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Streetshares’ hands-on experience with Reg A+

Streetshares operates in a niche where it can reduce its cost of customer acquisition and raises capital in a novel way.  Streetshares is the first small business lender to be declared qualified by SEC for raising $50 mil in debt under the Regulation A+. The company has shared their experience with the steps, costs and timelines for the Reg A+ qualification process.

Streetshares background

Streetshares was founded by Mark Rockefeller (CEO) and Mickey Konson (COO) in 2014. They have introduced the concept of “affinity-based-lending” by focussing on connecting veteran-owned businesses with veteran lenders. The founders believe that by borrowing the principle of peer pressure from microfinance institutions, they will be able to reduce the risk of default. The strategy seems to be working as the company has been able to place over $9 million in loans since inception. The company,  with a total of 23 people at this time,  has raised over $8 mil in total funding, including a $4.5 mil in Series A in 2016 from Fenway Summer Ventures and Pivot Investment Partners.

Mark had been in the military for 9 years, before working as an attorney at Milbank, Tweed, Hadley & McCloy LLP where much of his work involved unwinding the Lehman Brothers bankruptcy. Mickey was the head of Capital One’s consumer retail bank business. Mark had seen payday lenders preying on veterans and army personnel and believed that a veteran to veteran funding approach would create a trust factor for the lender and a sense of responsibility for the borrower. The niche Streetshares wants to dominate is not a small category, with the founder estimating veteran-owned businesses to be 15% of the entire market. For this end, the company has partnered with multiple veteran organizations and as such 60% of its borrowers are ex-service members. The association with veteran organizations not only creates goodwill but also reduces CAC, as it does not have to rely on expensive loan brokers.


The move seems to have paid off with 13000 street shares members, 400 loans disbursed and only a 2% default rate. The average loan size is $22000, with the amount ranging from $2000 to $100,000. The tenure is from 3 to 36 months and average APR is in high teens (Range: 8-40%) and comparable to credit cards. As compared to other business loan platforms- Kabbage and OnDeck, the company does not charge any pre-payment penalty. This translates into better reviews for the site from borrowers but also inspires transparency at all levels.

The company has created a niche via affinity group lending, but its major claim to fame is being Reg A+ is a part of JOBS Act 2012, which allows growth companies and start-ups to raise $50 mil in 12 months from non-accredited investors with no limit on the number of such investors.

According to a press release by Streetshares on March 15, 2016:

“The crowdlending product, created through Regulation A+ of the Jumpstart Our Business Startups (JOBS) Act, offers a fixed return to investors, a first for this type of investment. StreetShares uses the proceeds to generate loans to qualified small businesses. Unlike current “peer-to-peer” lending sites, repayment to investors is not tied to the performance of a particular underlying loan. StreetShares is the first company to apply this law to the $100 billion small business loan market. Until now, only wealthy “accredited investors” could invest in these popular securities.”

Reg A+ and securities

The law enabling Reg A+ filings took effect on June 19th, 2015. Streetshares filed their application on June 23rd, 2015.  The original Reg A allowed a raise of $5 mil without public registration of the shares and existed since 1933. Unlike the very popular Reg D, companies filing under the original Reg A were still subject to the state securities rules which made it very onerous to use for just $5 mil.

Reg A+ increased the maximum raise to $50 mil per 12 months and most importantly allowed for federal preemption of state-level laws.

The SEC envisioned that the Reg A+ would be used for equity primarily, but applying it to crowd lending and creating a secured return structure for lenders will go a long way in differentiating Streetshares from its peers. Though the company will offer the securities only to military families at first, it will eventually open up to the general investing public. The SEC approval has increased the investing universe for the marketplace

Though the company will offer the securities only to military families at first, it will eventually open up to the general investing public. The SEC approval has increased the investing universe for the marketplace lender by 10X, as only 10% of the general public falls under the category of an accredited investor.

What it takes to get Reg A+

Despite Mark, the company CEO, being a trained securities attorney Streetshares relied both on an in-house general counsel and attorney Brian Korn from Manatt, among others,  for their application and ongoing legal needs.  Part of the application process the company had to estimate the cost of the process. The company estimated $500,000 in fees and 9 months to get the final approval which turned out to be relatively accurate. It is also expected that some of the funds raised under Reg A+ are used to pay for the process itself. It should, therefore, be possible for legal fee arrangements at times to be paid over time with the capital raise.

The application took 9 months to get approved. Being one of the 1st ones the SEC had to be comfortable with all aspects and the interaction with the regulator was very open and constructive according to Streetshare’s CEO. Once the details of their application were understood the day to day of the application resulted in many phone calls in order to discuss details and a setup that was appropriate for the company and the regulator.

The application was approved in March 2016.

The cost and effort to obtain the Reg A+ qualification, however, is just the beginning. Once obtained, the company still has to market the offering to find potential investors and convince them it is a good investment. That cost is far from negligible as well.

Reg A+ filing will be a unique first mover advantage for the company which will attract press, visibility and attention from the entire industry.

Non-accredited investors are limited to investing up to a $1000 each. Despite this, the company has raised 1% of the $50 mil during the soft launch. The company aims to market the Reg A+ through its own website at the moment.

For future raises, the company is also not restricted to $ 50 mil as the SEC does not aggregate the exemption under Reg D.

Ongoing Reg A+ costs

Starting 2008 , Lending Club and Prosper fought the SEC to allow them to market to unaccredited investors. As a result, the companies ended up focused on institutional investors instead.

Streetshares, while getting most of the capital from accredited investors so far,  has chosen to create a community, which though restrictive is big enough to be a ten billion dollar category.

The veteran community will obviously find Streetshares to be a remarkable solution which not only solves their funding and investing issues but also recognizes them as an important part of the business community. The recent $4.5 mil Series-A will be a shot in the arm for the young start-up to attract the $50 million it needs to jump to the big league. But the entrepreneurs behind Streetshares have shown chutzpah and the perseverance to take the path less traveled. And their bet seems to be paying off.

The cost of compliance of Reg A+ is estimated to top $ 100,000 a year. So in reality, all start-ups cannot afford to go through SEC to attract non-accredited investors. Reg A+ does not fit all needs. It is too expensive for too early stage companies. Through its $50 mil per 12 months cap, it is not enough capital for the large companies. However if $50 mil per year will make a difference in the p2p lender’s business and the lenders has $1 to $2 mil in capital and a good story to sell Reg A+ may be a great tool among others. Raising $250 mil over 5 years, for example, could put any early stage p2p lender on track to be the next Amex or Capital One.


Author : George Popescu

George Popescu


About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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