1

Report to Congress on Regulation A / Regulation D Performance

As Directed by the House Committee on Appropriations in

H.R. Rept. No. 116-122

This is a report by the staff of the U.S. Securities and Exchange Commission (SEC). The 

Commission has expressed no view regarding the analysis, findings, or conclusions 

contained herein.

August 2020
2

Executive Summary 

Congress directed the staff of the Securities and Exchange Commission (Commission or 

SEC) to report on the performance of Regulation A and Regulation D offerings. In its Joint 

Explanatory Statement accompanying the Financial Services and General Government 

Appropriations Act,

1 Congress states: 

The Committee is concerned about the implications of private and quasi-public 

market growth on public markets and investors. The Committee believes public 

markets offer certain valuable benefits to investors that private and quasi-public 

markets do not provide, including more robust transparency, better pricing 

efficiency, more accurate valuations, deeper levels of liquidity and lower trading 

costs, and stronger accountability mechanisms. The Committee directs the SEC’s 

Division of Economic and Risk Analysis to study the performance of Reg A+ and 

Reg D offerings and within 180 days issue a public report comparing the 

performance of Reg A+ and Reg D offerings versus all other offerings. 

In response to the Committee’s directive, this Report presents the SEC staff’s analysis of 

available data and evidence on the state and performance of exempt offerings under Regulation 

A and Regulation D during the time periods noted for each of these types of offerings.2 The time 

span of our analysis preceded the onset of the global COVID-19 pandemic, which is expected to 

have a negative impact on offering activity.3

 

1 See H. Committee Print of Consolidated Appropriations Act, 2020, Comm. on Approp., 116 Cong, 2d Sess. No. 

38-678 (Jan. 2020), at 652, available at: https://www.govinfo.gov/content/pkg/CPRT116HPRT38678/pdf/CPRT-116HPRT38678.pdf. The Joint Explanatory Statement (Joint Explanatory 

Statement) accompanying Division C of the Consolidated Appropriations Act, 2020 addressed reporting 

directives to the SEC generally. The enactment of appropriations for the Commission on December 20, 2019, 

confirmed the directive to prepare this report. See Consolidated Appropriations Act, 2020, Pub. Law No. 116-

93, 133 Stat. 2317 (2020).

2 Staff in the Division of Economic Risk and Analysis (DERA) was primarily responsible for the data analysis in 

this report.

3 See, e.g., S.P. Kothari, DERA Economic and Risk Outlook, U.S. SEC. AND EXCHANGE COMM’N (Apr. 23, 2020), 

available at https://www.sec.gov/files/DERA_Economic-and-Risk-Outlook-Report_Apr2020.pdf.
3

Main Findings

Regulation D Offerings

Our analysis of Regulation D offerings is based on available data from electronic filings 

for 2009 through 2019, except where noted elsewhere.

• As a capital-raising tool, Regulation D accounts for a large share of the offering market

and provides a robust choice for issuers seeking to raise capital. 

• Over the past decade, there has been a steady increase in the number of offerings and 

amounts raised in Regulation D offerings. In 2019, over $1.5 trillion was reported raised 

under Regulation D. 

• By comparison, during the same timeframe, approximately $1.2 trillion was raised 

through registered offerings, and just over $1 billion was reported raised under 

Regulation A during the same timeframe. 

• Private funds raised more than $11 trillion of the $15.5 trillion sold in Regulation D 

markets during 2009 through 2019. However, non-fund issuers dominate in terms of 

number of offerings. 

• Private funds for which data is available exhibited strong performance, with significant 

variation across funds, as shown in greater detail in Section III.B.2. However, this period 

has also coincided with favorable market performance, resulting in high market portfolio 

returns.

Note: The distinct risk and illiquidity profile of private funds, as well as differences in 

data sources and methodologies for measuring performance, make direct comparisons 

with mutual fund and market portfolio returns difficult. 
4

• On the basis of our analysis of a small subset of public companies that conducted

Regulation D offerings during the timeframe, and in line with prior studies, we find that 

such companies tend to be smaller, less profitable, and more financially constrained than 

public companies conducting registered offerings. The companies relying on Regulation 

D grew faster one year after the offering but had lower profitability and stock returns, 

compared to public companies undertaking registered offerings. 

Regulation A Offerings

Our analysis of Regulation A offerings is based on data from the effective date of the 

amendments that dramatically expanded it in mid-2015 (also termed “Regulation A+”) through 

the end of 2019, except where noted elsewhere. 

• As a capital-raising tool, Regulation A met with somewhat mixed offering success during 

this period. While the use of Regulation A has increased over time, amounts raised (as 

reported) were generally below amounts sought. 

Note: Proceeds information is incomplete because of lags in reporting and most offerings 

being made on a continuous basis.

• Among Regulation A offerings, we find Tier 2 accounted for most of the issuer activity, 

successful offerings, and growth in proceeds. (See discussion of Tier 2 in Section II.B. 

below).

• Among issuers with some offering proceeds, close to 80% of issuers continued to file 

reports on the Commission’s Electronic Data Gathering, Analysis, and Retrieval system

(EDGAR) one year after the offering, and just under one-half of issuers remain there 

three years after the offering. 
5

• The typical issuer with available post-offering data experienced a considerable increase 

in assets and revenues, but not in profitability, following the offering. The magnitude of 

the jump is generally related to the small initial size and early stage of the typical issuer.

• A minority of issuers that raised capital under Regulation A had a secondary trading 

market for their securities (on the over-the-counter (OTC) market or a stock exchange). 

Among those issuers, typical performance was below performance benchmarks; however, 

underperformance was not statistically significant. 

Note: Our analysis and inference are limited by small sample size, data noise, and selfselection of issuers into the Regulation A market. 

Summary of Conclusions

Overall, our analysis confirms that Regulation D accounted for significantly more capital 

raising than Regulation A, with the difference on the order of magnitude of 1000x in a typical 

year during the examined period. Although the use of Regulation D by private funds, which are 

ineligible under Regulation A, plays a significant role, Regulation D use by non-fund issuers also 

significantly outpaced Regulation A use. Excluding funds, most of the issuers relying on either

exempt offering method are small, unlisted companies, which considerably limits data 

availability. However, according to available data, some of the operating companies using these 

offering methods exhibit considerable growth potential.
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I. Introduction

Regulation A and Regulation D are two sets of rules that enable issuers to conduct an 

offering that is exempt from the registration requirements of the Securities Act of 1933 (the 

“Securities Act”).

4

 Over the past decade, markets for securities that are exempt from registration 

have experienced significant growth. 

In response to the reporting directive from Congress,

5 the Commission’s staff has studied 

the performance of Regulation A and Regulation D offerings. In this report, we analyze the 

performance of these offerings. Except where specified otherwise, the analysis is based on 

available data from electronic filings through the most recently completed calendar year (2009

through 2019 for Regulation D and June 2015 through December 2019 for Regulation A), which 

coincided with a period of generally favorable macroeconomic and market performance. 

Subsequent to the end of the period analyzed in this report, as of August 2020, the U.S. has 

experienced significant macroeconomic and market dislocations related to the global effects of

COVID-19 and the related response. These factors are expected to have a negative impact on 

offering activity, including under Regulation A and Regulation D, as well as on the likelihood of 

liquidity events, such as initial public offerings (IPOs), and the performance of these investments 

in 2020.

Some of the analysis in this study incorporates the findings of the Commission staff’s

lookback review of Regulation A (published March 4, 2020), as called for in the 2015 

 4 For a discussion of the various exemptions from registration under the Securities Act, including Regulation A 

and Regulation D, see Concept Release on Harmonization of Securities Offering Exemptions, Release No. 33-

10649 (Jun. 18, 2019) [84 FR 30460 (Jun. 26, 2019). 

5 See supra footnote 1.
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Regulation A adopting release, and the findings of the biennial offering limit review, as required 

by Section 3(b)(5) of the Securities Act.

6

 

Below is a summary of the characteristics and performance of Regulation A and 

Regulation D offerings.

Regulation D

• Over the past decade, there has been a steady increase in Regulation D offerings. As 

a capital-raising tool, Regulation D accounts for a large share of the offering market and 

provides a robust financing method for issuers seeking to raise capital. In 2017-2019, the 

Regulation D market surpassed the registered offering market based on the amount of 

reported proceeds. In 2019, Regulation D accounted for over $1.5 trillion in reported 

proceeds. By comparison, in 2019 registered offerings accounted for approximately $1.2 

trillion in proceeds, and Regulation A accounted for just over $1 billion in reported 

proceeds. Much like public capital markets, capital raising through Regulation D 

offerings has been pro-cyclical. Private funds raised the largest amount of financing in 

the Regulation D market during this period.

• Private funds exhibited strong returns during this period. While there is variance in 

mean and median returns, depending on the year and data source, the private fund asset 

class exhibited generally strong returns in absolute terms during this period. However, as 

noted above, this period also coincided with favorable market and mutual fund 

performance. 

 6 See U.S. SEC. AND EXCHANGE COMM’N, Regulation A Lookback Study and Offering Limit Review Analysis

(2020), available at https://www.sec.gov/files/regulationa-2020.pdf (“Regulation A Lookback Report”).
8

As an important caveat, the distinct risk and illiquidity profile of private funds and data 

differences make it difficult to draw direct comparisons. 

• Among non-fund issuers in the Regulation D market, issuers in the 

Banking/Financial, Technology, and Real Estate industries accounted for the most 

capital raised. As more than 95% of non-fund Regulation D issuers are private 

companies, data on their performance are scarce. We present available evidence on the 

performance of investments in private companies. We then turn to the (small) subset of 

Regulation D issuers that are public companies and thus have performance data available. 

These issuers tend to be smaller, less profitable, and more financially constrained at the 

time of the Regulation D offering, compared to public companies conducting registered 

offerings. Reporting companies with Regulation D offerings grew faster but had lower 

profitability and stock returns one year after the offering than reporting companies 

undertaking registered offerings. However, selection bias is likely because these issuers 

tend to be smaller, less profitable, and more financially constrained at the time of the 

Regulation D offering, compared to public companies conducting registered offerings. 

As an important caveat, the public company subset of Regulation D issuers is not 

representative of the much larger set of private companies relying on Regulation D. 

Regulation A

• As a capital-raising tool, Regulation A met with somewhat mixed offering success 

during this period. While the use of Regulation A has increased over time, amounts

reported raised were generally below amounts sought, with the caveat that proceeds 

information is incomplete because of the nature of observed reporting, as well as the fact 
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that most offerings were made on a continuous basis, with an increase in offering activity 

in later years. 

• Among Regulation A offerings, Tier 2 accounted for most of the issuer activity, 

successful offerings, and growth in proceeds. Among issuers reporting some offering 

proceeds, close to 80% of issuers continued filing in EDGAR (including filings other 

than those required under Regulation A) a year after the offering, and just under one-half 

of issuers continued filing in EDGAR three years after the offering. Where data were

available, the typical issuer experienced a considerable increase in assets and revenues, 

but not in profitability, following the offering. The magnitude of the jump is related to 

the small initial size and early stage of the typical issuer. 

• For the minority of Regulation A issuers that had a secondary trading market for 

their securities, stock returns after the offering were positively skewed, with means 

substantially higher than medians. Typical performance, in absolute terms and in 

excess of the market index return, was below the performance of other considered groups 

of small issuers. The underperformance was not significant, although the power of the 

analysis was limited by very small sample size. Finally, with the caveat about the latency 

of potential violations, there have been few instances of civil cases or administrative 

proceedings involving Regulation A during this period.

The rest of the report is organized as follows: Section II presents the market and offering 

landscape and evidence on the offering and issuer characteristics for both Regulation A and 

Regulation D offerings; Section III presents available evidence on performance of Regulation A

and Regulation D offerings and issuers; and Section IV provides our conclusions. In each 
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section below, we present the analysis of the Regulation D market first, given its much larger 

size, followed by the analysis of the Regulation A market.

II. Market and Offering Landscape

The existing regulatory framework and market practices permit a wide variety of methods 

for issuers to access external financing or realign their capital structure. Below we present an 

overview of the requirements of Regulation A and Regulation D, including recent rule changes,

as well as the associated market practices and how they fit within the broader landscape of 

exempt and registered offerings. 

Over the past several years, but particularly since the implementation of the Jumpstart 

Our Business Startups Act of 2012 (“JOBS Act”), the Commission has undertaken several 

rulemaking actions that involved changes to the framework for exempt offerings under 

Regulation A and Regulation D, as seen in Table 1 below. 

Table 1. Recent Rulemaking Actions Involving Regulation A and Regulation D under the 

Securities Act

Date Summary of Commission Action Title Citation

Jul.

2013

Adopted Rule 506(c) implementing 

Title II of the JOBS Act. 

Eliminating the Prohibition Against 

General Solicitation and General 

Advertising in Rule 506 and Rule 

144A Offerings

Release No. 33-9415 (July 10, 

2013) [78 FR 44771 (July 24, 

2013)]

Jul.

2013

Amended Rule 506 to disqualify 

certain “bad actors” under Rule 506 of 

Regulation D. 

Disqualification of Felons, Other 

“Bad Actors” from Rule 506 

Offerings

Release No. 33-9414 (July 10, 

2013) [78 FR 44729 (July 24, 

2013)]

Mar.

2015

Raised offering limits and made other 

changes to Regulation A to implement 

Title IV of the JOBS Act.

Amendments for Small and 

Additional Issues Exemptions under 

the Securities Act (Regulation A)

Release No. 33-9741 (Mar. 25, 

2015) [80 FR 21806 (Apr. 20, 

2015)] (“2015 Regulation A

Release”)

Oct. 

2016

Amended Rule 504 to increase the 

aggregate amount of securities that 

can be offered and sold in a 12-month 

period from $1 million to $5 million, 

and repealed Rule 505.

Exemptions to Facilitate Intrastate 

and Regional Securities Offerings

Release No. 33-10238 (Oct. 26, 

2016) [81 FR 83494 (Nov. 21, 

2016)]

Dec. 

2018

Amended Regulation A to extend 

eligibility to reporting companies, 

implementing the mandate of 

Economic Growth, Regulatory Relief, 

& Consumer Protection Act of 2018. 

Amendments to Regulation A

Release No. 33-10591 (Dec. 

19, 2018) [84 FR 520 (Jan. 31, 

2019)]
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Jun.

2019

Published a concept release on the 

harmonization of the exempt offering 

framework.

Concept Release on Harmonization 

of Securities Offering Exemptions

Release No. 33-10649 (Jun. 18, 

2019) [84 FR 30460 (Jun. 26, 

2019)] (“Harmonization 

Concept Release”)

Dec. 

2019

Proposed amendments to the 

accredited investor definition.

Amending the “Accredited Investor” 

Definition

Release No. 33-10734 (Dec. 

18, 2019) [85 FR 2574 (Jan. 

15, 2020)]

Mar.

2020

Proposed further amendments to 

simplify, harmonize, and improve 

aspects of the exempt offering 

framework.

Facilitating Capital Formation & 

Expanding Investment Opportunities 

by Improving Access to Capital in 

Private Markets

Release No. 33-10763 (Mar. 4, 

2020) [85 FR 17956 (Mar. 31, 

2020)] (“Harmonization 

Proposing Release”).

By allowing issuers to forgo the registration process, Regulation D affords issuers greater 

speed and flexibility of raising capital, reduced compliance costs, and a lower risk of sharing 

proprietary information with competitors. Raising capital under Regulation D may also enable 

issuers to retain a more concentrated ownership and control structure (including greater founder 

control over the company’s future decisions). Similar to Regulation D, Regulation A enables 

issuers to forgo the registration process and provide less extensive disclosures. Unlike 

Regulation D, as shown below, the Regulation A offering market is much smaller.

A. Regulation D

1. Institutional and Regulatory Background

Regulation D was adopted in 19827 to provide a unified scheme for exempting certain 

securities offerings from the registration requirements of the Securities Act. It was designed to 

simplify existing rules and regulations to facilitate capital formation, particularly for small 

businesses, consistent with the protection of investors. At its inception, the Regulation D market 

was comprised of offerings undertaken in reliance on three rules: Rule 504, Rule 505, and Rule 

506. Today, Regulation D offerings may be conducted under Rule 504, Rule 506(b), and Rule 

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 Revision of Certain Exemptions From Registration for Transactions Involving Limited Offers and Sales, 

Release No. 33-6389 (Mar. 8, 1982) [47 FR 11251 (Mar. 16, 1982)].
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506(c). Rule 505 was repealed, in conjunction with certain amendments to Rule 504, effective 

May 22, 2017. 

Rule 504

Rule 504 of Regulation D provides an exemption from registration under the Securities 

Act for the offer and sale of up to $5 million of securities in a 12-month period. Reporting 

companies, investment companies, and certain development-stage companies are ineligible to 

issue securities under Rule 504. In October 2016, the Commission adopted amendments to 

expand Rule 504 and repeal Rule 505, with the changes effective May 22, 2017. Prior to these 

rule changes, Rule 504 limited the aggregate amount of securities that could be offered and sold 

in a 12-month period to $1 million, while Rule 505 (available to both non-reporting and 

reporting companies) limited the aggregate offering amount in a 12-month period to $5 million, 

subject to certain other conditions. In general, issuers relying on Rule 504 may not use general 

solicitation or general advertising to market the securities, and securities are restricted. These 

prohibitions are generally inapplicable if the issuer complies with state registration requirements, 

or state exemptions from registration for sales to accredited investors.8

 8 Rule 501 contains the definition of the accredited investor. Today, natural persons may qualify as accredited 

investors based on the following criteria: (1) Individuals who have a net worth exceeding $1 million (excluding 

the value of the individual’s primary residence), either alone or with their spouses; (2) Individuals who had an 

income in excess of $200,000 in each of the two most recent years, or joint income with the individual’s spouse 

in excess of $300,000 in each of those years, and have a reasonable expectation of reaching the same income 

level in the current year; and (3) Directors, executive officers, and general partners of the issuer or of a general 

partner of the issuer. Some entities may qualify as accredited investors based on their status alone. These 

entities include: (1) Banks, savings and loan associations, brokers or dealers registered pursuant to Section 15 of 

the Exchange Act, insurance companies, small business investment companies, investment companies 

registered under the Investment Company Act, or business development companies as defined in Section 

2(a)(48) of that Act; (2) Private business development companies as defined in Section 202(a)(22) of the 

Advisers Act; and (3) Entities in which all of the equity owners are accredited investors. Other entities may 

qualify as accredited investors based on a combination of their status and the amount of their total assets. These 

entities include: (1) Tax exempt charitable organizations, corporations, Massachusetts or similar business trusts, 

or partnerships, not formed for the specific purpose of acquiring the securities offered, with total assets in 

excess of $5 million; (2) Plans established and maintained by a state, its political subdivisions, or any agency or 

instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total 
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Rule 506

Rule 506 was adopted in 1982 as a non-exclusive safe harbor under Section 4(a)(2) of the 

Securities Act. In 2013, the Commission amended Rule 506 pursuant to Title II of the JOBS 

Act, which directed the Commission to permit general solicitation and general advertising in 

certain Rule 506 offerings. (Prior to the JOBS Act, general solicitation had not been allowed for 

Rule 506 offerings.) Rule 506(c), which became effective on September 23, 2013, allows 

general solicitation and general advertising in Rule 506 offerings, without any limitation on 

amounts offered, as long as all purchasers are accredited investors and issuers take reasonable 

steps to verify that such purchasers are accredited investors. Rule 506, as it existed before the 

adoption of Rule 506(c), was preserved and re-designated as Rule 506(b). Offerings under both 

Rule 506(b) and Rule 506(c) must satisfy the conditions of (i) Rule 501 (definitions for the terms 

used in Regulation D); (ii) Rule 502(a) (integration); (iii) Rule 502(d) (limitations on resale); and 

(iv) Rule 506(d) (“bad actor” disqualification). Offerings under Rule 506(b) must also satisfy 

the conditions of (i) Rule 502(b) (type of information to be furnished); and (ii) Rule 502(c) 

(limitations on the manner of offering). 

Rule 506(b) is a non-exclusive safe harbor under Section 4(a)(2) of the Securities Act. It 

allows an issuer to offer and sell an unlimited amount of securities, provided that: (1) offers do 

 assets in excess of $5 million; (3) Employee benefit plans (within the meaning of the Employee Retirement 

Income Security Act) if a bank, savings and loan association, insurance company, or registered investment 

adviser makes the investment decisions, or if the plan has total assets in excess of $5 million; and (4) Trusts 

with total assets in excess of $5 million, not formed for the specific purpose of acquiring the securities offered, 

the purchases of which are directed by a person who meets the legal standard of having sufficient knowledge 

and experience in financial and business matters to be capable of evaluating the merits and risks of the 

prospective investment.
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not involve general solicitation or general advertising; and (2) sales are made only to accredited 

investors, or up to 35 sophisticated non-accredited investors.9

2. Offering and Issuer Characteristics

Below we discuss amounts of Regulation D capital raising, issuer types, and the 

distribution of issuer industries and locations. In Table 2 below, we present data on Regulation 

D offering and issuer characteristics.

Data Sources

Our analysis and the data presented are based on electronic Form D filings from 2009 

through 2019 available on EDGAR.10 (The Commission required the form to be filed on 

EDGAR starting in March 2009.) 

To address duplication, we consolidate multiple amended filings at the offering level, 

using the original “accession id” available in subsequent filings; thus, the number of unique 

offerings is less than the total number of filings during the same period. In offerings with 

amendments, “total amounts sold” reported in the amended filing are compared to the “total 

amounts sold” reported in the original filing to calculate incremental proceeds, which are 

attributed to the calendar year in which the amendment is filed. For offerings initiated prior to 

2009 and continuing in subsequent years, an issuer’s only electronic filings during the considered 

period would have been Form D amendments. If these amendments reference a post-2008 sale 

 9

 See Rule 506(b)(2)(ii) (stating that “[e]ach purchaser who is not an accredited investor either alone or with 

his purchaser representative(s) has such knowledge and experience in financial and business matters that he 

is capable of evaluating the merits and risks of the prospective investment, or the issuer reasonably believes 

immediately prior to making any sale that such purchaser comes within this description.”).

10 See also Scott Bauguess, Rachita Gullapalli, & Vladimir Ivanov, Capital Raising in the U.S.: An Analysis 

of the Market for Unregistered Securities Offerings, 2009–2017 (U.S. Sec. and Exchange Comm’n, DERA 

White Paper, Aug. 2018), available at https://www.sec.gov/dera/staff-papers/whitepapers/dera_white_paper_regulation_d_082018 (“Regulation D White Paper”).
15

date, the first amendment filed electronically is treated as an original Form D filing, as Form D 

was not filed electronically prior to 2009.

A number of pooled investment funds appear to report, in their annual amendments, net 

asset values (NAVs) for total amount sold under the offering. NAVs could reflect fund 

performance as well as new investment into, and redemptions from, the fund. In the absence of 

detailed information in the filed form, we treat the “total amounts sold” as amounts raised in the 

offering. Finally, when an issuer checks the box to claim multiple offering exemptions (Rule 

504, 505, or 506), for the purposes of this analysis, we assume that any issuer that checks the box 

for Rule 506 is relying on Rule 506. 

Comparative Data 

Where feasible, we provide comparative data for issuers that raised capital through 

registered offerings during 2009 through 2019 and also for the current set of reporting 

companies. We obtain data for issuers conducting registered offerings from SDC Platinum’s 

New Issues database. We select all registered public offerings conducted in the U.S. market

during 2009 through 2019, excluding IPOs11 and government/federal agency offerings. We 

obtain financial information for reporting companies from S&P’s Compustat, a commercial 

database that compiles, aggregates, and standardizes financial data reported by public companies. 

For the purposes of this analysis, we use data from Compustat North America (Fundamentals 

Annual) for the latest fiscal year that is available for all companies, as of the time of retrieval, in 

 11 For this analysis, we consider follow-on equity offerings and debt offerings as more appropriate benchmarks for 

Regulation D offerings because the motivations for conducting an IPO may extend beyond raising capital to 

meet a company’s financial needs. See, e.g., Marco Pagano, Fabio Panetta, & Luigi Zingales, Why Do 

Companies Go Public? An Empirical Analysis, 53 J. FIN. 27 (1998) (showing that companies go public after a 

period of strong investment and growth to capitalize on higher valuations, to reduce leverage and cost of debt, 

and for change in control).
16

the database. The data presented in the tables and figures below may be incomplete for small 

and non-exchange-listed public companies.

Capital Raising under Regulation D

Table 2 below presents summary statistics for Regulation D capital raising activity and 

issuer characteristics.12 Almost all of the capital raised in the Regulation D market is raised 

under Rule 506(b). For 2019, of the approximately $1.56 trillion raised through Regulation D, 

Rule 506(b) offerings accounted for $1.5 trillion, which exceeds the capital raised in 2019

through registered offerings ($1.2 trillion). Offerings under Rule 506(c) raised approximately 

$66 billion, and offerings under Rule 504 raised approximately $228 million.

 12 See also Harmonization Concept Release; Regulation D White Paper, supra footnote 10. 
17

Table 2. Summary of Regulation D Issuer and Offering Characteristics, 2009–201913 

Number of Issuers 173,697

Number of Offerings 242,070 

Amounts Reported Sold $13,576 billion

Mean Amount Sold (if reported) $58 million

Median Amount Sold (if reported) $1.50 million

Mean Offer Size (if reported) $71 million

Median Offer Size (if reported) $2.25 million

Median Years Since Incorporation 2

Median Issuer Size (if reported)

Private Funds (Net Asset Value)

Non-Fund Issuers (Revenue)

$25 million - $50 million

$1 million - $5 million

Used Intermediary 20%

Total Investors

As reported in initial Form D filings

All filings, including amendments

3.4 million

5.9 million

Average Investors/Offering (if reported) 10

 13 The number of issuers is based on a unique Central Index Key (CIK) identifier. Number of offerings represents 

all new offerings initiated during the period 2009 through 2019, as represented by a Form D filing, and 

offerings initiated prior to 2009 but continuing into the period 2009 through 2019 (as represented by an 

amendment filed). Amounts Reported Sold is calculated as described above and includes amounts sold reported 

in initial Form D filings and incremental amounts sold reported in amendment filings. Total number of 

investors, as reported in Form D and Form D/A filings, is calculated similarly. Issuers are not required to file a 

Form D at the close of offering. Not all offerings report amounts raised sold in their initial Form D filing.
18

Table 314 below summarizes recent data on the state of the Regulation D market. 

Table 3. Offerings by Exemptions Available under Regulation D in 2019 

Rule 504 Rule 506(b) Rule 506(c) Regulation D -

Total

Number of New 

Offerings 476 24,636 2,269 27,381

Amount Reported 

Raised $0.2 billion $1,491.9 billion $66.3 billion $1,558.4 billion

Reporting Company and Listing Status

Table 4 below presents a classification of the reporting and trading status of Regulation D 

issuers during the 2009 through 2019 time period.

15 Approximately 2% of all Regulation D 

issuers are also reporting issuers and are listed on a stock exchange or quoted on the OTC 

market. Almost 90% of offerings by non-fund issuers raise capital through equity securities. 

 14 This table includes Regulation D offerings for all issuers, including pooled investment funds. Data are

obtained from Form D filings. The amount raised is based on “Total amount sold” in new and amended 

Form D filings. Incremental proceeds reported in amended filings are recorded in the year of the amended 

filing. We believe reported data is likely an underestimate of the amount raised because (1) Rule 503 of 

Regulation D requires issuers to file a Form D no later than 15 days after the first sale of securities, but a 

failure to do so does not invalidate the exemption; so, some Regulation D issuers may fail to file a Form D

(we note that, while failure to file Form D does not affect the exempt offering, it could have other 

consequences, including, under Rule 507, the potential loss of ability to rely upon Regulation D in the 

future), and (2) there is no requirement to file a Form D at completion of the offering, or to file an 

amendment to reflect additional amounts offered if the aggregate offering amount does not exceed the 

original offering size by more than ten percent (so, amounts reported may be lower than total amounts 

sold).

15 We obtain this information by merging the list of Regulation D issuers with Compustat North America data 

using CIK as the common identifier, which yields matches for 4,108 unique Regulation D issuers. This 

includes some companies that became reporting companies subsequent to their Regulation D offering. Trading 

venue for reporting company Regulation D issuers is based on Compustat data reported during calendar year 

2019 or later. Trading venue for issuers conducting registered offerings is based on SDC Platinum data. The 

proportion of U.S. exchange-listed issuers is close to 90% for registered equity offerings.
19

Table 4. Reporting Company and Listing Status of Regulation D Issuers 

Regulation D Issuers 

2009–2019

Reporting Companies

Exchange-Listed 2,184

OTC - Bulletin Board 23

OTC - Other 1,852

No Trading Market / Unknown 51

Non-Reporting Companies

Private Funds 67,582

Private Non-Fund Issuers 102,007

TOTAL 173,697

As the table above shows, almost half of the 4,108 reporting companies that are also 

Regulation D issuers are OTC companies. This is a much larger proportion than the share of 

OTC companies in the current set of all reporting companies (23%), and is also larger than the 

proportion of OTC companies in the subset of companies that raised capital through a registered

offering during 2009 through 2019 (22%). (See Figure 1 below.)
20

Figure 1. Secondary Market Trading Status of Regulation D Issuers that are Reporting 

Companies16 

 16 Some Regulation D issuers became reporting companies subsequent to their private offering. The proportions 

remain similar (53% exchange-listed; 46% OTC) when we consider only those Regulation D issuers that were 

reporting companies during the year they conducted their Regulation D offering. 

4%

7%

1%

23%

22%

45%

73%

71%

54%

0% 20% 40% 60% 80%

All Reporting issuers

Issuers with Registered offering

during 2009-2019

Regulation D issuers that are

Reporting companies

U.S. Exchange Listed

OTC/ Pink Sheet

Foreign listed/ Private/Unknown
21

Industry Distribution

Table 5 below presents the industry distribution of Regulation D issuers, issuers that 

conducted a follow-on registered equity or debt offering during the 2009 through 2019 period, 

and all reporting companies (based on information reported in calendar year 2019 or later).

17

The largest number (39%) of Regulation D issuers are from the pooled investment fund industry. 

Among non-fund Regulation D issuers, most issuers are in the technology, real estate, health 

care, and financial services industries. 

Table 5. Industry Distribution of Regulation D Issuers and Reporting Companies (2009–

2019)

Industry Regulation D 

Issuers

Issuers with a 

Registered Offering 

All Reporting 

Companies 

Private Funds 38.9% Not applicable Not applicable

Agriculture 0.8% 0.2% 0.2%

Banking/Financial 7.6% 19.9% 39.0%

Business Services 1.6% 6.2% 1.8%

Energy 6.0% 11.3% 6.4%

Health Care 10.0% 19.2% 11.2%

Manufacturing 2.7% 11.1% 9.8%

Other 21.4% 7.0% 12.7%

Real Estate 25.5% 7.3% 4.1%

Restaurants 1.8% 0.8% 0.7%

Retailing 2.0% 2.3% 2.1%

Technology 20.0% 12.9% 11.2%

Travel 0.7% 1.7% 0.8%

Geographic Distribution

 17 Industry information for Regulation D issuers is based on Form D data, which use a broader industry 

classification. See https://www.sec.gov/files/formd.pdf. Industry information for reporting companies is based 

on Compustat data reported in 2019 or later. Industry information for issuers with follow-on equity or 

registered debt offerings is obtained from SDC Platinum. For comparability, SIC-based industry definitions for 

reporting companies and registered offerings are converted to the Form D industry classification. 
22

Most Regulation D issuers are located, in terms of principal place of business, in 

California or New York (see Figures 2 and 3 below),

18 even though many are incorporated in 

Delaware. The next largest states based on principal place of business are Texas, Florida, and 

Massachussetts. This is similar to reporting companies, whose top five states of headquarters 

locations are California, New York, Illinois, Texas, and Massachusetts. While 9% of offerings 

are conducted by Regulation D issuers that are headquartered outside of the United States, 20% 

of reporting companies (as reported in 2019) were located abroad, and 15% of registered 

offerings conducted in the United States during 2009 through 2019 were undertaken by 

companies located in a foreign country. During 2009 through 2019, approximately 10% of 

Regulation D offerings were initiated by foreign-incorporated companies. By comparison, 30% 

of reporting companies and approximately 13% of issuers conducting registered offerings19 were 

incorporated outside of the United States based on information filed during 2019.

 18 Figure 2 is based on Form D initial filings, excluding amendments, and includes offerings by operating 

companies and pooled investment funds. Figure 3 is based on amounts reported raised in Form D initial filings 

and amendments and includes offerings by operating companies pooled investment funds.

19 For issuers conducting registered offerings, SDC data on country of incorporation is available only for 63% of 

observations.
23

Figure 2. Number of Regulation D Offerings by Issuer Headquarters Location (2009–2019)

Figure 3. Regulation D Amounts Sold by Issuer Headquarters Location (2009–2019)

bln = billion
24

Issuer Size and Age Distribution

Figure 4 below shows the distribution of issuer revenue ranges as reported in Item 5 of 

Form D. Most issuers conducting Regulation D offerings that report their revenues on Form D 

tend to be small. Although most non-fund issuers decline to disclose their revenues (65%), for 

those that do, most have revenues of less than $1 million. Issuers that report more than $100 

million in revenues account for only about 1% of the number of all new offerings.20 Not 

surprisingly, among Regulation D issuers that report size, large issuers (greater than $100 million 

in revenue) account for a greater share of proceeds. Large Regulation D issuers include private 

companies as well as exchange-listed companies and large OTC companies. By comparison, 

65% of reporting companies and 83% of reporting companies that conducted a follow-on 

registered offering during 2009 through 2019 reported revenues exceeding $100 million.21

 20 Form D also contains information on NAV of hedge funds and other investment funds. Since 2009, more 

than three-quarters of issuers have declined to disclose NAV, but of those that do, a trend similar to 

revenue is reported—the largest number of issuers is in the smallest NAV categories.

21 Calculated based on DERA analysis of SEC reporting companies that had a class of equity security with a 

market price reported in Compustat at the end of fiscal year 2018 and as reported during calendar year 2019 

or later. Data for fiscal year 2019 were still being filed as of the time of this analysis and will be 

comprehensively available in Compustat with a lag.
25

Figure 4. Size Distribution of Non-Fund Regulation D Issuers (2009–2019)

The small reported size of Regulation D issuers is also consistent with their young age, as 

measured by years since incorporation. Seventy percent of Regulation D issuers were 

incorporated for less than 3 years when they initiated their offering. This includes 87% of fund 

issuers and 63% of non-fund issuers. (See Figure 5 below.) While data on date of incorporation 

is not available for reporting companies in our data source, previous research has indicated that 

reporting companies tend to be older than 3 years when they have their IPOs.

22 Among 

reporting companies with available data on the date of their IPO, more than 80% had their IPO 

prior to 2015. 

 22 Prior empirical research finds that the median age of firms conducting an IPO during 1980-2003 was relatively 

stable at seven years. See, e.g., Tim Loughran and Jay Ritter, Why Has IPO Underpricing Changed Over 

Time?, 33 FIN. MGMT. 5 (2004).

64.5%

15.4%

2.2%

9.8%

3.8%

2.3%

1.0%

0.9%

77%

4%

3%

3%

1%

1%

1%

11%

0% 20% 40% 60% 80%

Decline to Disclose

No Revenues

Not Applicable

$1 - $1,000,000

$1,000,001 - $5,000,000

$5,000,001 - $25,000,000

$25,000,001 - $100,000,000

Over $100,000,000

Amounts Sold Number of Issuers
26

Figure 5. Regulation D Issuer Age, 2009–2019 

Trends in Regulation D Offerings

Almost 90% of offerings by non-fund issuers raise capital through equity securities. A 

substantial amount of empirical research has documented that public capital markets are procyclical and appear to be affected by business cycles, investor sentiment, and time-varying 

information asymmetry.23 Figure 6 below shows Regulation D offering activity on the basis of 

the number of new Form D filings (excluding amendments) on EDGAR, by calendar year, 

plotted alongside the S&P 500 index levels, for the period 1993 through 2019. The data indicate 

that Regulation D offerings, similar to public capital markets, are also driven by business cycles. 

 23 See, e.g., Michelle Lowry, Why Does IPO Volume Fluctuate So Much?, 67 J. FIN. ECON. 3 (2003); 

Aydogan Alti, IPO Market Timing, 18 REV. FIN. STUD. 1105 (2005); Chris Yung, Gonul Colak, & Wei 

Wang, Cycles in the IPO Market, 89 J. FIN. ECON. 192 (2008).

0%

20%

40%

60%

80%

100%

Funds Non-Funds

1 year or less 2-3 years 4-5 years greater than 5
27

Figure 6. Number of Regulation D Offerings (1993-2019) 

B. Regulation A

1. Institutional and Regulatory Background

The Commission originally adopted Regulation A in 1936 as an exemption for small 

issuers under Section 3(b) of the Securities Act, the Commission’s exemptive authority for 

offerings of up to $5 million.24 Title IV of the JOBS Act redesignated Section 3(b) as 

Section 3(b)(1) and added new Sections 3(b)(2) through 3(b)(5) to the Securities 

Act.

25Section 3(b)(2) directed the Commission to adopt rules adding a class of securities exempt 

from the registration requirements of the Securities Act for offerings of up to $50 million of 

securities within a 12-month period. Sections 3(b)(2) through (5) specify certain terms and 

 

24 See Release No. 33-632 (Jan. 21, 1936).

25 See Release No. 33- 9741 (Mar. 25, 2015).

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

5,000

10,000

15,000

20,000

25,000

30,000

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

New Regulation D offerings S&P500 Index

Number o f Offerings

S&P 500 Index
28

conditions for such exempt offerings and authorize the Commission to adopt other terms, 

conditions, or requirements as necessary in the public interest and for the protection of investors. 

In 2015, the Commission adopted final rules to implement Section 401 of the JOBS Act 

by creating two tiers of Regulation A offerings: Tier 1, for offerings of up to $20 million in a 12-

month period; and Tier 2, for offerings of up to $50 million in a 12-month period. 

In adopting the two-tiered structure for Regulation A in 2015, the Commission stated that it 

expected the requirements for Tier 1 to result in securities offerings that would be more local in 

character, while Tier 2 offerings would likely be more national in character. While an issuer of 

$20 million or less of securities can elect to proceed under either Tier 1 or Tier 2, Tier 2 issuers 

are subject to additional requirements. For example, Tier 2 issuers are required to include 

audited financial statements in their offering circulars (Part F/S of Form 1-A) and must provide 

ongoing reports on an annual and semiannual basis with additional requirements for interim 

current event updates, therefore providing a continuous flow of information to investors and the 

market (Rule 257 of Regulation A). Tier 2 offerings are not subject to state securities law 

registration and qualification requirements, while Tier 1 offerings remain subject to those state 

requirements. 

In addition to expanding the Regulation A offering limit and establishing an ongoing 

reporting regime for Tier 2 issuers, the 2015 amendments sought to modernize the Regulation A 

filing process (including by requiring electronic filing), align practice in certain areas with 

prevailing practice for registered offerings, and create additional flexibility for issuers in the 

offering process. In 2018, the Commission amended Regulation A, making reporting companies 

eligible under Regulation A.
29

2. Offering and Issuer Characteristics 

Table 6 below summarizes information on issuer and offering characteristics in qualified 

Regulation A offerings during the period from the 2015 Regulation A amendments through the 

end of 2019 (the most recently completed calendar year).

Table 6. Regulation A Issuer and Offering Characteristics26

Metric Mean Median

Total assets $32,582,700 $311,500

Employees 38.9 2.5

Age (years since incorporation) 6.6 3.0

Revenue $2,642,800 $0

% revenue >0 47%

Net income -$490,100 -$14,000

% net income >0 21%

Cash and cash equivalents $1,842,700 $31,200

Property, plants, and equipment $4,677,200 $0

Long-term debt $5,758,900 $0

% continuous offerings 80%

% testing the waters 27%

% offerings with affiliate selling security holders 6%

States of solicitation 38 51

% equity offerings 93%

Although issuers are highly heterogeneous, to date, most issuers in qualified Regulation 

A offerings have been small (based on assets and revenues) and relatively young. Among the 

issuers with revenue information available, just under one-half had generated revenue. Turning 

 

26 Statistics are based on qualified offering statements. The information is based on Part I of Form 1-A of 

Regulation A offering statements or latest amendment qualified between June 2015 and December 2019. 

See infra footnote 110. Certain security types characterized as “other” were reclassified as equity or debt 

based on description. Revenue information was not available for approximately 5.5% of issuers.
30

to offering characteristics, most offerings (93%) involved equity securities, were conducted on a 

continuous basis (80%), and did not report sales by affiliated security holders (94%). Offerings 

were generally conducted on a best-efforts basis.27 Over one-quarter of qualified offerings used 

testing the waters (solicitation of investor interest), almost all of which were Tier 2 offerings. 

The median offering involved national solicitation by the issuer or intermediary, but solicitation 

was generally limited to a handful of states in Tier 1 offerings (median of three among qualified 

Tier 1 offerings).

Secondary Trading Market

Between June 2015 and December 2019, the majority of Regulation A issuers lacked a 

liquid secondary trading market for their securities. Table 7 and Figure 7 below summarize data 

on secondary trading markets for Regulation A issuers. 

Table 7. Secondary Trading Market of Regulation A Issuers28

Market Issuers %

Exchange-listed 11 3.2%

OTC 75 21.7%

No market identified 260 75.1%

Total 346 100%

 27 Information in Part I of Form 1-A across qualified offerings (or latest amendment qualified between June 

2015 and December 2019) indicates that 93% of the offerings reported being best-efforts offerings. Some 

of the remaining offerings were associated with mergers and dividend reinvestment plans, while some 

others may reflect inaccuracies in tagging. We are not aware of firm commitment underwriting in this 

market segment.

28 Information on exchange listing was based on searches of CERT submissions and news searches and 

excludes issuers delisted as of December 31, 2019. Information on OTC quotation was based on data from 

OTC Markets as of the end of December 2019. Among OTC issuers, 14 were identified as being quoted on 

either OTCQX or OTCQB and 61 were identified as being quoted on OTC Pink. No issuers were 

identified as being quoted on the OTC Bulletin Board. For issuers with multiple classes of securities, we 

cannot determine whether the class issued in a Regulation A offering is quoted on the OTC market. Grey 

market issuers are excluded. Among securities quoted on the OTC market, liquidity can vary significantly 

from issuer to issuer and is on average lower than the liquidity of securities listed on major exchanges. 

Many filers mention a lack of a public market for their securities in their disclosures.
31

Figure 7. Secondary Trading Market of Regulation A Issuers

Relatively few reporting companies relied on Regulation A during this period. The 

amendments to permit reporting companies to use Regulation A became effective on January 31, 

2019. Approximately 17 reporting companies sought to use Regulation A to conduct an offering 

in 2019, of which 11 offerings were qualified. The impact of reporting companies’ eligibility to 

rely on Regulation A on capital formation and investor protection remains to be seen. 

Industry Distribution

The industry distribution reflects a heavy concentration of offerings in the finance sector

(primary Standard Industrial Classification (SIC) codes between 6000 and 6999). 

Figure 8 below shows the industry distribution of the amounts sought in qualified 

Regulation A offerings. Finance, insurance, and real estate accounted for 53% of financing 

sought in qualified Regulation A offerings. Examining more granular SIC code data suggests 

that financial issuers were frequently real estate investment trusts (REITs) and other real estate 

companies, other holding companies, non-depository credit institutions, and commercial banks. 

The most common industry among nonfinancial issuers in qualified offerings was business 

services (which includes software), followed by chemicals. 

11

75

260

Exchange listing

OTC

No market identified
32

Figure 8. Capital Sought in Qualified Regulation A Offerings, by Issuer Industry29

Figure 9 below shows the industry distribution of the proceeds reported in Regulation A 

offerings. The finance sector accounted for 79% of reported proceeds (with real estate issuers 

accounting for 69% of all reported proceeds). The most common industry among nonfinancial 

issuers was transportation equipment, followed by business services.

 29 See infra footnotes 110 and 111. The industry is based on the primary SIC code as reported in Part I of 

Form 1-A or the latest amendment to it.

Agric., forestry, fishing

1%

Finance, insurance, real 

estate

53%

Manufacturing

18%

Mining & construction

2%

Pub. admin. & nonclass.

0%

Retail & wholesale

5%

Services

18%

Transport, 

communic., utilities

3%
33

Figure 9. Proceeds Reported in Regulation A Offerings, by Issuer Industry30

Geographic Distribution

Close to 50% of qualified offerings were by issuers incorporated in Delaware, with an 

additional 13% by issuers incorporated in Nevada. As with reporting companies, headquarters 

location often differs from the state of incorporation. 

Figure 10 below summarizes the geographic distribution of financing sought in qualified 

Regulation A offerings, by state of issuers headquarters location. Issuers headquartered in 

California accounted for 24% of the aggregate amounts sought, followed by Washington, D.C.

(16%) and Florida (9%). Figure 11 below summarizes the geographic distribution of the 

proceeds reported in Regulation A offerings, by state of issuer headquarters location. Issuers 

headquartered in Washington, D.C., accounted for 36% of reported proceeds (due to one large 

 30 See infra footnote 111. The industry is based on the primary SIC code as reported in Part I of Form 1-A or 

the latest amendment to it.

Agric., forestry, fishing

0%

Finance, insurance, real 

estate

79%

Manufacturing

12%

Mining & construction

0%

Retail & 

wholesale

3%

Services

4%

Transport, 

communic., utilities

2%
34

REIT sponsor headquartered in Washington, D.C.), followed by California (13%) and Utah 

(7%).

Figure 10. Capital Sought in Qualified Regulation A Offerings, by Issuer Location31

Figure 11. Proceeds Reported in Regulation A Offerings, by Issuer Location32

mln = million

 31 See infra footnote 110. The state of location is based on the state of headquarters location as reported in 

Part I of Form 1-A or the latest amendment. The maps exclude Alaska, Hawaii, and U.S. territories. Those

areas did not have issuers with qualified Regulation A offerings between June 2015 and December 2019.

32 See supra footnote 31 and infra footnote 111.
35

III. Evidence on the Performance of Regulation A and Regulation D offerings and issuers

Below we analyze evidence on the performance of Regulation A and Regulation D

offerings, based on primary data, where they are available, and the analysis of data from research 

studies and other external reports. We start by discussing the performance measures and data 

limitations (Section III.A). Next, we present the evidence on the performance of Regulation D 

(Section III.B) and evidence on the performance of Regulation A (Section III.C).

A. Performance Measures and Data Considerations

Measures

At the outset, we acknowledge that “performance” can mean different things for issuers, 

investors, and capital markets. From the perspective of issuers relying on exemptions under 

Regulation A and Regulation D, offering performance can be assessed as a capital-raising tool. 

Issuers choosing to rely on a particular offering method to meet their external financing needs 

may weigh the amount of capital they can raise to fund their businesses or investment projects

against the cost of raising capital using that offering method. 

From the perspective of investors, performance can be measured in several ways: (1) 

subsequent operating and financial performance of the issuer (e.g., profitability and growth); (2) 

for private issuers, the incidence of subsequent financing rounds, public market exits, acquisition 

exits, and business survival; and (3) for public issuers (and the subset of private issuers with 

return information, such as those private funds that provide such information), returns. A binary 

metric of issuer performance that can also be highly relevant for investors in a Regulation A or 

Regulation D offering is the incidence of fraud or another securities law violation. Finally, the 

breadth of additional investment opportunities that become available when issuers can utilize

these exemptions, which can be used to diversify investor portfolios relative to investing only in 
36

public companies, can also be used to characterize the performance of the Regulation A and 

Regulation D exemptions from the standpoint of investors.

Data Sources

We collect the data for the discussed performance measures from the following sources. 

We extract data on the exemptions’ performance as a capital-raising tool from EDGAR filings.

We use Form D filings to obtain data for Regulation D issuers. Data on Regulation A issuers are 

based on Form 1-A filings and amendments to those filings, offering circular supplements, 

annual reports on Form 1-K, semi-annual reports on Form 1-SA, current reports on Form 1-U, 

exit reports on Form 1-Z for Regulation A issuers, as well as Exchange Act reports for 

Regulation A issuers that are, or become, Exchange Act reporting companies. We obtain data on 

issuer financial and operating performance from EDGAR filings and Compustat, where 

available. We gather market data for traded issuers from Center for Research in Security Prices

(CRSP)/Compustat and OTC Markets, where specified. Information on mergers and acquisitions 

(M&A) and public market exits and follow-on capital raises is collected from EDGAR filings, 

SDC Platinum, and S&P Capital IQ. Information on private fund returns is obtained from 

commercial databases (Preqin for private equity (PE) funds and HFM Global (HFM) (formerly 

known as Hedge Fund Intelligence (HFI)), Eureka, TASS, and BarclayHedge for hedge funds). 

Primary data on the performance of Regulation A and Regulation D offerings are supplemented 

with statistics obtained from external sources, including research studies and industry reports.

Data Limitations 

We acknowledge several limitations on our analysis related to the features of exemptions 

and availability of data. Because of the nature of the market, with most issuers not publicly 

traded on an exchange or quoted on the OTC market, as well as the scaled or very limited 
37

disclosure requirements applicable to most issuers offering securities under Regulation A and 

Regulation D, comprehensive performance data are not available for all issuers and offerings, 

and some of the available data are noisy.33 For example, trading information is available only 

for a subset of operating company issuers in Regulation D offerings that are either exchangelisted or quoted on the OTC market; and even where trading information is available, the traded 

class of securities generally does not have the same terms and characteristics as the securities 

offered under Regulation D.34 Trading information is also available only for a small number of 

Regulation A issuers that have obtained an exchange listing after the offering, as well as for 

those Regulation A issuers that are quoted on the OTC market. 

Return information is available for a subset of private funds, including hedge funds and 

PE funds that rely on Regulation D. Such data may be an incomplete representation of the riskadjusted performance of the full set of private fund issuers relying on Regulation D for several 

reasons. Comprehensive data on returns of all pooled investment funds relying on Regulation D 

are not required to be disclosed. Data from commonly used databases is provided voluntarily 

and so may be affected by selection bias, resulting in overrepresentation of funds and fund-years 

with better risk-adjusted performance. Further, because of the differences in reporting entity 

identifiers, we are not able to match such data to individual Regulation D offerings. Thus, some 

offerings conducted under other exemptions from registration under the Securities Act and 

Investment Company Act of 1940 (“Investment Company Act”) may be represented in the 

 33 For instance, some of the performance data are manually collected from filings in an unstructured format or 

automatically collected from filings in a structured format, such as XML. Data may contain noise, 

particularly in cases of unaudited or restated financial statements or filings with tagging errors. 

34 For example, securities issued under Regulation D are restricted securities that may only be resold in a limited 

set of circumstances, in particular, pursuant to an effective registration statement under the Securities Act or a 

valid exemption from registration for the resale, such as Section 4(a)(1) of the Securities Act, or the nonexclusive safe harbor of Rule 144. See https://www.sec.gov/fast-answers/answersrestrichtm.html.
38

statistics, and some fund offerings conducted under Regulation D may not be included in the 

presented statistics. 

Data on survivorship of issuers in Regulation A and Regulation D offerings are also 

affected by noise. Measuring survivorship through the presence of subsequent EDGAR filing 

activity significantly underestimates survivorship because many Regulation A and Regulation D 

issuers do not incur ongoing reporting obligations under either the Exchange Act or Regulation 

A. Measuring survivorship through the absence of bankruptcy filings may significantly 

overestimate survivorship because many smaller issuers that either do not have significant 

liabilities or that do not have significant assets recoverable through a bankruptcy proceeding will 

likely liquidate without a bankruptcy filing. 

Performance data available for private issuers are not directly comparable to the data for 

public issuers on the basis of similar metrics. For example, return data for Regulation A and 

Regulation D issuers quoted on the OTC market are not directly comparable to return data on 

exchange-listed securities, because the OTC market has significantly lower liquidity and a higher 

incidence of days with no trading. As another example, where return data for private securities 

are available (e.g., in the case of private fund returns), a direct comparison to the returns on 

publicly traded assets may be difficult because of a lack of comparability. Private investments 

are characterized by different risk exposures (e.g., nontraditional systematic risk factors in 

private fund portfolios), illiquidity (e.g., because of restricted status of securities, contractual 

provisions such as lock-up periods, and/or a lack of a secondary trading market), and high 

transaction costs (including trading, due diligence, and search costs). This lack of comparability 

is an outgrowth of individual market segments being designed to meet specific needs of different 

types of issuers and attract specific investor clienteles through offering transactions. 
39

It is unclear whether our findings can be extrapolated beyond the specific time period 

under consideration. Unless specified otherwise, our data end at the end of the most recently 

completed full year of data (2019). For Regulation D, the analysis begins in 2009 because 

electronic data on Regulation D became available in the second quarter of 2009. For Regulation 

A, the analysis begins in mid-2015, when the amendments became effective and electronic data 

on issuers and offerings became available. The 2009-2019 period coincided with generally 

favorable market conditions. We recognize that evidence on performance obtained during boom 

periods may not apply to other periods. Therefore, where available, we supplement primary 

performance data on private investments with evidence from related academic literature 

spanning earlier periods and greater variation in macroeconomic cycles.

Sections III.B. and III.C below present the available evidence on the performance of 

Regulation A and Regulation D. These exemptions have unique characteristics and associated 

differences in data availability, sample construction, and appropriate benchmarks. Further, the 

two market segments are vastly different in size, with annual Regulation D proceeds exceeding 

annual reported Regulation A proceeds by an order of magnitude of 1000x. Therefore, we 

present the analysis for the two exemptions separately.

B. Regulation D

Below we present evidence from primary data analysis and synthesis of existing studies 

on the performance of Regulation D as a capital-raising tool and on the performance of 

Regulation D investments. In line with prior work, we analyze performance of funds and nonfund issuers separately because of the unique institutional characteristics and aspects of 

performance data and metrics applicable to these two categories of issuers. 
40

1. Performance of Regulation D as a Capital-Raising Tool

First, we consider the performance of Regulation D as a capital-raising tool and as a 

source of diverse investment opportunities. As described above, Regulation D has accounted for 

a large amount of capital formation. Total capital raised annually in the private capital market is 

large both in absolute terms and when compared to the amounts raised in the public markets.

(See Figure 12 below.) In 2019, registered offerings of equity and debt accounted for 

approximately $1.2 trillion of new capital, compared to more than $2.7 trillion reported raised 

through all unregistered offering channels.35 Of this, the largest amount was raised by 

Regulation D offerings—approximately $1.6 trillion—which is considerably larger than the 

amount of public debt (straight and convertible) and public equity (common and preferred) 

offerings over the same time. Over the 2009 through 2019 period, $13.6 trillion was raised 

through Regulation D offerings compared to $14.1 trillion raised through registered offerings of 

debt and equity, including IPOs. As shown in Figure 12 below, in each of the years since 2017

through 2019, the amounts raised in the Regulation D market have surpassed aggregate amounts 

raised through registered offerings of debt and equity.

 35 See Harmonization Proposing Release, at n. 12. Besides Regulation D, other unregistered offerings include 

offerings relying on Rule 144A, Regulation A as described above, Regulation Crowdfunding, Regulation S, 

and Section 4(a)(2) of the Securities Act. By its terms, Rule 144A is available solely for resale 

transactions. However, market participants use it to facilitate capital raising by issuers by means of a twostep process, in which the first step is a primary offering on an exempt basis to one or more financial 

intermediaries, and the second step is a resale to “qualified institutional buyers” in reliance on Rule 144A.
41

Figure 12. Aggregate Capital Reported Raised in 2009–2019 through Regulation D 

Offerings and Registered Offerings36 ($ billion)

Table 8 below estimates the size of the private and public markets in terms of number of 

offerings per year. As the table shows, offerings in the private market occur with a significantly 

higher frequency compared to public market issuances. Regulation D offerings occur with far 

greater frequency than any other offering method surveyed, indicating that the accumulation of 

capital raised through Regulation D occurs by way of much smaller offering denominations than 

other methods. This finding is consistent with Regulation D being the primary tool for capital 

raising by smaller entities.

Table 8. Number of Regulation D Offerings and Registered Offerings by Year (2009–2019) 

Year Public Equity 

Offerings- IPOs

Registered

Follow-on Equity 

Offerings

Registered Debt 

Offerings

Regulation D 

Offerings37

 

36 In this figure, amounts raised in public equity offerings include amounts raised in IPOs.

37 These represent offerings that were initiated during the year or were active during the year. Generally, offerings 

by pooled investment funds are continuous in nature and extend into multiple years. 

 $-

 $200

 $400

 $600

 $800

 $1,000

 $1,200

 $1,400

 $1,600

 $1,800

 $2,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Public Equity Offerings Public Debt Offerings Regulation D Offerings

Amounts Raised ($ billion)
42

2009 68 874 1,445 18,295

2010 200 872 1,930 25,993

2011 201 662 1,465 27,336

2012 206 748 1,473 28,184

2013 283 967 1,510 30,429

2014 347 829 1,576 33,429

2015 218 767 1,565 34,877

2016 119 702 1,636 35,793

2017 178 798 1,846 37,785

2018 269 723 1,641 40,417

2019 244 685 1,484 41,196

Relative to registered markets, where the majority of capital is raised through fixed 

maturity debt, approximately two-thirds of Regulation D offerings represent new equity capital. 

Registered offerings of new equity capital constitute less than 17% of the overall capital raised 

through registered offerings.

Next, we characterize the available data on the composition and diversity of investment 

opportunities available in Regulation D offerings. The largest category of issuers in the 

Regulation D capital market, based on the amount sold, are pooled investment funds

(predominantly private funds), which include hedge funds, venture capital (VC) funds, PE

funds, and other pooled investment funds, according to the classification on Form D.

38 Since the 

 

38 Other pooled investment funds include, for example, commodity pools and registered investment companies. 

Commodity pools are investment trusts, syndicates, or similar enterprises that are operated for the purpose of 

trading commodity futures. Registered investment companies are entities such as mutual funds that issue 

securities to investors, hold pools of securities and other assets, and are registered with the Commission under 

the Investment Company Act. Other pooled investment funds also include private funds that would be 

investment companies but for the exclusion provided in Sections 3(c)(1) or 3(c)(7) of the Investment Company 
43

Commission first required electronic filing of Forms D in 2009, pooled investment funds have 

accounted for $11.7 trillion of new capital raised through Regulation D offerings and reported on 

Form D, compared to approximately $2 trillion raised by non-funds. Hedge funds are the largest 

category of fund issuers in the Regulation D market, having raised more than $4 trillion of new 

capital during this period. In terms of the amounts raised by fund type, PE funds raised the 

largest mean amount. A breakdown of the number of offerings and amount of capital raised 

during 2009 through 2019 by type of pooled investment fund, as reported by issuers in Item 4 of 

Form D, is presented in Table 9 below. 

Table 9. Number of Offerings and Amounts Raised by Fund Type, 2009–2019 

Number 

of 

Offerings

Aggregate

Amounts 

Reported Sold

($ billion)

Mean 

Amounts 

Reported Sold

($ million)

Median 

Amounts 

Reported Sold

($ million)

Pooled Investment

Funds 65,591 $11,738.0 $179 $16

Hedge Funds 20,242 $4,022 $199 $26

Private Equity Funds 17,939 $3,215 $179 $33

Venture Capital Funds 8,437 $308 $37 $3

Other Investment Funds 18,973 $4,193 $221 $6

While funds dominate in terms of amounts sold in the Regulation D market, non-fund 

issuers initiated almost three-fourths of new offerings. (See Figure 13 below.) Of the non-fund 

offerings that identified a specific industry, most were from the Finance/Banking/Insurance, 

Technology, and Real Estate industries. Almost 22% of offerings check “Other” for industry, for 

 Act. While some registered investment companies use Regulation D, based on our analysis of Form D data, the 

overwhelming majority (99.7%) of pooled investment fund offerings reported on Form D are excluded from the 

definition of “investment company” under the Investment Company Act. Very few Form D fund issuers are 

identified as mutual funds in Morningstar data (based on CIK identifiers, where available). Thus, for purposes 

of evaluating the performance of pooled investment fund Regulation D issuers, we focus on private fund 

returns.
44

which further information is not available. In terms of total amounts reported to be raised, the 

top industries were Banking & Financial, Technology, and Real Estate. (See Figure 14 below.)

Similar to Regulation D, industries with the largest amounts raised in registered offerings were 

Banking & Financial and Technology, followed by Manufacturing and Energy. 

Figure 13. Number of Offerings and Amounts Raised by Fund and Non-Fund Regulation D 

Issuers: 2009–2019

Private 

Funds

86%

Non 

Fund 

Issuers

14%

Amounts Raised

Private 

Funds

19%

Non 

Fund 

Issuers

81%

Number of Offerings
45

Figure 14. Number of Offerings and Amounts Raised by Non-Fund Industry (2009–2019)

Consistent with the large number of non-fund offerings and the smaller proportion of 

capital they raised in the Regulation D market, the median offering size for non-fund issuers is 

substantially lower than the median offering size for funds. During 2009 through 2019, the 

median offer size of non-fund issuers was $1 million (see Table 10 below). This indicates a 

large number of small offerings by non-fund issuers, consistent with the original regulatory 

objective to target the capital formation needs of small businesses. As the table below shows, 

mean and median amounts raised in Regulation D offerings are significantly smaller than the 

amounts raised in registered offerings, across all industries.

0%

10%

20%

30%

40%

0%

10%

20%

30%

40%

Number Regulation D Offerings Number of Registered Offerings

Regulation D - Amount Sold Registered Offerings - Amounts Sold
46

Table 10. Mean and Median Amount Raised by Offering and Industry Type (2009–2019) 

Offering Type Regulation D Public Equity (nonIPO)39Public Debt

Amounts Raised 

($ million) Mean Median Mean Median Mean Median 

Private Funds $179 $16 n.a. n.a. n.a. n.a.

Agriculture $10 $1 $86 $11 $528 $500

Banking/Financial $40 $2 $362 $75 $581 $400

Business Services $6 $1 $200 $80 $580 $399

Energy $18 $1 $288 $170 $550 $449

Health Care $9 $2 $83 $30 $753 $595

Manufacturing $12 $1 $206 $81 $582 $498

Other $10 $1 $172 $82 $438 $399

Real Estate $12 $2 $250 $146 $393 $349

Restaurants $4 $1 $252 $105 $604 $499

Retailing $8 $1 $289 $208 $866 $650

Technology $8 $1 $169 $59 $993 $750

Travel $6 $1 $417 $200 $466 $447

Intermediaries in securities offerings serve an important role in reducing information 

asymmetry about issuers and in lowering search costs involved in matching issuers with 

investors. While intermediation is widespread in registered offerings of debt and equity, it is 

much less common among unregistered offerings. On the basis of Form D data, we find 

approximately 20% of Regulation D offerings initiated during 2009 through 2019 reported using

an intermediary to raise capital. The use of intermediaries is different across issuer types and 

 39 See supra footnote 11.
47

industries. Among Regulation D issuers, 28% of offerings by financial issuers and 21% of 

private fund offerings reported using an intermediary, while approximately 15% of offerings by 

operating companies (i.e., non-fund, non-financial companies) used an intermediary in their 

offerings. The biggest users of intermediaries are issuers in the real estate industry (35%) and 

energy industry (32%). There is also significant variation in fees paid between fund and nonfund issuers. Private funds, on average, paid approximately 2% during the 2009 through 2019 

period, while non-fund issuers paid approximately 5.4% on average.

A large proportion of investors in Regulation D offerings are accredited investors. While 

Rule 506(c) prohibits sales to non-accredited investors, up to 35 non-accredited investors can 

purchase securities in a Rule 506(b) offering. Based on the analysis of data from initial Form D 

filings, including by pooled investment funds, we estimate that approximately 3.4% to 6.9% of 

all offerings initiated during 2009 through 2019 had one or more non-accredited investor 

participating in the offering.40

On the basis of information in initial Form D filings and amended filings, we estimate 

that approximately 5.9 million investors participated in Regulation D offerings initiated during 

2009 through 2019. However, these counts do not adjust for any repeat participation among 

investors in offerings. Because the data do not identify individual investors, we cannot estimate 

the number of unique investors participating in Regulation D offerings.

 40 This estimated range is based on DERA staff analysis of Form D data on initial Form D filing among all 

Rule 506(b) offerings from 2009 to 2019. In particular, the 3.4% estimate is based on offerings that report 

that at least one non-accredited investor already have invested in the offering as of the Form D filing and 

may represent a lower bound because it relies on available Form D filings, and because a final Form D 

upon the conclusion of an offering is not required to be filed. If we also include Rule 506(b) offerings on 

Form D that accept non-accredited investors but reported having zero non-accredited investors in the initial 

filing, the estimated percentage of offerings involving accredited investors during the 2009-2019 period is 

approximately 6.9%, which may be viewed as an upper bound estimate.
48

2. Performance of Private Funds

As discussed in Section II.A.2 above, private funds account for the largest share of 

Regulation D market activity. Below we present available evidence on the performance of 

private funds. First, we present data on the performance of hedge funds. Next, we turn to other 

private funds (notably, PE and VC funds). Because of the nature of the data and the long-term 

cash flow structure of PE and VC funds, we consider these funds’ performance separately from 

hedge funds. We conclude with a summary of the evidence on the performance of mutual funds, 

which are registered investment companies, and returns on the market index.

Hedge Funds41

Table 11 and Figure 15 below present data on hedge fund performance. We obtain 

information on all funds covered in four major commercial data sources on hedge fund returns: 

BarclayHedge, HFM, Eureka, and TASS. Different databases vary in their coverage of hedge 

funds reporting their performance. Following the sample period used for Regulation D data, we 

present mean and median returns, as well as the 25th (P25) and 75th percentiles of the return 

distribution (P75) and the number of observations (Obs.) for each year during 2009 through 

2019.

 41 As used in this sub-section, except where defined otherwise, the reference to “hedge funds” is based on the use 

of the term by commercial data vendors that aggregate and check the accuracy of data self-reported by funds, 

which has also been used in academic research, and not on a strict application of any legal definition of a hedge 

fund. For example, one of the vendors whose data we use below, EurekaHedge, explains that “[h]edge funds 

are investment vehicles that explicitly pursue absolute returns on their underlying investments. . . the ‘Hedge 

Fund’ definition has come to incorporate any absolute return fund investing within the financial markets 

(stocks, bonds, commodities, currencies, derivatives, etc.) and/or applying non-traditional portfolio management 

techniques including, but not restricted to, shorting, leveraging, arbitrage, swaps, etc. Hedge funds can invest in 

any number of strategies and they are perhaps most readily identifiable by their structure, which is typically a 

limited partnership (the manager acting as the general partner and investors acting as the limited partners) with 

performance related fees, high minimum investment requirements and restrictions on types of investor, entry 

and exit periods.” See https://www.eurekahedge.com/Research/News/1829/What-is-a-Hedge-Fund. This 

definition may differ from that used by the other vendors whose data we use.
49

Table 11. Hedge Fund Returns (2009–2019)

42

Year Mean Median P25 P75 Obs.

Barclay Hedge

2009 33.5% 23.0% 12.2% 43.7% 1,646

2010 13.8% 10.2% 5.1% 18.7% 1,902

2011 -3.7% -3.1% -9.4% 2.8% 2,193

2012 11.9% 10.0% 5.1% 16.5% 2,572

2013 13.6% 10.7% 4.1% 20.2% 3,072

2014 5.9% 4.6% 1.2% 9.3% 3,607

2015 1.7% 1.3% -2.7% 6.2% 4,059

2016 6.1% 4.1% 0.0% 9.8% 4,568

2017 10.9% 7.9% 3.4% 15.4% 5,063

2018 -4.9% -4.4% -10.1% -0.1% 5,444

2019 11.3% 8.6% 3.9% 16.7% 5,782

2009-2019 7.4% 5.2% -0.6% 12.7%

HFM

2009 35.5% 24.7% 11.6% 47.3% 784

2010 16.4% 12.8% 7.4% 21.9% 872

2011 0.7% 1.2% -6.3% 7.3% 959

2012 11.5% 10.4% 3.8% 16.9% 1,047

2013 14.6% 11.8% 5.2% 21.6% 1,154

2014 7.1% 5.8% 0.7% 11.4% 1,270

2015 1.7% 1.6% -4.9% 8.1% 1,338

2016 10.9% 7.6% 1.9% 15.4% 1,438

2017 22.7% 9.0% 3.3% 15.5% 1,523

2018 -0.1% 0.5% -7.3% 6.8% 1,499

2019 11.3% 8.5% 3.5% 15.7% 1,317

2009-2019 11.2% 7.3% 0.4% 15.3%

Eureka

 42 Returns are annual returns for all funds reported in the respective database, including funds of funds (FOFs) 

and global as well as U.S. funds reporting data. For each database used here, funds report returns, which 

generally are expected to be reported net of fees. Twelve months of monthly return data are required for a 

fund-year observation to be included in the estimate. Thus, funds entering or exiting in the course of a 

calendar year are not included in the statistics for that calendar year. Due to differences in fund identifiers 

and overlaps, we are unable to consolidate data on all funds, so the data are presented for each database. 

Also, self-reporting may result in upward-biased estimates of average performance. 
50

2009 24.6% 16.4% 3.6% 35.7% 2,650

2010 13.3% 10.2% 3.4% 19.0% 2,785

2011 -1.8% -1.4% -8.4% 5.1% 2,848

2012 7.4% 6.8% 0.5% 13.9% 2,817

2013 11.4% 9.6% 0.5% 19.1% 2,822

2014 5.3% 4.1% -1.6% 9.7% 2,724

2015 0.0% -0.1% -6.2% 6.1% 2,631

2016 6.0% 4.6% -1.0% 10.7% 2,541

2017 14.9% 6.6% 1.5% 12.9% 2,411

2018 -4.1% -3.1% -9.9% 2.5% 2,161

2019 9.9% 7.9% 2.8% 15.6% 1,827

2009-2019 8.0% 5.1% -2.1% 13.3%

TASS

2009 18.8% 12.1% 5.5% 23.5% 8,023

2010 8.4% 7.0% 2.8% 11.4% 8,118

2011 -2.5% -2.9% -8.3% 6.0% 7,823

2012 7.7% 6.9% 2.0% 12.0% 7,146

2013 11.0% 8.0% 3.4% 13.8% 6,343

2014 4.7% 4.1% -0.2% 8.9% 5,887

2015 3.0% 2.3% -2.2% 9.5% 5,330

2016 4.9% 3.0% -2.5% 12.0% 5,084

2017 12.0% 7.1% 2.5% 12.6% 4,742

2018 -0.1% -2.0% -8.3% 4.4% 4,344

2019 11.5% 7.0% 2.8% 12.5% 3,880

2009-2019 7.4% 5.6% -0.8% 11.7%

On the basis of the data presented above, we note considerable variance in return 

statistics over time, which were also somewhat sensitive to sample coverage in different sources. 

However, the hedge fund asset class as a whole reported generally strong returns in absolute 

terms during this period. As an important caveat, this period has coincided with favorable 

market performance. Thus, Figure 15 below plots mean annual hedge fund returns from the four 

databases alongside annual market portfolio returns from CRSP.
51

Figure 15. Average Hedge Fund Returns versus Market Returns (2009–2019)

For most years of the sample period, the market portfolio realized higher returns than the 

return reported in the hedge fund data. However, as hedge funds may invest in a variety of nonequity assets and have a distinct risk and illiquidity profile, comparisons with stock market 

returns should be treated with caution.

Evidence on Hedge Fund Returns from External Studies

A number of studies have considered hedge fund returns. For example, a recent 

academic study has found mean (median) annual net hedge fund returns to be approximately 9% 

(8%).43 Extensive research has analyzed risks of hedge fund investments and found that 

systematic risk exposures of hedge funds often differ from those of public market investments.44 

 43 See Vikas Agarwal, T. Clifton Green, & Honglin Ren, Alpha or Beta in the Eye of the Beholder: What Drives 

Hedge Fund Flows?, 127 J. FIN. ECON. 417 (2018) (“Agarwal et al. (2018)”) at Table 1 (examining 71,117 

observations from Eurekahedge, HFR, Lipper TASS, and Morningstar for 16,185 hedge funds and FOFs from 

1994 through 2012. Average (median) CAPM alpha was 4.9% (3.4%); average (median) multi-factor alphas 

were 2.7-5.1% (1.4-3.4%), depending on the risk adjustment model).

44 See, e.g., William Fung & David A. Hsieh, Hedge Fund Benchmarks: A Risk-Based Approach, FIN. 

ANALYSTS J., Sept./Oct. 2004, at 65; William Fung & David A. Hsieh, Measurement Biases in Hedge Fund 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Barclay Hedge Eureka HFM

TASS CRSP value-weighted CRSP equal-weighted
52

A small number of recent studies examine the subset of larger private funds subject to Form PF 

reporting requirements.45 For example, a recent study examining quarterly Form PF data on 

returns of larger hedge funds from 2012Q4 through 2016Q4 reports average (median) quarterly 

gross returns of 2.5% (2.2%) with a 25th-75th percentile range of -0.5% to 5.1% and average 

(median) quarterly net returns of 1.8% (1.7%), with a 25th-75th percentile range of -0.7% to 4.2%, 

respectively.46 Another recent report, examining all Form PF filers’ private fund returns from 

2012 through 2016, finds median annual gross returns of 12.1%, with the median fee of 1.9%, 

 Performance Data: An Update, FIN. ANALYSTS J., May/June 2009, at 36; Manuel Ammann, Otto R. Huber, 

& Markus Schmid, Benchmarking Hedge Funds: The Choice of the Factor Model (Working Paper, 2011); 

Zheng Sun, Ashley W. Wang, & Lu Zheng, Only Winners in Tough Times Repeat: Hedge Fund 

Performance Persistence over Different Market Conditions, 53 J. FIN. AND QUANTITATIVE ANALYSIS 2199 

(2018); Charles Cao et al., What Is the Nature of Hedge Fund Manager Skills? Evidence from the RiskArbitrage Strategy, 51 J. FIN. AND QUANTITATIVE ANALYSIS 929 (2016); Agarwal et al. (2018), supra

footnote 43; Jakub W. Jurek & Erik Stafford, The Cost of Capital for Alternative Investments, 70 J. FIN. 

2185 (2015); Turan G. Bali, Stephen J. Brown, & Mustafa O. Caglayan, Systematic Risk and the Cross 

Section of Hedge Fund Returns, 106 J. FIN. ECON. 114 (2012); Turan G. Bali, Stephen J. Brown, & 

Mustafa O. Caglayan, Macroeconomic Risk and Hedge Fund Returns, 114 J. FIN. ECON. 1 (2014); Andrea 

Buraschi, Robert Kosowski, & Fabio Trojani, When There Is No Place to Hide: Correlation Risk and the 

Cross-Section of Hedge Fund Returns, 27 REV. FIN. STUD. 581 (2014); Ravi Jagannathan, Alexey 

Malakhov, & Dmitry Novikov, Do Hot Hands Exist Among Hedge Fund Managers? An Empirical 

Evaluation, 65 J. FIN. 217 (2010); Andrea Buraschi, Robert Kosowski, & Worrawat Sritrakul, Incentives 

and Endogenous Risk Taking: A Structural View on Hedge Fund Alphas, 69 J. FIN. 2819 (2014); Ronnie 

Sadka, Liquidity Risk and the Cross-Section of Hedge-Fund Returns, 98 J. FIN. ECON. 54 (2010); and Ilia 

D. Dichev & Gwen Yu, Higher Risk, Lower Returns: What Hedge Fund Investors Really Earn, 100 J. FIN. 

ECON. 248 (2011).

45 Form PF must be filed by any adviser (a) that is registered or required to register with the SEC as an investment 

adviser, (b) that manages one or more private funds and (c) together with its related persons, collectively, had at 

least $150 million in private fund assets under management as of the last day of the most recently completed 

fiscal year. See https://www.sec.gov/about/forms/formpf.pdf.

46 The study focused on the subset of Form PF filers that are qualifying hedge funds (i.e., with a NAV of at 

least US$500 million as of the last day in any month in the fiscal quarter immediately preceding the 

adviser’s most recently completed fiscal quarter). See Mathias S. Kruttli, Phillip J. Monin, & Sumudu W. 

Watugala, Investor Concentration, Flows, and Cash Holdings: Evidence from Hedge Funds (Fed. Reserve 

Board, Fin. & Econ. Discussion Series No. 2017-121, 2017), at Table 1. See also Mark D. Flood & Phillip 

Monin, Form PF and Hedge Funds: Risk-Measurement Precision for Option Portfolios (Office of Fin. 

Research, Working Paper No. 16-02, 2016).
53

significant dispersion across funds, and near-zero net returns for the bottom 25% of reporting 

funds.47

Other Private Funds 

Below we discuss the performance of other private funds, including PE and VC funds. 

For purposes of the analysis below, we follow Preqin, our data source, in presenting data on

buyout, VC, and certain other private fund strategies (such as private debt investing, 

infrastructure, natural resources, real estate PE, etc.) as part of the broader “PE” category, 

applying that term in a broader sense not limited to buyout funds.48 All of these strategies share 

certain commonalities, such as the nature of fundraising from limited partners (LPs), a lack of 

liquidity, long-term focus, and irregular cash flows that must be considered in evaluating 

performance. We also present breakdowns showing performance of these types of private fund 

strategies. 

According to a Preqin analysis, in 2019 global PE fund assets under management (AUM) 

accounted for approximately $4 trillion,

49 and fundraising was estimated at $595 billion across 

 47 See David Johnson & Francis Martinez, Form PF Insights on Private Equity Funds and Their Portfolio 

Companies (Office of Fin. Research, Brief Series No. 18-01, 2018), at 4 and Figure 8.

48 Preqin notes that it “collects performance data from a variety of sources to ensure a high degree of accuracy and 

confidence.” Sources of data include institutional investors that are limited partners, fund managers (with over 

2,200 firms choosing to submit performance data to date), listed firm financial reports, public filings, and 

annual reports. See https://docs.preqin.com/pro/Private-Capital-Performance-Guide.pdf and

https://docs.preqin.com/pro/Preqin-Glossary.pdf. This approach to sample construction not limited to buyout 

and VC funds has also been used, for example, in Arthur Korteweg & Morten Sorensen, Skill and Luck in 

Private Equity Performance, 124 J. FIN. ECON. 535 (2017) (“Korteweg & Sorensen (2017)”). See also J. 

Martin and R.-D. Manac Varieties of Funds and Performance: The Case of Private Equity, WORKING PAPER, 

University of Amsterdam (2018); Nathalie Gresch and Rico von Wyss, Private Equity Funds of Funds vs. 

Funds: A Performance Comparison, 14 J. PRIVATE EQUITY 43 (2011); Daniel Hobohm, Investors in Private 

Equity Funds: Large-Scale Performance Analysis and the Question if Location Matters, WORKING PAPER, 

Ludwig Maximilian University of Munich (2008).

49 See Elisângela Mendonça, Global Private Equity Crosses the $4tn Assets Mark - Report, PRIVATE EQUITY

NEWS, Feb. 5, 2020, https://www.penews.com/articles/global-private-equity-crosses-the-4tn-assets-mark-report20200205.
54

1,316 funds.

50 According to a different recent report, in 2019 the U.S. VC industry had $444 

billion in AUM across 5,733 funds by 2,371 VC firms.51 The same study estimated that in 2019 

new VC fundraising reached $50.5 billion across 272 funds, while VC funds invested $133.4 

billion across 11,360 deals with 10,430 portfolio companies. 

PE and VC fund performance is frequently measured using annualized internal rates of 

return (IRR) on the basis of fund contributions and distributions (which include the value of any 

unrealized investments).

52 Thus, in our analysis below, we use IRR as a measure of 

performance.53 Table 12 below presents the analysis of performance of PE and VC funds 

covered in Preqin data, as described above, grouped by fund size, where fund size is measured 

by capital committed to the funds.54 From the results, it appears that the top quartile of PE and 

 50 See Chris Cumming, Private-Equity Fundraising Dips in 2019 for First Time Since 2010, WALL ST. J., Feb. 2, 

2020, https://www.wsj.com/articles/private-equity-fundraising-dips-in-2019for-first-time-since-2010-

11580651367.

51 See NVCA Yearbook 2020, Public Data Pack, https://nvca.org/recommends/nvca-2020-yearbook_publicdata-pack-2/ (“NVCA (2020)”). The median fund was relatively small ($80 million), reflecting right 

skewness. 

52 IRR is a time-weighted return that uses the present value of cash contributed, distributions, and the value of 

unrealized investments as of measurement date, and excludes performance fees. 

One alternative measure is a multiple of invested capital (also referred to as total value to paid in capital), 

defined as the sum of all fund distributions and value of unrealized investments divided by the value of all fund 

contributions by LPs. See, e.g., Korteweg & Sorensen (2017) (performing the main analysis using IRRs and 

obtaining similar results in robustness tests using multiples).

53 Data are obtained from Preqin Ltd. The data are as of 2018, with an update in 2019 covering 19 PE strategies, 

including buyout, and VC strategies and 9 regional focuses around the globe, including the United States and 

North America. Due to a low number of funds in certain strategies, some strategies were combined into a 

broader strategy. Real Estate strategy includes Real Estate Co-Investment, Real Estate Secondaries, Real Estate 

Fund of Funds and Real Estate. Infrastructure strategy includes Infrastructure Secondaries, Infrastructure Fund 

of Funds, and Infrastructure. Early Stage includes Early Stage (Seed), Early Stage (Start-Up) and Early Stage. 

Venture strategy includes Venture Debt and Venture (General). Net IRR is calculated using capital calls, 

management fees, distributions, and the fair value of unrealized investments and is expressed as an annualized 

rate of return. For definitions of these and other strategies used in this data, see

https://docs.preqin.com/pro/Preqin-Glossary.pdf. 

54 Some literature has found diseconomies of scale in fund performance. See, e.g., Mark Humphery-Jenner, 

Private Equity Fund Size, Investment Size, and Value Creation, 16 REV. FIN. 799 (2012); Florencio Lopez-deSilanes, Ludovic Phalippou and Oliver Gottschalg, Giants at the Gate: Investment Returns and Diseconomies of 

Scale in Private Equity 50 J. Fin. Quant. Anal. 377 (2015); Korteweg & Sorensen (2017), supra note 52; 

Douglas Cumming and Na Dai, Fund Size, Limited Attention and Valuation of Venture Capital Backed Firms, 
55

VC funds has generated substantial returns for its investors. Overall, PE and VC funds exhibited 

strong performance. The median IRR across all PE and VC funds is approximately 14%, which 

is close to the 10% historical average annual return on the S&P 500 index. This result is 

generally consistent with what academic studies on the performance of PE funds document.55 

However, PE and VC fund investments are less liquid and generally have a greater risk exposure 

than an investment in the S&P 500 index. 

 18 J. EMPIR. FIN. 2 (2011) (finding diseconomies of scale in the VC industry). But see Harris et al. (2014), 

supra note 55 (finding no significant relation between performance and fund size for buyout funds and finding 

that VC funds in the bottom quartile of size underperform while top size quartile VC funds have the best 

performance although they do not differ significantly from funds in the second and third size quartiles).

55 See, e.g., Robert S. Harris, Tim Jenkinson, & Steven N. Kaplan, Private Equity Performance: What Do We 

Know?, 69 J. FIN. 1851 (2014) (“Harris et al. (2014)”).
56

Table 12. Net Internal Rate of Return (%) by Fund Size (2009–2019)

Size ($ million) Mean Median P25 P75 Obs.

< 100 19.4 15.7 9.5 24.9 736

100 - 250 15.1 13.5 8.2 20.0 804

250 -1000 15.7 13.7 8.8 20.2 1194

1000 - 5000 13.9 13.2 8.1 18.7 486

> 5000 17.3 16.1 13.4 21.2 68

All funds 16.2 14.0 8.7 20.9 3,288

Tables 13 through 15 below provide additional breakdowns of fund performance data by 

vintage year, fund strategy, and region. On the basis of average IRRs, it appears that early-stage 

VC and secondaries have performed the best over the time period under consideration.56 In 

terms of regional focus, PE funds with primary regional focus on deals in North America, Asia, 

and Middle East have generated the highest average IRRs. 

 56 Secondaries funds are funds that purchase stakes in privately held companies directly from the holder of the 

securities. Early-stage VC funds invest in companies at an early stage of their lifecycle (seed or startup). For 

definitions of these and other strategies used in this data, see https://docs.preqin.com/pro/Preqin-Glossary.pdf. 
57

Table 13. Net Internal Rate of Return (%) by Vintage Year

Vintage Year Mean Median 25% 75% Obs.

2009 16.8 13.0 8.6 20.2 238

2010 14.3 13.2 8.9 19.0 361

2011 15.9 14.5 9.8 20.4 438

2012 16.5 14.0 10.0 20.1 404

2013 14.5 13.2 8.5 18.4 488

2014 16.6 14.0 9.0 21.0 523

2015 15.4 14.4 8.4 22.0 505

2016 19.2 15.0 8.4 24.2 289

2017 17.4 12.5 3.0 27.1 220
58

Table 14. Net Internal Rate of Return (%) by Fund Strategy (2009–2019)

Main Focus Mean Median P25 P75 Obs.

Balanced 18.9 13.4 8 21.3 31

Buyout 16.5 15.7 8.7 23 685

Co-investment 19.4 17.7 10.8 23.4 142

Direct Lending 9.2 9.4 6.6 11.9 92

Direct Secondaries 20.8 17.1 10.4 22.3 26

Distressed Debt 13.4 11 7.4 15.1 88

Early Stage 21.9 17.4 8.6 29.2 251

Expansion / Late Stage 17.5 13.2 9.3 20.2 66

Fund of Funds 13.2 13.3 9.3 17.4 486

Growth 16.2 12.8 7.9 21.5 253

Infrastructure 15.6 9.7 6.8 14.5 96

Mezzanine 10.9 9.9 8.1 13.9 80

Natural Resources 9.2 8.2 -0.7 21.3 75

Real Estate 15.4 14 10 19.6 654

Secondaries 22.5 17.5 13.9 23.8 135

Special Situations 10.6 10.5 5.5 14.5 39

Timber 4.6 4.4 2.9 7.7 18

Turnaround 16 20.2 7.8 30.3 19

Venture 18.7 15 7 27.7 230

All Funds 16.1 13.9 8.7 20.6 3,466
59

Table 15. Net Internal Rate of Return (%) by Regional Focus (2009–2019)

Main Region Mean Median P25 P75 Obs.

Africa 11.0 10.2 7.6 13.6 18

Middle East & Israel 21.1 17.9 9.5 27.0 32

Australasia 17.9 15.6 11.6 24.6 47

Diversified Multi-Regional 10.2 9.5 4.1 14.4 73

Americas 10.8 10.0 3.3 16.6 76

Asia 17.9 14.4 9.2 22.5 320

Europe 16.1 13.2 8.5 19.4 693

US 13.8 12.5 8.1 18.1 914

North America 17.7 15.8 9.9 23.0 1,293

All Funds 16.1 13.9 8.7 20.6 3,466

Evidence on PE and VC Fund Returns from External Studies

Various academic studies have examined PE and VC returns during earlier time periods, 

providing somewhat mixed evidence about the performance of those funds.57 Several studies 

find strong outperformance of PE and VC fund investments compared to public equity markets.58 

For example, one study finds that buyout and VC funds outperform the S&P 500 on average by 

20% to 27% over the life of a fund.59 Other studies find that PE funds on average either do not 

 

57 See, e.g., the survey of the literature in Andrew Metrick & Ayako Yasuda, Venture Capital and Other 

Private Equity: A Survey, 17 EUR. FIN. MGMT. 619 (2011). 

58 See, e.g., John H. Cochrane, The Risk and Return of Venture Capital, 75 J. FIN. ECON. 3 (2005) (“Cochrane 

(2005)”); Arthur Korteweg & Morten Sorensen, Risk and Return Characteristics of Venture Capital-Backed 

Entrepreneurial Companies, 23 REV. FIN. STUD. 3738 (2010) (“Korteweg & Sorensen (2010)”); Harris et al. 

(2014), supra footnote 55.

59 See Harris et al. (2014), supra footnote 55.
60

outperform public equity markets, or perform only marginally better, on a risk-adjusted basis.

60 

Another important feature of PE fund performance documented by the academic literature is 

long-term performance persistence. PE funds that are high performers tend to continue to do 

well, while underperformers tend to continue to underperform.61 One recent study finds, 

however, that as the PE industry has matured, the persistence in performance has substantially 

declined.62

A number of studies have focused on VC performance.63 A few studies have focused on 

the performance of FOFs that invest in buyout and VC funds. For instance, one recent study 

finds that, net of fees, FOFs “provide returns equal to or above public market indices for both 

buyout and venture capital. While FOFs focusing on buyouts outperform public markets, they 

underperform direct fund investment strategies in buyout. In contrast, the average performance 

of FOFs in venture capital is on a par with results from direct venture fund investing.”64 The 

study reports data, as of December 2012, for FOFs with vintage years 1997 through 2007 on the 

 60 See, e.g., Steven N. Kaplan & Antoinette Schoar, Private Equity Performance: Returns, Persistence, and 

Capital Flows, 60 J. FIN. 1791 (2005) (“Kaplan & Schoar (2005)”); Francesco Frazoni, Eric Nowak, & Ludovic 

Phalippou, Private Equity Performance and Liquidity Risk, 67 J. FIN. 2341 (2012); Narasimhan Jegadeesh, 

Roman Kräussl, & Joshua M. Pollet, Risk and Expected Returns of Private Equity Investments: Evidence Based 

on Market Prices, 28 REV. FIN. STUD. 3269 (2015); Ludovic Phalippou & Oliver Gottschalg, The Performance 

of Private Equity Funds, 22 REV. FIN. STUD. 1747 (2009); Joost Driessen, Tse-Chun Lin, & Ludovic Phalippou, 

A New Method to Estimate Risk and Return of Nontraded Assets from Cash Flows: The Case of Private Equity 

Funds, 47 J. FIN. & QUANTITATIVE ANALYSIS 511 (2012) (finding annual underperformance of -12% for VC 

funds and no underperformance for Leveraged Buyout (LBO) funds).

61 See Kaplan & Schoar (2005), supra footnote 60; Korteweg & Sorensen (2017), supra footnote 52 (finding that 

the spread in expected net-of-fee future returns between top and bottom quartile PE firms is 7–8 percentage 

points annually.)

62 See Reiner Braun, Tim Jenkinson, & Ingo Stoff, How Persistent Is Private Equity Performance? Evidence from 

Deal-Level Data, 123 J. FIN. ECON. 273 (2017). 

63 See, e.g., Cochrane (2005), supra footnote 58; Arthur Korteweg & Stefan Nagel, Risk-Adjusting the Returns to 

Venture Capital, 71 J. FIN. 1437 (2016) (“Korteweg & Nagel (2016)”); Axel Buchner, Abdulkadir Mohamed, & 

Armin Schwienbacher, Does Risk Explain Persistence in Private Equity Performance?, 39 J. CORP. FIN. 18 

(2016).

64 See Robert S. Harris et al., Financial Intermediation in Private Equity: How Well Do Funds of Funds 

Perform?, 129 J. FIN. ECON. 287 (2018) (“Harris et al. (2018)”).
61

basis of information from Burgiss and Preqin databases, respectively, finding average (median) 

annualized IRRs of 8.1% (7.2%) and 7.9% (6.7%), respectively.65 Across vintage years 1997

through 2007, average public market equivalent (PME)66 performance of all FOFs in the study 

relative to S&P 500 was 1.16 and median was 1.15; average and median PME relative to Russell 

2000, which captures small cap stocks, was 1.03 (1.00), respectively.67 According to a recent 

industry study, as of mid-2018, net IRRs for buyout funds in the United States averaged 15% for 

five years ending June 2018 (just over 10% for 10- and 20-year investment horizons), 

outperforming S&P 500 modified PME performance.68

The presented data on private fund performance uses common performance measures 

without adjusting for risk.69 In extrapolating from the presented data, it is important to note that 

 65 See id. at Table 1.

66 A PME measure compares an investment in a PE fund to an equivalently timed investment in the relevant 

public market index. For more detail on PME, see also Kaplan & Schoar (2005), supra footnote 60. PME 

takes into account irregular cash flows associated with the PE asset class. The measure does not account 

for risk differentials between PE and public market investments. See also, e.g., Harris et al. (2018), supra 

footnote 64. 

67 See Harris et al. (2018), supra footnote 64, at Table 2.

68 See Global Private Equity Report 2019, BAIN & COMPANY, available at 

https://www.bain.com/contentassets/875a49e26e9c4775942ec5b86084df0a/bain_report_private_equity_rep

ort_2019.pdf, at Figure 1.27.

69 Some studies have sought to adjust private funds’ returns for risk. See, e.g., Korteweg & Nagel (2016), 

supra footnote 63. The study examines VC fund cash flows between 1979 and 2012, obtained from Preqin, 

yielding a sample of 545 funds, raised by 278 firms, with vintage years between 1979 and 2008. Mean 

(median) IRR is 8.84% (4.37%), respectively, while mean (median) investment multiple is 1.57 (1.16), 

respectively. See id. at Table 1. The study finds average PME (normalized by deducting 1) is 0.048 (not 

statistically significantly different from 0). See id. at Table 2. For nearly liquidated funds, the average 

PME is 0.276. The study finds that the PME understates the PME premium because VC funds have betas 

in excess of 1 and thus overstate the abnormal returns of VC funds relative to public market investments 

during periods of favorable market conditions. See also Arthur Korteweg, Risk Adjustment in Private 

Equity Returns, 11 ANN. REV. FIN. EC. 131 (2019). The study indicates that “risk-adjusted return estimates 

vary substantially by method, time period, and data source” and further notes that “[t] he weight of 

evidence suggests that, relative to a similarly risky investment in the stock market, the average venture 

capital (VC) fund earned positive risk-adjusted returns before the turn of the millennium, but net-of-fee 

returns have been zero or even negative since. Average leveraged buyout (BO) investments have generally 

earned positive risk-adjusted returns both before and after fees, compared with a levered stock portfolio.”
62

PE valuations, and associated returns, tend to be affected by aggregate conditions.70 Time-toliquidity for PE funds is also likely to be affected by market conditions. For example, according 

to one report, on the basis of data from 2011 through 2019, the average time-to-liquidity for 

active buyout funds was around 3.2 years (2.7 in 2019).71 The report also suggests that, when 

faced with adverse market conditions, active buyout funds are likely to delay exits, leading to 

increasing average time-to-liquidity.

Mutual Fund Returns and Market Portfolio Returns

For comparison with the performance of hedge funds and other private funds, in this section 

we provide summary statistics for the performance of U.S. mutual funds (net of fees),

72 as well as 

market portfolio returns. Table 16 below presents return statistics of U.S. mutual funds from 2009 

through 2019 as a function of fund size. The statistics in the P25 and P75 columns represent the 

25th and 75th percentiles of the return distribution, respectively. Tables 17 and 18 below present 

mutual fund returns by year and by fund category, respectively. 

 70 See, e.g., Private Equity Valuations During Downturns, EFRONT, Apr. 30, 2020, available at

https://www.efront.com/research-papers/private-equity-valuations-during-downturns/.

71 See Returns, Risks, and Liquidity of LBO Funds in Q4 2019, EFRONT, May 11, 2020, at 8, available at

https://www.efront.com/research-papers/returns-risks-and-liquidity-of-lbo-funds-in-q4-2019/.

72 The analysis of U.S. mutual fund performance is based on CRSP Survivor-Bias-Free Mutual Fund database. 

We exclude all ETFs, money market funds, and variable annuities. We report summary statistics of returns net 

of fees at the fund level. We aggregate share classes to the fund level using weights based on total net assets in 

the prior month. Annual returns are subsequently calculated by compounding the fund’s monthly returns. If a 

monthly return is missing, then no return would be calculated for that year. We group funds into different broad 

investment categories using CRSP objective codes.
63

Table 16. U.S. Mutual Funds Returns by Fund Size (2009–2019)

Size ($ million) Mean Median P25 P75 Obs.

<100 9.41 7.44 -0.30 18.04 33,791 

100-250 9.46 6.93 0.34 17.13 12,562 

250-1000 9.40 7.01 0.28 17.16 18,466 

1000-5000 8.97 6.89 0.03 16.93 13,102 

>5000 8.84 6.95 -0.13 16.95 4,603 

All 9.31 7.11 0.06 17.43 73,978 

Table 17. Historical Returns of U.S. Mutual Funds (2009–2019)

Year Mean Median P25 P75 Obs.

2009 28.13 26.86 16.92 35.88 6,021

2010 13.30 12.87 7.29 18.26 6,088

2011 -1.82 -0.74 -6.14 3.85 6,143

2012 12.17 12.81 7.64 16.53 6,390

2013 16.65 17.58 0.44 31.57 6,598

2014 4.77 4.92 1.01 9.15 6,906

2015 -2.23 -1.18 -4.30 1.08 7,211

2016 7.38 6.31 1.80 11.26 7,321

2017 14.88 13.90 5.87 21.72 7,180

2018 -6.76 -5.78 -11.08 -1.30 7,145

2019 18.95 19.93 9.73 26.59 6,975
64

Table 18. U.S. Mutual Fund Returns by Fund Category (2009–2019)

Fund Category Mean Median P25 P75 Obs.

Alternative Strategy 2.69 2.20 -3.87 8.42 4,065

Foreign Bonds 4.64 4.30 -1.85 10.21 1,677

Foreign Equity 9.87 9.25 -4.67 22.66 12,426

General Bonds 5.37 3.84 0.69 7.91 6,951

Mixed Strategy 7.98 7.72 0.25 14.26 8,086

Mortgage-Backed Securities 4.64 3.95 1.09 6.72 1,041

US Corporate Bonds 6.33 5.97 0.58 9.67 910

US Equity 12.98 12.87 0.98 23.84 30,773

US Government Bonds 2.71 1.81 0.27 4.84 1,752

US Municipal Bonds 4.83 3.64 0.79 8.02 6,297
65

We also report annual value- and equal-weighted market portfolio returns from the CRSP 

database in Table 19 below.

Table 19. Market Portfolio Returns (2009–2019)73

Year

Market Return

(Value-Weighted)

Market Return

(Equal-Weighted)

2009 31.3% 64.3%

2010 17.7% 25.2%

2011 -1.1% -9.0%

2012 15.8% 16.8%

2013 30.5% 30.9%

2014 10.5% 2.9%

2015 -1.7% -6.9%

2016 12.7% 16.0%

2017 20.7% 15.8%

2018 -6.3% -13.1%

2019 29.3% 21.7%

Because of differences in the measures of performance and sources of data applicable to 

different categories of private funds versus mutual funds and the market index portfolio, as well 

as, importantly, substantial differences in risk exposures, underlying investment portfolios, 

liquidity, timing of cash flows, nature of data reporting, and extent of regulatory oversight 

 

73 Annual returns are calculated by compounding monthly returns, including distributions, of an equalweighted or value-weighted market portfolio, as indicated, obtained from CRSP. These returns are gross of 

trading costs. 
66

applicable to private funds versus registered investment companies, it is difficult to draw a 

meaningful comparison of performance between these very different asset classes.

3. Performance of Non-Fund Regulation D Issuers

Various studies have compared the behavior of private and public companies, arriving at 

mixed conclusions.74 Small private companies often face significant financing constraints, 

which can both limit growth during booms and increase downside risk during contractions. In 

particular, small businesses typically have limited access to securities markets and commonly 

rely on personal savings, business profits, outside debt, and friends and family as initial sources 

of capital.75 According to one survey, approximately 64% of small businesses relied on personal 

or family savings, compared to 0.6% receiving VC capital. The survey also finds that about one-

 74 As a general caveat, there may be differences in methodology and data definitions in the performance 

estimates reported in various sources cited in this section. See, e.g., Huasheng Gao, Po-Hsuan Hsu, & Kai 

Li, Innovation Strategy of Private Firms, 53 J. FIN. QUANTITATIVE ANALYSIS 1 (2018) (finding that public 

companies’ patents rely more on existing knowledge, while private companies’ patents are broader in scope 

and more exploratory); Viral Acharya & Zhaoxia Xu, Financial Dependence and Innovation: The Case of 

Public Versus Private Firms, 124 J. FIN. ECON. 223 (2017) (showing that public companies in externalfinance-dependent industries spend more on R&D and generate a better patent portfolio than their private 

counterparts); John Asker, Joan Farre-Mensa, & Alexander Ljungqvist, Corporate Investment and Stock 

Market Listing: A Puzzle?, 28 REV. FIN. STUD. 342 (2015) (finding that listed companies invest less and are 

less responsive to changes in investment opportunities compared to observably similar, matched private 

companies); Naomi Feldman et al., The Long and the Short of It: Do Public and Private Firms Invest 

Differently? (Fed. Reserve Board, Fin. & Econ. Discussion Series No. 2018-068, 2018) (finding that public 

companies invest more in long-term assets—particularly innovation—than private companies); Vojislav 

Maksimovic, Gordon M. Phillips, & Liu Yang, Do Public Firms Respond to Investment Opportunities 

More than Private Firms? The Impact of Initial Firm Quality, (Nat’l Bureau of Econ. Research, Working 

Paper No. 24104, 2017) (finding that public companies respond more to demand shocks after their IPO and 

are more productive than their matched private counterparts, particularly in industries that are capital 

intensive and dependent on external financing); Menachem Abudy, Simon Benning, & Efrat Shust, The 

Cost of Equity for Private Firms, 37 J. CORP. FIN. 431 (2016) (finding that private companies are 

associated with a higher cost of equity); Ilan Cooper & Richard Priestley, The Expected Returns and 

Valuations of Private and Public Firms, 120 J. FIN. ECON. 41 (2016) (finding that the cost of capital and 

valuations are similar across private and public companies). 

75 See U.S. DEP’T OF TREASURY, A Financial System that Creates Economic Opportunities: Banks and Credit 

Unions (June 2017), available at https://www.treasury.gov/press-center/pressreleases/Documents/A%20Financial%20System.pdf. See also Alicia M. Robb & David T. Robinson, The 

Capital Structure Decisions of New Firms, 27 REV. FIN. STUD. 153 (2014), at Table 4 (showing that while 

entrepreneurial companies frequently rely on outside loans, outside equity use is uncommon).
67

third of businesses used banks and other financial institutions as a source of capital for financing 

business operations in 2014. The survey further finds that a significant share of businesses that 

established new funding relationships continued to have unmet credit needs. Further, according 

to the survey, small businesses owned by underrepresented minorities faced significantly higher 

hurdles in obtaining external financing. 

Below, we present available evidence and research on the performance of non-fund 

issuers in the Regulation D market. Comprehensive data on returns of private placements by 

non-fund issuers, including securities issued under Regulation D, are not available because many 

issuers in unregistered offerings do not experience liquidity events (and data on returns in those 

cases are limited) and most securities purchased in unregistered offerings do not trade in a 

secondary market.

76 Thus, with few exceptions, academic studies have focused on private fund 

returns, discussed in Section III.B.2 above. 

Evidence on Returns

A 2016 study has analyzed U.S. angel investment returns for a sample of 245 companies 

that received investment from an angel investor group and that either reported a successful exit 

or shut down.

77 The study found an average 2.5x investment multiple and 22% IRR (gross of 

 76 Most private securities are restricted. A limited secondary market for private securities exists, which 

includes the market for limited partnership (LP) interests in private funds and the direct market for the 

stock of private companies. See Robert Loveland, Eric Fricke, & Sinan Goktan, Do Private Firms Benefit 

from Trading in the Private Securities Market?, J. ENTREPRENEURIAL FIN., Fall 2017 (“Loveland et al. 

(2017)”). See also Darian M. Ibrahim, The New Exit in Venture Capital, 65 VAND. L. REV. 1 (2012); 

William A. Birdthistle & M. Todd Henderson, One Hat Too Many? Investment Desegregation in Private 

Equity, 76 U. CHI. L. REV. 45 (2009); David F. Larcker, Brian Tayan, & Edward Watts, Cashing It In: 

Private-Company Exchanges and Employee Stock Sales Prior to IPO (Stanford Closer Look Series, Sept. 

12, 2018). We lack trading data from such marketplaces in order to construct return, risk, or liquidity 

measures. 

77 See Robert E. Wiltbank & Wade T. Brooks, Tracking Angel Returns: 2016 Report with 2017 Update, 

ANGEL RES. INST. (2017), available at https://angelresourceinstitute.org/reports/tracking-angel-returns2017-update.pdf. 
68

legal and other investment costs), with an average 4.5-year holding period. The study found that 

returns were skewed, with 10% of all exits generating 85% of all cash, while 70% of investments 

generated negative returns. According to the study, a 2017 update identified 20 additional 

outcomes (exits or closures), yielding an average 2.3x investment multiple and a 19.3% average 

IRR for the full sample. Another industry study considering 684 AngelList investments with 

nonnegative returns finds a mean (median) IRR of 35% (21%), and a mean (median) investment 

multiple of 1.7x ( 2.7x), net of fees and carried interest.78 

Certain additional data are made available by individual intermediaries. For example, 

one intermediary reports a 41% unrealized net IRR and a 3.3x investment multiple (based on 

unrealized value divided by amount invested) for Regulation D investments in companies funded 

through its website from 2013 through 2016, based on 119 startup investments.79 This 

intermediary also reported, as of December 2018, that 81% (96 of 119) startups were still active,

40% raised a subsequent Series A round in excess of $3 million, and 9% (11 out of 119) were 

valued over $100 million.

Some studies have examined financial returns to individuals or households from the 

choice to become an entrepreneur.

80 For instance, a 2002 study finds that that, although 

entrepreneurial investment is extremely concentrated, the returns to PE are no higher than the 

 78 See Abraham Othman, Startup Growth and Venture Returns, ANGELLIST (Dec. 2019), available at

https://angel.co/pdf/growth.pdf. AngelList is a platform that allows accredited investors to make VC-like 

investments in startups. Data on all investments are not available in the cited source. But see also, e.g., Olga 

Itenberg & Erin E. Smith, Syndicated Equity Crowdfunding: The Trade-Off Between Deal Access and Conflicts 

of Interest (Simon Bus. Sch., Working Paper No. FR 17-06, Mar. 2017).

79 See https://wefunder.com/funds (retrieved March 23, 2020).

80 For a review of the evidence on earnings from entrepreneurship, see, e.g., Thomas Astebro, The Returns to 

Entrepreneurship, in OXFORD HANDBOOK OF ENTREPRENEURIAL FINANCE (Douglas Cumming ed. 2012).
69

returns to public equity.81 The study attributes the willingness of households to invest 

substantial amounts in a single privately held firm with a seemingly far worse risk-return tradeoff to large nonpecuniary benefits, a preference for skewness, or overestimated probability of 

survival. In turn, a 2011 study finds that owners of private companies require compensation for 

a lack of diversification in the form of higher returns.

82

Evidence on Exits

In instances where a private non-fund issuer has a subsequent registered offering or an 

M&A exit, returns on a private company investment can be examined on the basis of the “exit” 

valuation. Prior work has thus considered IPO and M&A exits, with some of those studies 

providing information on returns attained through such exits, for a subset of the companies.

83 As 

an important caveat, where IPO and M&A exits are observed, data on the terms of such exits 

compared to the terms of pre-exit private investments are scarce and valuations are difficult to 

compare because of variation in legal and contractual terms of securities and limited disclosure 

available about pre-exit private placement rounds. Terms of private company exits involving a 

private financial or corporate acquirer are not required to be disclosed and acquirers may have 

competitive or other commercial reasons to prefer non-disclosure. 

 81 See Tobias J. Moskowitz & Annette Vissing-Jørgensen, The Returns to Entrepreneurial Investment: A Private 

Equity Premium Puzzle?, 92 AM. ECON. REV. 745 (2002)

82 See Elisabeth Müller, Returns to Private Equity – Idiosyncratic Risk Does Matter!, 15 REV. FIN. 545 

(2011). 

83 See, e.g., Umit Ozmel, David T. Robinson, & Toby E. Stuart, Strategic Alliances, Venture Capital, and Exit 

Decisions in Early Stage High-Tech Firms, 107 J. FIN. ECON. 655 (2013); Susan Chaplinsky & Swasti 

Gupta-Mukherjee, The Decline in Venture-Backed IPOs: Implications for Capital Recovery, in HANDBOOK 

OF RESEARCH ON IPOS (Mario Levis & Silvio Vismara eds. 2013), at 35; Eric Ball, Hsin Hui Chiu, & 

Richard Smith, Can VCs Time the Market? An Analysis of Exit Choice for Venture-Backed Firms, 24 REV. 

FIN. STUD. 3105 (2011); Richard Smith, Robert Pedace, & Vijay Sathe, VC Fund Financial Performance: 

The Relative Importance of IPO and M&A Exits and Exercise of Abandonment Options, 40 FIN. MGMT.

1029 (2011). 
70

For instance, a 2016 study84 examined Thomson Reuters’ Venture Economics data, 

supplemented with Thomson Reuters’ SDC Platinum New Issues and Mergers and Acquisitions 

data, EDGAR filings, and hand collection of data, for “all U.S.-based portfolio companies with 

reported investments from VC firms that had final outcomes during the period 1986–2008 

resulting in (1) mergers, acquisitions or buyouts (categorized broadly as “M&A” exits); (2) IPOs; 

or (3) failures.” The study counted as failures companies classified as bankrupt (Chapter 7 or 

Chapter 11), defunct, or “living dead.” Because of underreporting of failures, the study 

classified “active investments as living dead if they have not received a financing round for at 

least five years as of December 2008,” which was the end of the sample period. The study found

that “[o]f the 4468 total companies identified as failures in our sample, 126 are bankruptcies, 

1869 are defunct, and 2473 are living dead.” Calculation of exit returns results in sample 

attrition. The study notes that “[a] total of 1222 M&A exits and 1436 IPO exits have sufficient 

post-money valuation data to calculate returns.” The study notes a sharp rise in the frequency of 

M&A exits over time, stating that “with the exception of 2007, M&A make up more than the 

majority of exits in every year from 2001 onwards.” The study further finds that “the mean 

[non-annualized] return to VCs from M&A exits is 99.5% compared to 211.7% for IPO exits, a 

difference of 112.2% that is significant at the 1% level. Both forms of exit display highly 

skewed returns where the mean returns substantially exceed the median returns (-31.5% for 

M&A; 109.7% for IPOs).”

Like IPO activity more generally, VC-backed IPO exits are highly cyclical. According to 

a recent report, there were 82 VC-backed IPO exits in 2019, totaling $199 billion, compared to 

 84 See Susan Chaplinsky & Swasti Gupta-Mukherjee, Investment Risk Allocation and the Venture Capital Exit 

Market: Evidence from Early Stage Investing, 73 J. BANKING & FIN. 38 (2016).
71

89 exits totaling $65 billion in 2018 and 59 exits totaling $51 billion in 2017.85 By comparison, 

in 2008 and 2009, there were only 13 and 11 IPO exits, respectively, according to the same 

report. The report also estimates that, in 2019, among IPO exits, the average time from first VC 

funding round to exit was approximately 7 years; the average ratio of IPO pre-money valuation 

to total VC invested was 5.7. Because of the impact of exits of a few private companies with 

high valuations on means in samples with a relatively small number of observations, the ratio has 

varied significantly over time (even during the boom years), from as low as 2.5 in 2016 to as 

high as 12.0 in 2012. 

Some sources self-report exit outcomes for angel and other private investors. For 

example, according to one industry survey of angel investors, approximately 40% of all exits 

resulted in positive returns (41.7% for angels with an entrepreneurial background and 34.7% for 

angels without an entrepreneurial background).86 In some other instances, funds and other 

investors in private companies may rely on follow-on financing rounds to calculate updated 

valuations of private companies they hold in their portfolios. Such valuations may be 

confounded by differences in the terms of securities offered in different financing rounds, as well 

as any deviations from fundamental value due to information frictions.87

 85 See NVCA (2020), supra footnote 51, at 21–22.

86 Because some investments did not have an exit, the study also considered the percentage of positive exits 

as a proportion of all companies, with estimates ranging from 7–8% for angels with 1–10 investments, 12% 

for angels with 11–50 investments, and 15% for angels with over 50 investments. See Laura Huang et al., 

The American Angel, AM. ANGEL CAMPAIGN (Nov. 2017), at 13, 17, available at 

https://www.theamericanangel.org/. Data on returns, net of fees, obtained from such exits are not available 

in the cited source. The source obtained data from a survey of angel investors between March 2016 and 

February 2017, which may contain biases and may not be representative of the performance of all 

Regulation D angel investors. 

87 For a recent analysis of venture-backed company valuations, see, e.g., Will Gornall & Ilya A. Strebulaev, 

Squaring Venture Capital Valuations with Reality, 135 J. FIN. ECON. 120 (2020). Focusing on 135 U.S. 

private companies with reported valuations above $1 billion, the study finds that “reported ‘unicorn’ postmoney valuations average 48% above fair value, with 14 being more than 100% above.” They attribute the 

difference to the difference in legal terms of preferred shares issued in recent financing rounds and other 
72

Identifying an appropriate benchmark return for evaluating returns of private companies 

is challenging for several reasons. Because of more limited disclosure requirements for exempt 

offerings, it is difficult to observe comprehensive, standardized information on the risk profile of 

the underlying investment. Finally, the illiquidity and the nature of data on private firm returns 

make it difficult to construct an appropriate benchmark.88 Such risk, liquidity, and measurement 

differentials can have important effects on the returns of private securities.89

Performance of Reporting Companies Using Regulation D

As discussed above, most non-fund Regulation D issuers are private companies for which 

financial and operating performance data are scarce. However, a small minority of Regulation D 

issuers are public companies, for which such data are available. Approximately 4% of non-fund 

Regulation D issuers were reporting companies with data in Compustat North America when 

 share classes, which may lack such protections as IPO return guarantees, vetoes over down-IPOs, or 

seniority to all other investors.

88 See, e.g., Douglas Cumming, Lars Helge Hass, & Denis Schweizer, Private Equity Benchmarks and 

Portfolio Optimization, 37 J. BANKING & FIN. 3515 (2013) (stating that “institutional investments in PE are 

both long-term and illiquid, and it is thus somewhat difficult to establish optimal portfolio weights, 

particularly relative to more liquid asset classes.”). The study shows that listed PE indices, transactionbased PE indices, and appraisal value-based PE indices do not appropriately capture risk/return inputs for 

portfolio optimization or for risk models. See also Korteweg & Sorensen (2010), supra footnote 58 (stating 

that because “[v]aluations of entrepreneurial companies are only observed occasionally, albeit more 

frequently for well-performing companies. . . estimators of risk and return must correct for sample selection 

to obtain consistent estimates. . . Our selection correction leads to markedly lower intercepts and higher 

estimates of risks compared to previous studies.”); Antti Ilmanen, Swati Chandra, & Nicholas McQuinn, 

Demystifying Illiquid Assets: Expected Returns for Private Equity, J. ALTERNATIVE INVESTMENTS, Winter 

2020, at 8 (noting that “modeling private equity is not straightforward, due to a lack of good quality data 

and artificially smooth returns,” the study attempts to assess “private equity’s realized and estimated 

expected return edges over lower-cost public equity counterparts” and finds “a decreasing trend over time, 

which does not seem to have slowed the institutional demand for private equity. We conjecture that this is 

due to investors’ preference for the return-smoothing properties of illiquid assets in general.”). 

89 For example, many issuers in private placements are smaller. Small companies, even among listed 

companies, tend to be more financially constrained and disproportionately affected by downturns. See, 

e.g., Gabriel Perez‐Quiros & Allan Timmermann, Firm Size and Cyclical Variations in Stock Returns, 55 J. 

FIN. 1229 (2000); Murillo Campello & Long Chen, Are Financial Constraints Priced? Evidence from Firm 

Fundamentals and Stock Returns, 42 J. MONEY, CREDIT, & BANKING 1185 (2010).
73

they conducted their Regulation D offering.

90 This category of issuers reported approximately 

$400 billion in Regulation D proceeds during 2009 through 2019. This represents approximately 

3% of capital reported to be raised by all issuers and 22% of capital raised by non-fund issuers in 

the Regulation D market during 2009 through 2019. By comparison, reporting companies raised 

approximately $11.7 trillion and $1.8 trillion in registered debt offerings and registered followon equity offerings, respectively, during the same period.91

Characteristics of Reporting Company Regulation D Issuers

This small subset of reporting companies that conducted Regulation D offerings has 

distinct characteristics and is not representative of all Regulation D non-fund issuers. Therefore, 

inference from the performance of this subset of companies should be treated with significant

caution. Past studies of private investments in public equity (PIPEs) found that public 

companies that undertake PIPE offerings have a distinct set of characteristics. For example, one

study finds that public companies with lower stock performance, higher burn rates, and more 

uncertain cash flows that tend to have fewer financing options in public equity markets are more 

likely to choose a PIPE.92 As a caveat, past studies of PIPEs that we found used commercial 

 90 To obtain financial data we merge our Regulation D data with Compustat North America by year, using 

CIK as the issuer identifier. This is to account for multiple offerings by an issuer. Based on the merge 

using issuer and year criteria, the number of unique issuers which have financial data for the year of 

offering and subsequent year falls from 4,108 to 3,720. Excluding issuers with missing data in the year of 

the offering or the year after the offering and applying various filters reduces the sample size further. As a 

caveat, some issuers may conduct continuous Regulation D offerings over several years, resulting in 

confounding effects (a close-out Form D filing upon completion of the offering is not required).

91 We merge data related to companies conducting registered debt and registered follow-on equity offerings 

obtained from SDC Platinum with Compustat North America (Fundamentals Annual) to obtain financial and 

accounting data for the set of reporting companies relying on registered offerings during 2009 through 2019. 

We exclude reporting companies that conducted both registered offerings and Regulation D offerings to avoid 

confounding effects.

92 See, e.g., Susan Chaplinsky & David Haushalter, Financing under Extreme Risk: Contract Terms and Returns 

to Private Investments in Public Equity, 23 REV. FIN. STUD. 2789 (2010) (“Chaplinsky & Haushalter (2010)”). 

They find, for example, that 84% of PIPE issuers had negative net income, return on assets was -0.39 on 

average, and almost 22% of these issuers had sales less than $1 million. The book-to-market ratio, which is 
74

data on PIPEs from earlier time periods and did not differentiate between PIPE offerings under 

Regulation D and under Section 4(a)(2).

Consistent with past studies, we observe that reporting companies that use Regulation D 

are very different from reporting companies that undertake only registered offerings. 93 Table 20

below presents available data on the initial size and profitability of reporting issuers in the year 

that they conducted a Regulation D offering or a registered offering. Similar to the selection 

effect documented in prior studies, we find reporting companies that conduct registered offerings 

are on average larger and more profitable than reporting companies that conduct Regulation D 

offerings.

 sometimes used as a proxy for financial distress, placed many PIPE issuers in the lowest decile of all companies 

on the New York Stock Exchange. The study also highlights the substantial differences in PIPE issuers’ risks 

and shows that the riskiest companies issue stock at a high discount. See also, e.g., Ioannis V. Floros & Travis 

R.A. Sapp, Why Do Firms Issue Private Equity Repeatedly? On the Motives and Information Content of 

Multiple PIPE Offerings, 36 J. BANKING & FIN. 3469 (2012) (confirming these findings in an analysis of repeat 

PIPE issuers and showing that issuers in successive PIPE transactions increasingly rely on hedge funds, which 

extract greater purchase price discounts); Hsuan-Chi Chen, Na Dai, & John D. Schatzberg, The Choice of 

Equity Selling Mechanisms: PIPEs versus SEOs, 16 J. CORP. FIN. 104 (2010) (“Chen et al. (2010)”) (concluding 

that companies lacking access to traditional alternatives of equity offerings due to information asymmetry and 

low operating performance and undervalued issuers seeking to raise capital at a lower cost rely on PIPEs).

93 Data on registered debt and equity offerings for 2009 through 2019 are obtained from SDC Platinum’s New 

Issues database. As explained above, we consider follow-on equity offerings and debt offerings as a better 

benchmark for Regulation D offerings, in terms of being a capital-raising tool. We exclude IPOs for the 

purposes of this analysis as previous research has shown that companies pursue IPOs for many reasons 

other than raising capital. See supra footnote 11.

 We merge SDC data with Compustat data for companies that did not rely on Regulation D offerings during 

2009 through 2019. We use various firm identifiers—CUSIP, CIK, and Ticker—to merge SDC data with 

Compustat. Companies that conduct both Regulation D offerings and registered offerings are included in 

only the Regulation D issuers group. Approximately one-third of Regulation D reporting companies in our 

sample also conducted a registered offering during the 2009-2019 period. We find that excluding such dual 

issuers from the Regulation D group as well, does not alter the principal implications presented in the 

following paragraphs.
75

Table 20. Characteristics of Reporting Company Regulation D Issuers

Panel A: Characteristics of Reporting Companies in Regulation D versus Registered Offerings 

in the Offering Year94

Companies Reporting Companies with 

Regulation D Offerings

Reporting Companies with Debt or 

Follow-On Equity Offerings

Financial Metric

Mean

($ million)

Median

($ million)

Mean

($ million)

Median

($ million)

Sales $672 $6 $9,965 $2,025

Assets $1,658 $40 $46,263 $6,085

Net Income $31 -$5 $875 $145

Number of FirmYear Observations 6,198 5,840

Panel B: Financial Condition of Reporting Company Regulation D Issuers

Variable Proportion of Firm-Year 

Observations with Available Data

Sales < $1 million 38%

Assets < $10 million 29%

Negative Net Income 77%

Penny Stock 40%

OTC companies 46%

Panel C: Distribution of Financial Metrics of Reporting Company Regulation D Issuers

Metric

Number 

of FirmYears

Median Mean

Standard 

Deviation

Minimum Maximum

Sales ($ million) 6,198 $6 $672 $3,304 $0 $27,027

 

94 Financial metrics are winsorized at 1% and 99% levels before averages of financial metrics are calculated.
76

Assets ($ million) 6,240 $40 $1,658 $7,887 $0 $67,499

Net Income ($ million) 6,197 -$5 $31 $274 -$262 $2,243

Market Valuation

($ million) 5,140 $58 $916 $4,216 $1 $36,932

Return on Assets 6,191 -0.2 -1.5 4.9 -38.1 0.3

Stock Price

($, close of fiscal year) 5,433 $1.7 $7.9 $14.9 $0.01 $85.2

Data in Panels A and B above show that reporting company Regulation D issuers tend to 

be small.95 Almost 40% had sales less than $1 million, and almost 30% had assets less than $5 

million. The median reporting company Regulation D issuer had a net loss in the year of the 

offering and more than three-quarters of such issuers had a net loss during the year they 

conducted a Regulation D offering (compared to one-fifth of reporting companies that undertook 

a registered offering). As described above, prior studies have found that low profitability and 

small size, often considered as proxies of a firm’s financial constraints, can be major factors for 

the self-selection of reporting companies into private placements instead of public capital 

markets. These differentials point to difficulty in comparing performance of reporting company 

Regulation D issuers and reporting companies with registered offerings. 

Data in Panel C above show significant variability in pre-offering financial and operating 

characteristics within the subset of reporting company Regulation D issuers. Large standard 

deviations, mean values that are much higher than median values, and wide ranges indicate that 

 95 Seventy percent of reporting issuers relying on Regulation D offerings during 2009 through 2019 met the 

current definition of smaller reporting company (SRC) in the year they conducted their Regulation D offering. 

In contrast, only about 20% of reporting companies that relied on registered offerings during 2009 through 2019 

met the current SRC definition in the year they conducted their follow-on equity or debt offering. An SRC is 

defined in Securities Act Rule 405, Exchange Act Rule 12b-2, and Item 10 of Regulation S-K to include an 

issuer with: (1) a public float of less than $250 million or (2) revenues of less than $100 million and either no 

public float or a public float of less than $700 million. See 

https://www.sec.gov/smallbusiness/goingpublic/SRC.
77

while the typical issuer is small and has a net loss, the distribution has long tails, with some 

issuers that are much larger. This variability may complicate inference about performance of 

reporting company Regulation D issuers as a group.

Financial and Return Performance of Reporting Company Regulation D Issuers

We next analyze the financial and stock return performance of reporting company 

Regulation D issuers one year after the offering. As a caveat, because some reporting companies 

using Regulation D are very small, there is considerable skewness in percentage changes.

96 To 

mitigate extreme tails and data noise, we correct for outliers through winsorization and impose 

minimum initial size filters (excluding issuer-years with initial assets less than $10 million and 

penny stocks). These filters result in the exclusion of a significant proportion of OTC-quoted 

companies from this analysis.

97 Before calculating percentage changes, we standardize sales, 

assets, and profits by the number of shares outstanding to account for fluctuations due to 

issuance of equity and/or stock-based mergers. 

 96 The long right tail in the distribution of asset and revenue growth rates persists even after corrections for 

extreme observations, with the resulting high means, both relative to medians and to mean growth rates 

documented for large public companies. Conversely, because most issuers in this small subset had a net 

loss, the distribution of post-offering profitability changes after the offering has a long left tail, with means 

below medians. This is in line with prior studies. A long right tail means that the distribution contains 

some extremely high growth rate values. See, e.g., Emma Schultz & Garry J. Twite, Are PIPEs a Bet on 

Growth Options? (Working Paper, 2016) (noting that common stock PIPEs are “risky bets on low 

probability positive outcomes. . . Firms are issuing common stock PIPE financing because they have not 

yet achieved the level of operations [that would] reveal their potential success to public investors, whereas 

firms that have achieved these levels issue SEOs. . . Common stock PIPEs are investments in firms with 

large highly uncertain growth opportunities, having more dispersed long-run returns than SEOs, with large 

positive extreme values.”); see also Table 3 in the same Working Paper, showing mean sales growth rates 

that are very high in absolute terms and compared to medians. See also Jongha Lim, Michael Schwert, & 

Michael S. Weisbach, The Economics of PIPEs, J. FIN. INTERMEDIATION (forthcoming 2019) (“Lim et al. 

(2019)”); David J. Brophy, Paige P. Ouimet, & Clemens Sialm, Hedge Funds as Investors of Last Resort?, 

22 REV. FIN. STUD. 541 (2009) (“Brophy et al. (2009)”).

97 These are generally in line with previous studies that focused on the exchange-listed subset of PIPE issuers in 

their sample construction. See, e.g., Chen et al. (2010), supra footnote 92; Chaplinsky and Haushalter (2010), 

supra footnote 92; Lim et al. (2019), supra footnote 96; Brophy et al. (2009), supra footnote 96.
78

Table 21 below presents average and median percentage changes in size and profitability 

one year after the offering for reporting company Regulation D issuers. The data show that 

exchange-listed reporting Regulation D issuers grew faster in terms of sales and assets. They

had, on average, lower profitability (return on assets) than OTC-quoted Regulation D issuers, but 

profits for the median exchange-listed company grew faster than for the median OTC company

in the combined reporting company Regulation D subset. Overall, a number of reporting 

company Regulation D issuers (both OTC and exchange-listed) exhibit very high growth 

potential, as evidenced by high mean growth rates for sales and assets.

Table 21. Financial Performance of Reporting Company Regulation D Issuers One Year 

after Offering98

Companies Exchange-Listed 

Regulation D Issuers

OTC-Quoted

Regulation D Issuers

Growth Metric Mean Growth Median Growth Mean Growth Median Growth

Sales 39% 9% 36% 2%

Assets 23% 3% 2% -6%

Return on Assets -1.4% 0.15% 2% 0.14%

Obs. 2,285-2,608 631-790

Table 22 below examines performance of reporting company Regulation D issuers

relative to reporting companies that relied on registered offerings and follow-on equity offerings. 

As an important caveat, performance differentials between reporting company Regulation D 

issuers and reporting companies that undertake registered offerings should not be interpreted 

 

98 Performance growth metrics are winsorized at 1% and 99% levels for all matched Regulation D-Compustat 

companies before average growth is calculated for each group. Because most issuers in this small subset 

report net losses, we scale net income by assets for purposes of analyzing changes in profitability.
79

causally. As discussed above, prior studies find that public companies pursuing private 

placements are associated with smaller size, more financial constraints, lower profitability, and 

greater uncertainty about their growth options and thus are systematically different from public 

companies pursuing registered offerings.99 Because most companies in the registered offering 

sample are exchange-listed, in this table we focus on exchange-listed Regulation D issuers to 

somewhat facilitate comparability. Despite this adjustment, considerable differences in 

comparability, and in within-group distributions, are likely to remain.100 

 99 See supra footnote 92 and accompanying discussion.

100 Another approach is matching reporting companies in Regulation D and registered offerings based on ex ante

financial characteristics. 
80

Table 22. Performance of Reporting Company Regulation D Issuers and Benchmark 

Groups of Registered Offering Issuers One Year after Offering101

Exchange-Listed

Regulation D Issuers

Issuers in Registered 

Debt and Follow-on 

Equity Offerings

Issuers in Registered 

Follow-on Equity 

Offerings

Growth 

Variable

Mean Median Mean Median Mean Median

Sales 39% 9% 6% 4% 6% 3%

Assets 23% 3% 4% 3% 3% 0.46%

Return on 

Assets

-1.4% 0.15% 1.0% 0.27% 1.2% 0.23%

Stock Return102 1.2% 0.0% 1.4% 1.2% 1.7% 1.4%

Number of 

Issuer-Years

1,843-2,608 4,906-5,029 2,770-3,486

Exchange-listed reporting companies that conduct Regulation D offerings have higher 

asset and sales growth (and greater variability in growth), but reporting companies relying on 

registered offerings have higher profitability.103 The post-offering performance likely reflects ex 

ante characteristics of the underlying companies, which may have also led the company to raise 

capital through private placements in lieu of registered offerings. Also, as discussed above, very 

high mean sales and asset growth rates are indicative of a significant positive right tail of growth 

 101 Performance growth metrics are also winsorized at 1% and 99% levels for exchange-listed companies 

before average growth is calculated. Growth rates are based on financial data available in Compustat. 

Returns are calculated as compounded returns over 12 months from the month of the Regulation D 

offering. 

102 CRSP data’s coverage is biased towards exchange-listed companies. For consistency, we maintain minimum 

size caps at the same level (assets of at least $10 million and stock price of at least $1 at the end of the fiscal 

year) and include only exchange-listed companies.

103 We also calculated growth rates after filtering out observations with firm size exceeding the 95th percentile of 

asset size of Regulation D companies. Our conclusions do not change. We also considered overall growth 

rates, in lieu of per-share growth rates, and the conclusions remained similar. 
81

rates that skews means. Nevertheless, high mean asset and sales growth rates indicate that a 

number of Regulation D issuers have strong growth potential.

We emphasize that the financial characteristics and performance data presented above are 

based on a small subset of non-fund Regulation D issuer companies with available data on 

financial characteristics and post-offering performance and thus are not representative of the 

performance of over 105,000 non-fund Regulation D issuers that are private companies. 

Survival Outcomes of Regulation D Issuers

Below we look at business outcomes of Regulation D issuers. Data on post-offering 

outcomes are similarly scant, with incomplete coverage and, as a result, the data may not be

representative of the universe of Regulation D issuers.

Going Public

We estimate that approximately 918 issuers conducted an IPO during 2009 through 2019 

subsequent to a Regulation D offering. Figure 16 below presents the time-series distribution of 

the number of Regulation D issuers’ IPOs following their Regulation D offerings. On average, 

IPOs by issuers that had made a prior (paper or electronic) Form D filing on EDGAR accounted 

for approximately 36% of the total number of IPOs per year. (Other IPO issuers may have raised 

private financing without filing a Form D, for instance, under Section 4(a)(2).)
82

Figure 16. Number of IPOs by Year (2009–2019)

Figure 17 below presents the total capital raised by issuers with prior Regulation D 

offerings as well as the total amounts raised during the period 2009 through 2019. On average, 

IPOs by issuers that had made a prior Form D filing on EDGAR raised approximately 26% of 

the total annual IPO proceeds during the period under consideration.

Figure 17. IPO Proceeds by Year (2009–2019)

Mergers and Acquisitions

0

50

100

150

200

250

300

350

400

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

IPOs with Regulation D offerings All IPOs

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

IPOs with Regulation D offerings All IPOs
83

Using data available on M&A in the United States, we estimate that—of the 102,542 

reported M&A transactions conducted in the U.S. during 2009 through 2019—9,759 M&A 

transactions involved target companies that previously had a Regulation D offering, and 4,688 

transactions involved acquirers that previously had a Regulation D offering.

104 Since the SDC 

database covers transactions involving both private and public companies, the target and 

acquiring Regulation D issuers are a mix of private companies and reporting companies at the 

time of transaction.

Table 23 below presents summary statistics of target companies and acquirers that 

previously had a Regulation D offering, relative to all M&A transactions. The data show that 

Regulation D issuers were more likely to be targets (7,969 companies) than acquirers (2,284 

companies). Though acquirers of Regulation D issuers are mostly U.S. companies (68%), a 

higher proportion of Regulation D targets than non-Regulation D targets have been acquired by 

foreign companies (mostly located in Canada, United Kingdom, Japan, and Germany). The table 

below also lists the top industries of target companies, which are somewhat similar between 

Regulation D issuers and non-Regulation D issuer targets.

Table 23. Summary Statistics for M&A Transactions Involving Regulation D Issuers

Targets that are 

Regulation D 

Issuers

Acquirers that are 

Regulation D 

Issuers

All M&A 

Companies

 104 M&A data are from SDC Platinum’s Mergers and Acquisitions database. As there was no common identifier 

available, we used fuzzy matching techniques to perform a merge based on issuer name, principal state of 

business, and industry. This approach identifies 5,132 (89,407) transactions involving Regulation D issuers that 

are targets and 3,953 transactions where Regulation D issuers are acquirers. The data are subject to limitations 

of the matching technique and coverage in the database. For example, coverage of transactions involving private 

acquirers may be incomplete and, thus, acquisition exit estimates may be under-inclusive. Each transaction 

involves a unique acquirer and target firm. We consider multiple acquisitions in a target in a year as one 

transaction. The proportion acquired is added across stakes acquired during the year. We consider only targets

that had M&A transactions after a Regulation D offering. We report industry classifications provided in SDC.
84

Number of Transactions (Unique 

Acquirer, Target, Year) 9,688 4,424 102,542

Number of Unique AcquirerTarget Transactions 9,230 4,417 101,479

Number of Unique Target 

Companies 7,969 2,284 95,400

Number of Targets/Acquirers

with ticker information 

959

(Targets)

696

(Acquirers)

4,918

(Acquirer or Target)

Proportion of Equity acquired –

Mean (Median)

92%

(100%)

98%

(100%)

96%

(100%)

Proportion of U.S. Acquirers 68% na 84%

Top Industries of Target 

Companies

• Pre-packaged 

Software (25%)

• Business Services 

(22%)

• Measuring 

Equipment (7%)

• Pharmaceuticals

• Business Services 

(30%)

• Pre-packaged 

Software (21%)

• Investment & 

Commodity Firms 

(20%)

• Business Services 

(18%)

• Pre-packaged 

Software (9%)

• Health Services

(7%)

• Measuring 

Equipment

Figure 18 below presents time-series data on M&A transactions for Regulation D issuers

relative to all transactions. These estimates are sensitive to database coverage and the matching 

technique.
85

Figure 18. M&A Transactions by Year (2009–2019)

Bankruptcies

To determine how frequently issuers that previously had a Regulation D offering go 

bankrupt, we match our sample of Regulation D issuers with bankruptcy data from SDC. 

Because the bankruptcy database includes public companies, we are able to match only 

Regulation D issuers that are registered companies. This limits our ability to estimate

bankruptcy outcomes for the whole Regulation D sample. 

We find that during the period 2009 through 2019, 143 reporting companies that 

previously had a Regulation D offering filed for bankruptcy. Over the same period, there were a 

total of 4,108 reporting companies that previously had a Regulation D offering. This results in 

an estimated rate of bankruptcy outcomes of approximately 3.5% for that sample. Over the same 

period, there were 14,111 reporting companies that did not have Regulation D offerings. Of 

0

3,000

6,000

9,000

12,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Regulation D Issuer Targets Regulation D Issuer Acquirers

Total M&A Transactions
86

those, 170, or approximately 1%, filed for bankruptcy. Thus, it appears that a larger fraction of 

reporting companies that previously had a Regulation D offering went bankrupt compared to 

reporting companies that did not undertake Regulation offerings. 

Misconduct

Another measure of performance of Regulation D issuers is the prevalence of fraud and 

other misconduct associated with these issuers. As an important caveat, data on fraud, 

particularly among private issuers, are scarce and subject to latency. Available data reflect fraud, 

whether related to offerings or to disclosure violations, that is detected and results in litigation 

against the issuer. Given the difficulty of detecting fraud or misconduct and numerous factors 

affecting whether it ultimately results in litigation, this data represent only a subset of potential 

fraud or misconduct and underestimates the actual rate of fraud. 

We use information on SEC litigation against issuers related to potential misconduct as a

measure of the outcomes of Regulation D issuers. Based on Ives Group’s Audit Analytics data 

on litigation and private placements from 2009 through 2019, we have identified relatively few 

SEC civil cases involving Form D filers. As a caveat, these estimates are limited by any gaps in 

coverage of individual CIKs in the Audit Analytics litigation database and do not distinguish 

offering fraud from financial reporting and other violations that resulted in SEC litigation. In 

particular, we identified 221 (6) SEC-related civil complaints, some of which did not involve 

securities offerings, during this time involving non-fund (fund) Form D filers, excluding cases 

that were dismissed or ruled in favor of the defendant. By comparison, we estimate from Audit 

Analytics data that there were 108,158 (69,642) unique non-fund (fund) Form D filers during this 

period. Given the scarcity of data, we have identified very few research or other external studies 

of private company securities fraud. One study focuses on the sample of SEC securities fraud 
87

cases brought against private companies during the period from October 1, 2015, to September

30, 2019.105 Another study uses survey data on financial reporting fraud.106 A different study 

focuses on fraud-related lawsuits involving the small subset of private companies that conducted

an IPO.107

C. Regulation A

1. Offering Performance 

Below we discuss available information on qualified Regulation A offerings and the 

number of issuances and amount raised under the exemption by both Tier 1 and Tier 2 

offerings.108 

Capital Raising under Regulation A

In Table 24 below, we analyze the available evidence on offering activity under 

Regulation A. Except where specified otherwise, we consider evidence from the effectiveness of 

the 2015 amendments (June 19, 2015) through December 31, 2019. During this period, we 

estimate that 442 issuers filed offering statements in connection with 487 offerings, of which 

 105 See Verity Winship, Private Company Fraud (Univ. of Ill. Coll. of Law, Legal Studies Research Paper No. 

20-13, 2020).

106 See A. Scott Fleming et al., Financial Reporting Fraud: Public and Private Companies, 1 J. FORENSIC 

ACCT. RES. A27 (2016). 

107 See Xuan Tian, Gregory F. Udell, & Xiaoyun Yu, Disciplining Delegated Monitors: When Venture 

Capitalists Fail to Prevent Fraud by their IPO Firms, 61 J. ACCT. & ECON. 526 (2016). The study 

considers “423 SEC AAERs [Accounting and Auditing Enforcement Releases] and 1,085 private classaction lawsuits, among which 212 suits were subject to both SEC enforcement and private class-action 

litigation” for IPOs from 1995 through 2005.

108 As discussed in greater detail in Section II.B.1 above, the 12-month maximum offering limit for Tier 1 is $20 

million and for Tier 2 is $50 million. Tier 2 offerings are not subject to state securities law registration and 

qualification requirements, while Tier 1 offerings remain subject to those state requirements. However, Tier 2 

issuers are subject to additional requirements. For example, Tier 2 issuers are required to include audited 

financial statements in their offering circulars and must provide ongoing reports on an annual and semiannual 

basis with additional requirements for interim current event updates.
88

approximately 382 offering statements filed by 346 issuers were qualified.109 The total amount 

sought was approximately $11.2 billion across all offerings, including approximately $9.1 billion 

across qualified offerings. 

Table 24. Capital Sought under Regulation A (June 19, 2015 – December 31, 2019)110

All Offerings with Filed

Offering Statements

($ million)

Tiers 1 & 2 Tier 1 Tier 2

Aggregate dollar amount sought $11,170.2 $1,101.5 $10,068.6

Number of offerings 487 145 342

Average dollar amount sought $22.9 $7.6 $29.4

Offerings Qualified by Commission Staff 

($ million) Tiers 1 & 2 Tier 1 Tier 2

Aggregate dollar amount sought $9,094.8 $759.0 $8,335.8

Number of offerings 382 105 277

Average dollar amount sought $23.8 $7.2 $30.1

Table 25 and Figure 19 below summarize information about the proceeds reported in 

Regulation A offerings. From June 2015 through December 2019, approximately $2.4 billion in 

proceeds was reported by 183 issuers. 

 109 Regulation A requires an issuer to file an offering statement that must be qualified before sales can occur. 

110 These data exclude offerings identified as withdrawn or abandoned. Some offerings included in our data 

may have been effectively halted and may be withdrawn or abandoned at a future date. Unless noted 

otherwise, the analysis relies on the information reported by issuers in the most recent amendment between 

June 2015 and December 2019, including post-qualification amendments. Offerings were identified based 

on CIK and file number; offerings identified as duplicates were consolidated; and amendments were 

consolidated with the original offering for purposes of the number of offerings. Rounding affects totals. 

After a prospective Regulation A issuer files an offering statement with the Commission, the offering 

statement is subject to review by Commission staff. The offering statement may then be declared qualified 

by a notice of qualification. After a Regulation A offering statement has been qualified, issuers may begin 

selling securities. 
89

Table 25. Capital Reported Raised under Regulation A (June 2015 – December 2019)

111

Capital Reported Raised

($ million)

Tiers 1 & 2 Tier 1 Tier 2

Aggregate dollar amount reported raised $2,445.9 $230.4 $2,215.6

Number of issuers reporting proceeds 183 39 144

Average dollar amount reported raised $13.4 $5.9 $15.4

Figure 19. Capital Reported Raised under Regulation A

Turning to a comparison of different offering tiers, as illustrated in Figure 19 above, Tier 

2 accounted for the majority of Regulation A offerings (70% of filed and 73% of qualified 

offerings), amounts sought (90% of amounts sought in filed offerings and 92% of amounts 

 111 Capital raised is based on information reported by companies in Forms 1-Z, 1-K, 1-SA, 1-U, and offering 

circular supplements pertaining to completed and ongoing Regulation A offerings and post-qualification 

amendments, and for issuers whose shares have become exchange-listed, information from other public 

sources. Estimates represent a lower bound on the amounts raised given the timeframes for reporting 

proceeds following completed or terminated offerings and that offerings qualified during the report period 

may be ongoing. In particular, proceeds in ongoing offerings disclosed in periodic reports of Tier 2 issuers 

are likely to be amended at a future date. Issuers that report proceeds of zero are excluded from the count. 

Some of the issuers that have not yet made reports of proceeds may have ongoing offerings. Other issuers 

may have halted attempts to raise capital under Regulation A but have not made subsequent EDGAR 

filings. If an issuer reported proceeds both from a Tier 1 and a Tier 2 offering, that issuer is counted twice 

(once under Tier 1 and once under Tier 2).

Tier 1

$230.4

Tier 2

$2,215.6

Aggregate dollar amount 

reported raised ($ 

million)

Tier 1

39

Tier 2

144

Number of issuers 

reporting proceeds

Tier 1

$5.9

Tier 2

$15.4

Average dollar amount 

reported raised ($ 

million)
90

sought in qualified offerings), and reported proceeds (91%) during this period. The larger Tier 2 

offering limit does not appear to be the sole factor for issuers’ decision between tiers, given that 

approximately 43% of filed Tier 2 offerings and 41% of qualified Tier 2 offerings sought 

amounts not exceeding the Tier 1 offering limit of $20 million.112 We estimate that 112 Tier 2 

issuers reported raising up to $20 million in financing under Regulation A, even though that 

amount would have made them eligible to use Tier 1 as well. Blue sky law preemption, 

facilitating nationwide solicitation and solicitation over the Internet, may have contributed to the 

popularity of Tier 2 offerings among issuers conducting Tier 2 offerings below the Tier 1 

offering limit.

113 

Trends in Regulation A

Aggregate Regulation A financing levels were significantly higher after the 2015 

amendments because of the increase in the offering limit as well as an increase in the number of 

offerings.114 As can be seen from Table 26 and Figure 20 below, issuer interest in Regulation A 

has grown during the June 2015 through December 2019 period. 

 112 See note 108 above.

113 See, e.g., U.S. SEC. AND EXCHANGE COMM’N, Transcript of the the 38th Annual SEC Government-Business 

Forum on Small Business Capital Formation (Aug. 14, 2019), at 132–135, available at

https://www.sec.gov/files/2019-sec-government-business-forum-small-business-capital-formationtranscript.pdf.

114 Prior to June 19, 2015, Regulation A issuers could raise up to $5 million in a 12-month period. See also

2015 Regulation A Release, at text accompanying n. 893 (noting that 26 offerings, excluding amendments, 

were qualified by the Commission in calendar years 2012 to 2014, which amounts to an average of 8–9 

qualified offerings per year).
91

Table 26. Trends in Financing under Regulation A (June 2015 – December 2019)115

All Tier 1 Tier 2

Filed

Jun. 2015 to

Aggregate

amount sought

($ million)

Number 

of 

offerings

Aggregate

amount sought

($ million)

Number 

of 

offerings

Aggregate

amount sought

($ million)

Number 

of 

offerings

Dec. 2015 1,109.1 55 306.0 26 803.1 29

Dec. 2016 3,289.3 174 724.1 78 2,565.2 96

Change in 2016 2,180.2 119 418.1 52 1,762.1 67

Dec. 2017 5,909.7 265 856.8 93 5,053.0 172

Change in 2017 2,620.4 91 132.7 15 2,487.7 76

Dec. 2018 8,195.9 362 979.8 119 7,216.1 243

Change in 2018 2,286.2 97 123.0 26 2,163.1 71

Dec. 2019 11,170.2 487 1,101.5 145 10,068.6 342

Change in 2019 2,974.3 125 121.7 26 2,852.5 99

All Tier 1 Tier 2

Qualified

Jun. 2015 to

Aggregate

amount sought

($ million)

Number 

of

offerings

Aggregate

amount sought

($ million)

Number 

of 

offerings

Aggregate

amount sought

($ million)

Number 

of 

offerings

Dec. 2015 181.9 15 68.8 10 113.1 5

Dec. 2016 1,892.1 100 305.7 42 1,586.4 58

Change in 2016 1,710.2 85 236.9 32 1,473.4 53

Dec. 2017 4,153.1 185 488.1 57 3,665.1 128

Change in 2017 2,261.0 85 182.4 15 2,078.6 70

Dec. 2018 6,332.1 280 724.5 86 5,607.6 194

Change in 2018 2,179.0 95 236.4 29 1,942.5 66

Dec. 2019 9,094.8 382 759.0 105 8,335.8 277

Change in 2019 2,762.7 102 34.5 19 2,728.2 83

All Tier 1 Tier 2

Reported

Proceeds

Jun. 2015 to

Aggregate

proceeds

($ million)

Number 

of issuers

Aggregate

proceeds

($ million)

Number 

of 

issuers

Aggregate

proceeds

($ million)

Number 

of 

issuers

Dec. 2015 9.6 2 2.0 1 7.6 1

Dec. 2016 238.7 27 55.6 7 183.1 20

Change in 2016 229.2 25 53.7 6 175.5 19

Dec. 2017 668.7 78 126.0 17 542.7 61

Change in 2017 430.0 51 70.3 10 359.6 41

Dec. 2018 1,404.4 132 186.5 27 1,218.0 105

Change in 2018 735.7 54 60.5 10 675.3 44

Dec. 2019 2,445.9 183 230.4 39 2,215.6 144

Change in 2019 1,041.5 51 43.9 12 997.6 39

 115 See supra footnotes 110 and 111. Totals as of the end of the respective period reflect exclusion of 

abandoned or withdrawn offerings. Changes over time in cumulative amounts reported raised may reflect 

the timing of reporting by the company rather than the time at which the capital was raised, and therefore 

should not be used to gauge trends in capital raising activity.
92

Figure 20. Trends in Regulation A

$306 $418 $133 $123 $122

$803

$1,762

$2,488

$2,163

$2,853

0

20

40

60

80

100

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Jun.-Dec. 2015 2016 2017 2018 2019

Number

Aggregate Amount Sought (millions)

Filed Offerings

Tier 1 (aggregate amount sought) Tier 2 (aggregate amount sought)

Tier 1 (number) Tier 2 (number)

$69 $237 $182 $236 $35

$113

$1,473

$2,079 $1,943

$2,728

0

20

40

60

80

100

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Jun.-Dec. 2015 2016 2017 2018 2019

Number

Aggregate Amount Sought (millions)

Qualified Offerings

Tier 1 (aggregate amount sought) Tier 2 (aggregate amount sought)

Tier 1 (number) Tier 2 (number)
93

The characteristics of Regulation A issuers were discussed in Section II.B.2 above. 

2. Performance of Regulation A issuers116

Financial and Operating Performance

Regulation A performance can be gauged on the basis of financial and operating 

performance of issuers after the offering. Such information is not available for all issuers with 

qualified Regulation A offering statements. Where available (because an issuer has filed a 

periodic report for a fiscal period ending after the offering date, or because a Tier 1/Tier 2 issuer 

has included financial statements for a fiscal period ending after the offering date in a subsequent 

offering or registration statement or amendment to it), we can analyze changes in profitability,

assets, and revenues after the offering. 

 116 The analysis in this section excludes qualified Regulation A offerings that did not report any proceeds to 

focus on post-offering performance and to avoid confounding with other factors involved in failed or 

postponed offerings. This yields an initial sample of 182 issuers (one issuer reported proceeds for separate 

Tier 1 and Tier 2 offerings). Data availability reduces sample size in individual tables.

$2 $54 $70 $61 $44

$8 $176

$360

$675

$998

0

10

20

30

40

50

$0

$200

$400

$600

$800

$1,000

$1,200

Jun.-Dec. 2015 2016 2017 2018 2019

Number

Aggregate Reported Proceeds (millions)

Reported Proceeds

Tier 1 (aggregate reported proceeds) Tier 2 (aggregate reported proceeds)

Tier 1 (number) Tier 2 (number)
94

Table 27 below summarizes available data. As can be seen from the table, most issuers have 

small pre-offering assets and revenues. The average and median issuer with available financial 

data for the year of the offering experiences a big jump in assets and revenues, but the typical 

issuer also experiences a widening of net losses as part of expanding its operations. The changes 

are more modest in the first full post-offering year. As discussed above in the context of 

Regulation D issuers, the large magnitude of the jump relative to initial performance metrics is 

driven by the generally low initial levels of sales and assets among issuers in the sample. The 

typical issuer, however, does not experience an improvement in profitability, continuing to 

realize a net loss. This is consistent with the majority of issuers being at an early stage and 

having net losses prior to the offering and the relatively short timeframe of post-offering 

analysis. As an important caveat, the subset of Regulation A issuers with available post-offering 

financial data is not a random subset of Regulation A issuers. Data availability is skewed 

towards issuers in Tier 2 offerings that have continued to file periodic reports, rather than ceased 

operations and reporting, and towards Tier 1 issuers that have filed post-qualification 

amendments and follow-on offerings, reporting new financial data. 
95

Table 27. Financial and Operating Performance of Regulation A Issuers117

Offering Year vs. Pre-Offering Pre-Offering Change in Offering Year

($000s) Obs. Mean Median Mean Median

Assets 144 $5,338 $138 $11,245 $1,310

Revenues 144 $5,146 $0 $572 $3

Net income 144 -$1,138 -$30 -$1,157 -$194

Post-Offering Year vs. Offering Year Offering Year Change in Post-Offering Year

($000s) Obs. Mean Median Mean Median

Assets 88 $15,381 $3,260 $10,554 $1,420

Revenues 88 $2,045 $105 $1,702 $124

Net income 88 -$2,005 -$417 -$1,285 -$88

The Regulation A market and the issuers it attracts are on the continuum between private 

and traditional public markets. Performance of private companies was discussed in Section 

III.B.3 above. There are limits on comparability of performance of Regulation A issuers to that 

 117 For this analysis, only Regulation A issuers that reported some proceeds under Regulation A are 

considered, and offerings conducted in connection with stock-based mergers (largely, Tier 1 offerings) are 

excluded due to potential confounding in post-offering assets and other financial statement metrics. PreOffering data are based on the latest fiscal year prior to the initial qualification of the first Regulation A 

offering, or financial data as of inception of the issuer, for issuers with less than one full fiscal year of data 

at the time of the offering statement qualification. Offering Year data are based on the fiscal year during 

which the first offering was qualified. Post-Offering Year data are based on the fiscal year following the 

year during which the offering was qualified. Post-Offering Data are missing for a large number of the 

offerings, particularly more recently qualified offerings. Data on assets, revenue, and net income are 

gathered from EDGAR offering statements and periodic report filings from June 2015 through April 2020. 

Some data noise is possible due to filer restatements and manual data gathering. Further, we do not 

observe the date when the financing was actually raised, which may occur over a period of time after initial 

qualification, and various offerings are conducted on a continuous basis and may be ongoing. Changes are 

expressed in dollar terms to address the extreme right tail in growth rates due to observations with close-tozero values in the denominator. Because Tier 1 filers (other than Exchange Act reporting companies, who 

were first permitted to conduct Regulation A offerings on January 31, 2019) do not file periodic reports, 

their post-offering performance data are more likely to be missing. For robustness we also considered 

changes in per-share values (where data on common shares outstanding was found in filings) to account for 

the effects of issuance and other changes in shares outstanding; the results were qualitatively similar, but 

changes were smaller in magnitude.
96

of traditional public companies. Given the small size and pre- or low-revenue profile of the 

typical Regulation A issuer (median revenues of $0 and 90th (95th) percentile of $4.7 ($10.9) 

million among issuers with a qualified offering statement; median assets of $0.3 million and the 

90th (95th) percentile of $47 million ($175 million)),

118 performance comparisons with smaller 

public company issuers are more appropriate than performance comparisons with either the full 

universe of public companies or the subset of larger exchange-listed companies included in 

major indexes. 

Therefore, in Table 28 below we report data on key operating and financial performance 

metrics from 2015 through 2019 (for comparability with the Regulation A sample period) for 

reporting companies with information in CRSP/Compustat, irrespective of trading venue, with 

revenues below $10 million and assets below $200 million, which approximates the 95th

percentile of the distribution of revenues and assets of Regulation A issuers. As can be seen 

from the table, such a company is typically considerably larger and more profitable than a 

Regulation A issuer, suggesting a lack of comparability. The typical smaller public company 

therefore experiences much smaller changes in assets and revenues relative to the previous year’s 

assets and revenues on a year-to-year basis. This is consistent with a significant number of 

Regulation A issuers being in the early stages of their business lifecycle and attempting to 

expand their business through financing under Regulation A.

Table 28. Financial and Operating Performance of the Comparison Group of Public 

Companies (2015–2019)119

Public Companies with Lagged Revenues <$10 million & 

 118 The Nth percentile of revenues is the level of revenues below which N% of the sample falls. For example, 90% 

(95%) of issuers with a qualified offering statement had revenues below $4.7 million ($10.9 million).

119 Based on CRSP/Compustat North America data for fiscal years ending during 2015 through 2019, 

irrespective of trading venue. Issuers incorporated outside the United States and Canada and issuers with 

missing data on assets are excluded. Data for fiscal year 2019 are incomplete, reflecting information 
97

($000s)

Lagged Assets <$200 million

One-Year Lag One-Year Change, $

Obs. Mean Median Mean Median

Assets 1,459 $50,045 $31,018 $14,584 -$464

Revenue 1,459 -$23,720 -$16,144 -$1,947 -$832

Net Income 1,459 $2,030 $419 $4,256 $0

Survival Outcomes

In Table 29 below, we summarize the survival outcomes, on the basis of different sources 

of available data, for issuers in qualified Regulation A offerings with some proceeds. As a 

caveat, estimating survival from EDGAR filing data is very noisy because one-time Tier 1 

issuers do not have periodic reporting obligations and because making an EDGAR filing is not 

an indication that the issuer has continued significant operations or is on a path towards 

profitability. Estimates of EDGAR-based survival rates are not available for issuers with 

recently qualified offerings, and because of data limitations, we lack other information on issuer 

survival.

 retrieved as of March 29, 2020. Database coverage of smaller issuers is less comprehensive. To be 

included in the sample, an issuer must have non-missing prior year assets below $200 million and prior 

year sales below $10 million. 
98

Table 29. Survival Rates and Outcomes of Regulation A Issuers120

Metric Statistic Obs.

% continued on EDGAR +1 year 81.3% 160

% continued on EDGAR +2 years 63.2% 114

% continued on EDGAR +3 years 45.8% 59

% identified as bankrupt 0.5% 182

% identified as acquired 4.4% 182

% raised follow-on financing,

other than under Regulation A

31.9% 182

% listed on an exchange and not delisted 6.0% 182

Return Performance

Next, we summarize data on returns of issuers that raised capital under Regulation A, 

which are available for the small subset of Regulation A issuers with market price data available, 

including issuers that became exchange-listed after the offering or issuers that either had been, or 

 120 Data are as of December 31, 2019, except where specified otherwise. The percentages do not add up to 

100% because an issuer may fall under multiple categories. 

% continued on EDGAR is based on periodic report or offering or registration statement filings (excluding 

comment letters, offering withdrawals, or non-timely filing notices) within the specified period after the 

initial Regulation A offering qualification. The respective time period since the initial qualification must 

elapse for a filer to be included in the statistic.

% identified as bankrupt is based on searches of S&P Capital IQ and Ives Group’s Audit Analytics data. 

Identification of filers filing for bankruptcy protection may be underinclusive and companies with limited 

debt or collateral would likely liquidate outside of a bankruptcy proceeding.

% identified as acquired is based on S&P Capital IQ data on M&A transactions from June 2015 through 

December 2019 where the Regulation A issuer is identified as the target and that were announced after the 

initial Regulation A offering qualification. This estimate may be underinclusive of deals involving targets 

and acquirers that are not reporting companies.

% raised follow-on financing is based on S&P Capital IQ data on financing transactions and Ives Group’s 

Audit Analytics data on Form D filings of Regulation A issuers after the initial Regulation A offering 

qualification. This estimate may be underinclusive of unregistered offerings, particularly unregistered 

offerings that are not reliant on Regulation D.
99

became, OTC-quoted after the offering. Available trading data for those issuers are obtained 

from CRSP and OTC Markets and summarized in Table 30 below. (Investment companies, or 

funds, are ineligible to rely on Regulation A, therefore we do not report information on fund 

performance for the Regulation A portion of the analysis.)

Table 30. Returns of Traded Regulation A Issuers121

Companies Exchange-Listed OTC-Quoted

Metric Mean Median Mean Median

Number of Companies with Available Data 13 28

Number of Trading Days Per Company 420 531 404 393

Annualized Buy-and-Hold Returns from Offer -15.1% -45.4% 11.3% -14.4%

Annualized Buy-and-Hold Returns from Listing -23.5% -47.7% -2.9% -23.9%

Annualized Buy-and-Hold Returns from Offer, in 

Excess of Market return

-23.1% -55.1% 17.0% -55.0%

Annualized Buy-and-Hold Returns from Listing, in 

Excess of Market Return

-33.9% -58.4% 2.3% -61.7%

 121 For exchange-listed Regulation A issuers, returns are based on CRSP daily data, covering the period from 

listing date or the first available date with CRSP data to delisting date or December 31, 2019, whichever is 

earlier. Buy-and-hold returns are constructed by compounding daily returns assuming investment at offer 

date or listing date as specified. For three issuers that were delisted during the sample period, delisting 

returns are incorporated in the final daily return. Distributions are excluded. Returns are adjusted for stock 

splits. Unlike the case of a traditional exchange-listed IPO, an exchange listing may follow a Regulation A 

offering with a considerable lag. For OTC-quoted issuers, returns are based on prices reported in OTC 

Markets. In some cases the OTC-quoted share class may not be the same share class as issued in the 

Regulation A offering, which we cannot determine with certainty due to limitations of available data. 

Issuers that were listed on an exchange after the offering but subsequently delisted are not included in the 

OTC subsample, to avoid double-counting. Five additional issuers were OTC-quoted at some point but 

lacked sufficient trading data to construct returns during the specified period. Regulation A offer dates and 

prices are obtained from Regulation A offering statements (for exchange-listed issuers, confirmed via news 

searches), even in case where an issuer pursues a subsequent registered offering. Returns are compounded 

and annualized. Returns are sensitive to market conditions, thus, returns in excess of market return (return 

of the CRSP value-weighted market index) are also reported.
100

Because most of the exchange-listed Regulation A issuers have not previously sought 

financing in a public offering, one potential way to provide context for evaluating their returns is 

to look at the average returns of traditional (registered, exchange-listed) IPOs. Three-year buyand-hold post-IPO returns averaged 22.4% during 1980 through 2018, with considerable 

variation based on issuer size, profitability, and the presence of VC/PE backing (three-year postIPO returns averaged -9.0% for companies with under $10 million in revenue, 3.3% for 

unprofitable companies, and 17.0% for IPOs without a financial sponsor, categories which may 

be more in line with the characteristics of a typical Regulation A company).

122 These estimates 

exclude first-day returns (from offer price to first market close), which during 1980 through 2018 

were estimated to be 17.9% for the average IPO (21.6% for issuers with revenues under $10 

million, 25.6% for unprofitable issuers, and 13.5% for issuers without a financial sponsor).123

Thus, one approximate benchmark for first-year returns from offer price for exchange-listed 

Regulation A companies could be 26% for all issuers (18% for issuers with revenues below $10 

million, 27% for unprofitable issuers, and 20% for issuers without a financial sponsor).

124 Postoffering performance of exchange-listed Regulation A issuers was below those benchmarks in 

 122 See Jay R. Ritter, Initial Public Offerings: Updated Statistics on Long-Run Returns (Mar. 10, 2020), at 

Tables 16, 17, and 19, available at

https://site.warrington.ufl.edu/ritter/files/IPOStatistics2019_Longrun.pdf. Equal-weighted average threeyear buy-and-hold percentage returns (capital gains plus dividends) are calculated from the first closing 

market price to the earlier of the three-year anniversary price, the delisting price, or December 31, 2019. 

Buy-and-hold returns for IPOs occurring after Dec. 31, 2018 are not calculated. During 2015 through 

2018, the equal-weighted average of post-IPO three-year returns calculated in this source was estimated to 

be approximately 29.8% (obtained by weighting annual data on average three-year returns by the number 

of IPOs per year).

123 See id. During 2015 through 2018, the equal-weighted average of post-IPO three-year returns was 

approximately 16.7% (obtained by weighting annual average first-day returns by the number of IPOs per year). 

124 These numbers are rough approximations obtained as the product of one plus the average first-day return and 

one plus the annualized average three-year return from first close (assuming a three-year period).
101

absolute terms, but in light of the small sample size, it was statistically indistinguishable from the 

benchmarks. 

Another potential benchmark is the return of a comparison group of non-Regulation A 

issuers during 2015-2019. Since most of the subset of Regulation A issuers that are listed or 

quoted are OTC-quoted or small listed companies, we consider the returns of (1) reporting OTC 

issuers (excluding the grey market) and (2) exchange-listed companies with revenues below $10 

million and assets below $200 million.

125 Table 31 below presents the results. Using the 

average annual return shown in Table 31 as a benchmark, we observe that the returns of this 

subset of Regulation A issuers were on average below the benchmark. Given high variance and 

small sample size, Regulation A issuers’ returns were not statistically significantly below the 

benchmark. 

 125 As discussed above, these thresholds approximate the 95th percentile of revenues and assets, respectively, 

among issuers with a qualified Regulation A offering during this period, although the typical reporting 

company meeting this maximum size cap is still considerably larger than a typical Regulation A issuer. We 

consider listed companies separately due to differences in data sources. 
102

Table 31. Returns of the Comparison Groups of Public Companies (2015–2019)126

Companies Reporting OTC Companies Exchange-Listed Companies 

with Revenues <$10 million 

& Assets <$200 million

Return Metric Obs. Mean Median Obs. Mean Median

Annual Returns 9,259 25.1% -22.2% 2,607 3.1% 0.0%

Annual Returns in Excess 

of the Market Index

9,259 14.2% -33.0% 2,607 1.2% -2.1%

Important caveats apply. Small sample size significantly limits the power of the analysis.

Changes in aggregate conditions and Regulation A market practices affect the extent to which 

past Regulation A performance may be indicative of the outcomes of future offerings.

127 As 

discussed in the context of Regulation D, significant differences in the initial characteristics of 

Regulation A and non-Regulation A issuers likely remain. Further, return differentials should 

not be interpreted causally because of the highly non-random nature of issuer choice to use 

Regulation A.

 126 Statistics reflect data from an unbalanced panel (i.e., companies may leave and enter the sample) to avoid 

survivorship bias. Return statistics are reported separately for OTC-quoted and exchange-listed securities 

due to different data sources. Returns are winsorized at 1% and 99% of the distribution to address outliers. 

Returns of OTC-quoted securities are based on daily close prices in OTC Markets data. Only common or 

preferred shares are considered. If there are multiple share classes, the share class with the largest market 

cap is retained. The market index return is the annual return of the value-weighted CRSP portfolio as 

provided by Kenneth French. We exclude grey market securities, investment funds, and issuers 

incorporated outside the United States and Canada, but we do not exclude REITs or penny stocks. If no 

close price at the end of the year is available, the latest close price in that calendar year is used to calculate

the annual return. Returns of exchange-listed securities are based on CRSP data, excluding distributions. 

We exclude companies with missing information on revenues or assets in Compustat, investment funds, 

and issuers incorporated outside the United States and Canada.

127 Nasdaq has amended listing eligibility requirements for Regulation A companies seeking to list on Nasdaq 

to require issuers to have a minimum operating history of two years at the time of approval of its initial 

listing application. See Order Granting Approval of a Proposed Rule Change to Adopt Additional 

Requirements for Listings in Connection with an Offering under Regulation A of the Securities Act, Release 

No. 34-86246 (June 28, 2019) [84 FR 32245 (July 5, 2019)]. Recently, the Commission also has proposed 

amending Regulation A to, among other provisions, expand the Regulation A offering limit. See 

Harmonization Proposing Release.
103

Finally, the 2020 Regulation A Lookback Report presented available evidence on the rate 

of misconduct by Regulation A issuers: From the effective date of the 2015 Regulation A 

amendments through December 2019, there have been relatively few instances of legal 

proceedings involving issuers or intermediaries relying on Regulation A, some of which are

ongoing.128 

IV. Conclusions

This report has examined available data and evidence on the state and performance of the 

U.S. exempt offering market, focusing on offerings under Regulation A and Regulation D. 

Throughout the analysis, we have examined available evidence from primary data sources, 

academic research, and external studies to the extent applicable, as well as outlined the 

limitations of presented inference and underlying performance data.

Unregistered offerings under Regulation D, particularly Rule 506(b) offerings by private 

investment funds, have dominated the examined offering activity. As a capital-raising tool, 

Regulation D accounts for a large share of the offering market and offers a robust choice for 

issuers seeking to raise capital. Over the past decade, Regulation D offerings have seen a steady 

increase in number of offerings and amounts raised. In terms of both amounts raised and number 

of offerings, the Regulation D market has surpassed registered offerings in the past few years. In 

2019, over $1.5 trillion was reported raised under Regulation D. By comparison, approximately 

$1.2 trillion was raised through registered offerings, and just over $1 billion was reported raised 

 128 See Regulation A Lookback Report, supra footnote 6, at Section E.1 and n. 39–41. The report notes that the 

“ability to quantify the risk of fraud in Regulation A offerings is limited by a relatively small sample size; 

latency of fraud (not all incidences may be detected or result in observable legal actions); and high business risk 

and failure rates of small and startup businesses under normal conditions. . .”. As an important caveat, the 

Lookback Report looked at all instances of alleged violations of securities laws and SEC regulations that 

resulted in SEC litigation or administrative proceedings against the issuer, which is not limited to fraud and thus 

may overestimate the rate of incidence of fraud.
104

under Regulation A during the same timeframe. Much like public capital markets, capital raising 

through Regulation D offerings is also pro-cyclical.

The dominant issuers in the Regulation D market are private funds, which raised more 

than $11 trillion of the $15.5 trillion sold in Regulation D markets during 2009 through 2019. 

However non-fund issuers dominate in terms of number of offerings. The Banking/Financial, 

Technology, and Real Estate industries raised the most amounts among non-fund issuers. The 

top five states in terms of number of offerings are California, New York, Florida, Texas, and 

Massachusetts.

Private funds account for the majority of capital raised under Regulation D. We have 

considered the performance of private funds during this period, to the extent data are available. 

PE and VC funds exhibited strong net IRRs, with significant variation across funds. Similarly, 

hedge funds exhibited generally strong returns in absolute terms during this period. However, 

this period has also coincided with favorable market performance, resulting in high market 

portfolio returns. As an important caveat, the distinct risk and illiquidity profile of private funds, 

as well as differences in data sources and methodologies for measuring performance, make direct 

comparisons with mutual fund and market portfolio returns difficult. 

As more than 95% of Regulation D non-fund issuers are private companies, performance 

data are scarce. Based on an analysis of a small subset of public companies with Regulation D 

offerings, in line with prior studies, we find such companies tend to be smaller, less profitable,

and more financially constrained than public companies conducting registered offerings. The 

small subset of public companies relying on Regulation D grew faster one year after the offering 

but had lower profitability and stock returns, compared to public companies undertaking 

registered offerings. As an important caveat, because a reporting company’s choice of the 
105

financing method is not random and the distribution of firm characteristics is very different, 

these performance differentials should not be interpreted causally. Further, these conclusions are 

based on an analysis of only 2% of Regulation D issuers (4% of non-fund Regulation D issuers) 

and therefore are not representative of the universe of non-fund Regulation D issuers. Analyzing 

survival outcomes of Regulation D issuers, on the basis of limited data coverage, we find that a 

number of Regulation D issuers go on to become public companies through an IPO, while some 

companies get acquired by other companies and some declare bankruptcy. Further, with the 

caveat about latency of violations of securities laws and regulations, we have identified relatively 

few civil actions involving Regulation D issuers.

Next, we have considered available data on Regulation A from the effectiveness of the 

amendments that dramatically expanded Regulation A (mid-2015) through the end of 2019. 

Examining the performance of Regulation A as a capital-raising tool, we observed that 

Regulation A met with somewhat mixed offering success during this period. While the use of 

Regulation A has increased over time, amounts reported raised were generally below amounts 

sought, with the caveat that proceeds information is incomplete because of lags in reporting and

most offerings being made on a continuous basis. 

Among Regulation A offerings, Tier 2 accounted for most of the issuer activity, 

successful offerings, and growth in proceeds. This is consistent with both larger offering limits 

and higher issuer interest (because of offering limits and other features that may make Tier 2 

attractive, including blue sky preemption). Among issuers with some offering proceeds, close to 

80% of issuers continue to file reports on EDGAR one year after the offering, and just under 

one-half of issuers continue to report three years after the offering. Further, with the caveat 
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about latency of violations of securities laws and regulations, we have identified relatively few 

enforcement actions involving Regulation A issuers.

We have also considered post-offering financial, operating, and market performance of 

Regulation A issuers, where data were available. We find that the typical issuer experienced a 

considerable increase in assets and revenues, but not in profitability, following the offering. The 

magnitude of the jump is related to the small initial size and early stage of the typical issuer. A 

minority of issuers that raised capital under Regulation A had a secondary trading market for 

their securities. Among Regulation A issuers that had a class quoted on the OTC market or listed 

on a stock exchange, stock returns after the offering were positively skewed, with means higher 

than the negative median performance. Typical performance, in absolute terms and in excess of 

the market index return, was below performance benchmarks on the basis of other groups of 

issuers. However, underperformance was not statistically significant. As a caveat, the analysis 

and our inference are limited by small sample size, data noise, and self-selection of issuers into 

the Regulation A market (i.e., the reasons for the choice of the financing method could be 

correlated to performance). 

The Regulation A and Regulation D markets have a number of unique characteristics that 

attract different types of issuers, offerings, and investors. Regulation D accounted for 

significantly more capital raising than Regulation A, with the difference on the order of 

magnitude of 1000x in a typical year during the examined period. Although the use of 

Regulation D by private funds, which are ineligible to rely on Regulation A, plays a significant 

role, Regulation D use by non-fund issuers also significantly outpaced Regulation A use. 

Excluding funds, most of the issuers relying on both exempt offering methods are small unlisted 

companies, which considerably limits data availability. However, some of the operating 
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companies utilizing these offering methods for which data are available exhibit considerable 

growth potential.