Equity Crowdfunding & Online Capital Raising
Why do we have a whole webpage dedicated to equity crowdfunding?
Equity crowdfunding is a specialized area that relatively few CPA firms serve as a core practice. dbbmckennon has worked with companies using Regulation A+ and Regulation Crowdfunding as part of their capital-raising strategies since the early development of the modern online capital-raising market.
It is a practice area we enjoy and continue to support.
Our experience includes audits and financial statement reviews for emerging-growth companies, Regulation A+ issuers, Reg CF issuers, and companies that later transition into the public markets.
What Is Equity Crowdfunding?
Equity crowdfunding allows companies to raise capital from a broader group of investors (the crowd) through securities offerings conducted under exemptions. This is substantially different from traditional public-offering registration requirements.
Two of the most common frameworks are Regulation A and Regulation Crowdfunding, each of which has different offering limits, investor rules, financial statement requirements, and ongoing reporting obligations.
Regulation A+
Regulation A allows eligible companies to raise capital through a streamlined securities offering process. Often dubbed a “Mini-IPO”, it has a similar process of filing to a typical IPO registration statement where the SEC reviews the document and may provide comment on it before it can go effective. Most companies raise under Tier II of Regulation A which allows them to bypass state blue sky laws and work directly with the SEC. With Tier II offerings, audited financial statements for the past two years, or lesser time if the Company was recently formed, are required.
Regulation A can be used by emerging-growth companies as part of a broader capital strategy and, in some cases, as a step toward future public-market activity. Companies that pursue this avenue typically have an audience that they are trying to reach, require larger amounts of capital than what Reg CF can provide, but do not yet want to access the public markets.
Regulation A is also flexible. While a Regulation A company is required to issue annual financial statements on Form 1-K and unaudited semi-annual financial statements on Form 1-SA, it can also be used to opt into the Securities Act of 1934 through the filing of a Form 8-A. This allows the Company, working with the right professionals to have the ability to list on a national exchange. This is a process that provides very similar outcomes to a traditional IPO on Form S-1, but also allows for investments from non-accredited investors.
Learn more about our Regulation A+ Audit Services →
Regulation Crowdfunding (Reg CF)
Regulation Crowdfunding allows eligible companies to raise capital from investors through registered crowdfunding intermediaries or broker dealers. Depending on the amount raised and the issuer’s circumstances, financial statements may need to be management certified, reviewed, or audited. That amount is adjusted each year for inflation. So potential Reg CF fliers should check the most up to date levels for which attestation services are required.
dbbmckennon provides both financial statement reviews and audits for companies raising capital under Reg CF.
Financial Statement Requirements Matter
The financial statement requirements for online capital raises depend on the exemption being used, the amount being raised, the issuer’s history, and other facts and circumstances. It’s important to speak with a CPA firm experienced in these offering types so you know exactly what is needed and when. It’s is also important to be forward thinking as independence standards for CPA firms change by offering type, and the type of firm (PCAOB vs non-PCAOB) may be important based on your future plans .
Engaging an accountant early can help avoid delays by identifying whether reviewed or audited financial statements are required and whether the company’s accounting records are ready for the engagement.
Experience Beyond a Single Offering
Companies using Regulation A+ and Reg CF are often early-stage or rapidly growing businesses with evolving accounting systems, complex equity structures, and tight capital-raising timelines.
Common issues may include:
SAFEs and convertible instruments
preferred equity
stock-based compensation
revenue recognition
Lease accounting
related-party transactions
going concern considerations
complex financing arrangements
business combinations and predecessor entity considerations
financial statement presentation and disclosures
Our experience with these companies helps us identify potential audit and review issues early and communicate clearly throughout the process.
From Crowdfunding to the Public Markets
Some companies use online capital raising as one stage in a broader financing strategy.
dbbmckennon has experience working with Regulation A+ and other emerging-growth issuers that later pursue an IPO, uplisting, direct listing, reverse merger, or other public-market transaction.
That broader experience can be valuable for companies that expect their financial reporting requirements to become more complex over time. It is also important because if Company wants to access the public markets, they generally need a PCAOB registered firm.
Why Companies Choose dbbmckennon
Specialized Experience
Equity crowdfunding and emerging-growth company audits are established areas of our practice, not occasional engagements. We are deeply connected to the service providers in this space and work closely with them.
PCAOB-Registered Firm
dbbmckennon is a PCAOB-registered CPA firm with experience serving both private and public companies. We can work with you from early stage startup to IPO.
Partner Involvement
Our partners remain directly involved and accessible throughout the engagement. They are experts in their field.
Responsive Communication
Capital raises move quickly. We emphasize early communication and coordination so potential issues can be addressed before they affect the offering timeline.
Relationships That Last
We want to work with companies beyond a single financing event and grow with them as their reporting needs evolve.
FAQ
Does every Reg A+ offering require an audit?
The requirements depend on the tier and circumstances of the issuer. Companies should evaluate the applicable financial statement requirements early in the offering process. Tier I offerings do not require audits, whereas Tier II offerings do. Most companies undertake Tier II offerings.
Does every Reg CF offering require an audit?
No. Depending on the amount being raised and the issuer’s circumstances, financial statements may be certified by management, reviewed, or audited.
Does dbbmckennon perform both audits and reviews?
Yes. We perform audits and financial statement reviews where appropriate for Regulation A and Regulation Crowdfunding issuers.
Can dbbmckennon work with a company that later goes public?
Yes, subject to applicable independence and engagement requirements. We work with both private and public companies and have experience with companies transitioning into the public markets.
Is it expensive to get a review or audit done?
We look at each client engagement as unique and each engagement and estimate is tailored to a client. Like most things in life, the costs to undertake a review or audit depend on the facts and circumstances of the Company. A newly formed company with a sole founder and no material activity is drastically different than a manufacturing company that has been around for thirty years. The best way to find out is to have an honest conversation and be as forthcoming as possible.
If you are considering Regulation A+, Regulation Crowdfunding, or another online capital-raising strategy, we would be glad to discuss the financial statement and audit requirements.