports afterwards; the rule makes an issuer that has not filed its required annual reports in the two years before a new offering statement ineligible to use the exemption again. In practice that means a crowdfunding raise is a public process: the terms, the financials and the progress of the round are visible to anyone, including the next round's investors.
Regulation A: the mini-IPO
Regulation A is a lighter-weight public offering, qualified by the SEC rather than registered, in two tiers. Under the current rule, a Tier 1 offering is limited to 20,000,000 dollars in a twelve-month period, including no more than 6,000,000 offered by selling securityholders that are affiliates of the issuer. A Tier 2 offering is limited to 75,000,000 dollars, including no more than 22,500,000 by such selling securityholders.
Tier 2 carries an investor limit too. Where the securities will not be listed on a national securities exchange upon qualification, a purchaser who is not an accredited investor may buy no more than 10 percent of the greater of their annual income or net worth (for a natural person), or of revenue or net assets for an entity. The issuer files an offering statement that the SEC must qualify, and a preliminary offering circular must reach anyone who indicated interest before qualification at least 48 hours before a sale to them.
The trade is plain. Regulation A reaches the general public at a scale crowdfunding cannot, but it requires an SEC-qualified offering statement and the legal and accounting work that goes with one — closer to a small public offering than a private round — before a single share is sold. It suits a company with a large, engaged following and the administrative capacity to run something that looks like a public company in miniature.
When to choose a public route
A rough decision rule — a starting point, not a measurement. A company whose most valuable backers are its customers, whose raise is under five million dollars, and that can accept a public record of its terms is a crowdfunding candidate. A company with a large following, a need above five million dollars and the capacity to produce and maintain public disclosure is a Regulation A candidate. A company whose natural investors are funds and angels belongs in Rule 506, which is faster, cheaper and private.
The routes can also combine. A company can raise a priced or SAFE round from institutions under Regulation D and a community round on a crowdfunding platform, which raises integration questions under Rule 152 that counsel must resolve. And a public raise is marketing as well as finance, which brings its own obligations: once a campaign is live, every message about it is part of the offering.
For placement agents, Regulation Crowdfunding is the business of funding portals and broker-dealers registered to act as intermediaries; a desk that is not set up to be one cannot simply run a crowdfunding round for a client.
Run a community raise like any other pipeline
- 1
Give the public raise its own pipeline
In /deals, keep a crowdfunding or Regulation A campaign separate from the institutional round — its stages (for example Platform selected, Offering statement filed, Live, Closed) and its deadlines are different, and mixing them hides both.
- 2
Put the filing, go-live and annual-report dates in /calendar. For a crowdfunding issuer the annual reports are not optional: missing them can bar the company from using the exemption again.
- 3
Route every campaign message through review
Draft campaign updates with the agent, but send them from /inbox yourself or let them park for approval — outbound mail the agent sends is held in the approvals queue in Settings until a person approves it.
Is the public route paying for itself?
- Cost of raise as a share of proceeds
- Platform fees, legal, accounting and marketing costs divided by capital raised.
- Healthy signal: Compare it with the cost of a private round of the same size. A Kavanah suggestion: if the public route costs more, the investor community it builds must be worth the difference.
- Share of investors who are customers
- Investors in the campaign who are also existing customers or users.
- Healthy signal: High is the point. A public raise that attracts no customers was a fundraise without the benefit that justified it.
- Ongoing filings on time
- Required annual or periodic reports filed by their due dates.
- Healthy signal: All of them. A late report is a compliance failure with a lasting consequence.
Key takeaways
- ·Reg CF and Reg A let companies raise from the public, but they are a tiny share of private capital — about $235M and $1.2B in the year to June 2025.
- ·Reg CF: up to $5M a year, through one registered intermediary, with caps on non-accredited investors keyed to $124,000.
- ·Reg A: Tier 1 up to $20M, Tier 2 up to $75M, with a 10% cap on non-accredited purchasers in unlisted Tier 2 offerings.
- ·Choose a public route for the investors it reaches — customers and community — and budget for the ongoing obligations.
Module 3 turns from what you sell to how you prepare to sell it: the narrative and deck that carry the story, the metrics that carry the evidence, the room that carries the diligence, and the list of investors who should see them.
Sources
- 1.17 CFR 227.100 — Crowdfunding exemption and requirements
U.S. Securities and Exchange Commission (eCFR) · Electronic Code of Federal Regulations, up to date as of October 21, 2026 · 2026
The $5,000,000 twelve-month issuer limit; non-accredited investor limits ($2,500 / 5% / 10% with the $124,000 thresholds); the single-intermediary requirement; ineligibility for failing to file required annual reports.
- 2.17 CFR 230.251 — Scope of exemption (Regulation A)
U.S. Securities and Exchange Commission (eCFR) · Electronic Code of Federal Regulations, up to date as of October 21, 2026 · 2026
Tier 1 limit of $20,000,000 (selling affiliates $6,000,000) and Tier 2 limit of $75,000,000 (selling affiliates $22,500,000); the 10% non-accredited purchaser limit for unlisted Tier 2 securities; delivery of a preliminary offering circular 48 hours before sale to those who indicated interest.
- 3.Office of the Advocate for Small Business Capital Formation — Fiscal Year 2025 Staff Report
U.S. Securities and Exchange Commission · SEC staff report (January 8, 2026) · 2026
Capital raised by non-fund issuers in the twelve months to June 2025: Reg A about $1.2B and Reg CF about $235M, against $378B under 506(b) and $24B under 506(c).
- 4.17 CFR 230.152 — General principle of integration
U.S. Securities and Exchange Commission (eCFR) · Electronic Code of Federal Regulations, up to date as of October 21, 2026 · 2026
The integration framework that governs concurrent offerings under different exemptions, such as a Regulation D round alongside a crowdfunding raise.