This annual report of the Office of the Advocate for Small Business Capital

ANNUAL REPORT FOR FISCAL YEAR 2019
Office of the Advocate for  
Small Business  
Capital Formation
U.S. SECURITIES AND EXCHANGE COMMISSION

ABOUT THIS REPORT + ACKNOWLEDGEMENTS
This annual report of the Office of the Advocate for Small Business Capital 
Formation for Fiscal Year 2019 is being delivered to the Committee on 
Banking, Housing, and Urban Affairs of the U.S. Senate and the Committee 
on Financial Services of the U.S. House of Representatives in accordance 
with Section 4(j) of the Securities Exchange Act of 1934 (the Exchange 
Act), as amended by the SEC Small Business Advocate Act of 2016,  
15 U.S.C. § 78d(j)(6).
Pursuant to Section 4(j)(6)(D) of the Exchange Act, this Report is provided 
directly to the committees of Congress without any prior review or 
comment from the Commission, any Commissioner, any other officer 
or employee of the Commission, or the Office of Management and 
Budget. It does not necessarily reflect the views of the Commission, the 
Commissioners, or staff of the Commission.
The work of the Office is possible only through the support of a talented 
and passionate team. While the Office has been supported by many 
colleagues across the agency during its first year in operation, we recognize 
the following team members who worked in the Office during FY2019:
Emerald Greywoode Boston-Mammah            Jessica W. McKinney 
Colin A. Caleb                        Jennifer Riegel
Julie Zelman Davis                          Malika Sullivan
 
Special thanks to our colleagues within the SEC for providing resources  
for this Report, including the Division of Economic and Risk Analysis  
for providing SEC data to quantify the state of small business capital 
formation and contextualize issues, and the Office of Public Affairs 
for making our written product for this report visually engaging. We 
particularly thank the following individuals: Daniel Bresler, Vlad Ivanov, 
Andy Kim, Anzhela Knyazeva, Wei Liu, Chris Onrubia, Narahari Phatak, 
Zehra Sikandar, and John Zheng.

ANNUAL REPORT: FISCAL YEAR 2019    |    i
Message from the Advocate
“Small businesses are the backbone of our economy” is a statement so 
often repeated that it has become a standard line used almost ubiquitously 
by leaders, both political and apolitical.
1
 Rightly so, given the role smaller 
companies play in our economy—from being the primary job creators 
over the past two decades, to the innovators of new technologies that 
change lives, to the generators of wealth for many investors. Yet small 
businesses are often underrepresented here in Washington, DC, where 
laws and rules impacting their operations are made.
I have the opportunity of a lifetime to serve as the U.S. Securities and 
Exchange Commission’s (SEC) first Advocate for Small Business Capital 
Formation after being appointed in December 2018 and beginning to build the SEC’s newest office starting 
in January 2019.
2
 During our formative first year of operation, I approached building our Office with the 
only frame of reference I had coming from the private sector: like a start-up. We crafted a business plan
3
 
to communicate with the public our mission, vision, and approach for supporting small businesses’ capital 
formation needs, just like many start-ups do before pitching to investors. Knowing that we needed to scale 
pragmatically and efficiently, we defined our minimum viable product (or MVP) and documented the steps 
we would take to achieve full scale programming, along with a timeline to provide visibility of what you 
could expect from us and when.
At almost every event we host, we simultaneously engage with businesses and their investors, recognizing 
that the success of businesses is interwoven with the success of their investors. In speaking with new 
audiences, I often analogize our Office to a megaphone, explaining that we take the ecosystem’s voices and 
make them louder within the SEC and the broader regulatory landscape to positively impact policy. It is 
my hope that this inaugural report will do just that: take the many voices that we hear, distill them into a 
concise summary, and communicate in a compelling manner what small businesses and their investors tell 
us that they need from our capital markets.
Looking back at FY2019 and our first nine months, I am proud of what we have accomplished to date, 
and I look forward to working collaboratively with the Commission, Congress, and our agency partners to 
deliver meaningful solutions to support the backbone of our economy: small businesses. We are proud to 
be, as many a small business storefront sign says, “Open for Business.”
MARTHA LEGG MILLER
Advocate for Small Business Capital Formation

Breaking Down Our Long Title
An independent office housed 
within the U.S. Securities 
and Exchange Commission, 
created by Congress via  
special legislation
One called to use your 
voice for others, derived 
from Medieval Latin
Office of the Advocate for
Small Business Capital Formation
From start-ups t
o small cap, 
“small” is relative for the SEC’s 
newest Office, which supports 
emerging, privately-held 
companies up to small public 
companies
The deployment of 
productive capital by 
informed investors to  
create economic growth

ANNUAL REPORT: FISCAL YEAR 2019    |    iii
Contents
ABOUT THE OFFICE   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .111
INAUGURAL YEAR OF THE OFFICE IN REVIEW   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .14
STATE OF SMALL BUSINESS CAPITAL FORMATION   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  1111
Small, Emerging Businesses   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  116
Mature and Later-Stage Businesses   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 121
Small Public Companies   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 24
Founder Demographics & Capital Formation
   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  26
Natural Disasters & Capital Formation   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  34
Rural Communities & Capital Formation .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  36
POLICY RECOMMENDATIONS   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 39
Modernize, Clarify, and Harmonize Exempt Offering Framework   .   .   .   .   .   .   .   .   .   .   .   .  40
Investor Participation in Private Offerings   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  141
Engaging Investors via Finders   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  44
Crowdfunding .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  46
Scaled Obligations for Smaller, Less Complex Reporting Companies   .   .   .   .   .   .   .   .   .  48
SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE   .   .   .   .   .   .   .   .   .   .  151



ANNUAL REPORT: FISCAL YEAR 2019    |    1
About the Office
C
ongress created the Office to 
provide a dedicated champion 
to smaller companies accessing 
critical capital to build, grow, and 
thrive. The Office operates pursuant 
to sections 4(j) and 40 of the Securities 
Exchange Act of 1934 (15 U.S.C. §§ 
78d and 78qq), as added by the SEC 
Small Business Advocate Act of 2016 
(P.L. 114-284) and amended by the 
Small Business Access to Capital after a 
Natural Disaster Act (title IX of division 
S of Public Law 115-141) (collectively, 
the Small Business Advocate Act).
The Office officially commenced operations in January 2019. As an independent office reporting 
directly to the Commission, the Office is statutorily charged with the following functions: 
§	Assisting small businesses and their investors in resolving significant problems they may have 
with the SEC or with self-regulatory organizations (SRO);
§	Identifying areas in which small businesses and their investors would benefit from changes in 
SEC regulations or SRO rules;
§	Identifying problems that small businesses have with securing access to capital;
§	Analyzing the potential impact on small businesses and their investors of proposed SEC 
regulations and SRO rules;
§	Conducting outreach to small businesses and their investors to solicit views on capital  
formation issues;
§	Proposing appropriate regulatory and legislative changes to the SEC and Congress to  
mitigate problems identified with small business capital formation and to promote the interests 
of small businesses and their investors; and
§	Consulting with the Investor Advocate on such regulatory and legislative changes and other 
small business issues.
The Office also proactively works to identify any unique challenges faced by minority-owned small 
businesses, women-owned small businesses, and small businesses affected by natural disasters.
Director Martha Miller describes the role of her office at the SEC to small business  
owners and entrepreneurs in Kansas City, MO .

2  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
The Office hosted a round table in Little Rock, AR at the Venture Center, a nonprofit fintech accelerator focused on solutions 
for community banks .
Scope of Small Businesses
The Office supports a spectrum of small businesses and their investors, from emerging, privately-held 
businesses to publicly traded companies with less than $250 million in public market capitalization.
4
 
Based upon commonalities in sources of capital and issues faced, the Office has segmented its target 
market into three categories of businesses and their corresponding investors:
Complexity of funding sources and offering types
Capital markets + liquidity
Small, emerging 
businesses
Mature and later-stage
businesses
Small reporting
companies

ANNUAL REPORT: FISCAL YEAR 2019    |    3
Our Mission
The Office’s mission is to advocate for small businesses and their investors to foster better access  
to capital markets, strengthening the voice of small business within the SEC and the broader 
regulatory landscape.
Work with small businesses 
to understand their capital 
formation issues through 
education and outreach
Analyze the potential impact of 
proposed rules and regulations 
likely to significantly affect  
small businesses
Help small businesses  
resolve issues with the SEC  
and SROs by recommending 
policy changes
Core Tenets
The Office adheres to the following core tenets in approaching its delivery of services and solutions  
to small businesses and their investors:
§	Small businesses are job creators, generators of economic opportunity, and fundamental to the 
growth of the country.
§	One size does not fit all for small businesses.
§	Good work has been done by the SEC, but we are not done and should continue to evolve as the 
market demands.
§	Small business policy should facilitate trust and confidence in capital markets to encourage 
efficient allocation of investment dollars.
§	We serve as a collaborator with, and contributor to, other SEC divisions and offices and SROs, 
not as an auditor.
Values
The Office is guided by four core values:
§	ACCESSIBILITY — We engage with both small businesses and their investors, as well as with  
the SEC, SROs, Congress, and other agencies on a regular basis through a variety of channels.
§	TRANSPARENCY — We are visible and open in our approach to supporting small businesses 
and their investors.
§	PRAGMATISM — We approach problems with a solution-oriented mindset by making  
practical, market-driven recommendations.
§	EFFICIENCY — We operate like a lean start-up, maximizing resources and focusing activities 
where the Office can have a measurable impact.

Inaugural Year of the Office in Review
LAUNCH OF THE SEC’S NEWEST OFFICE
JANUARY  
31
Martha Legg Miller was sworn in as 
the first Advocate for Small Business 
Capital Formation, with initial team 
members joining shortly thereafter .
MARCH  
18-20
Office hosts first external 
engagement events with  
entrepreneurs and investors in 
Kansas City, MO and KS .
APRIL  
8
Publication of Foundational  
Business Plan
5
 and roll out  
of plans for 2019 activities at 
SEC Speaks .
M AY    
6-10
National Small Business Week,  
including Small Business Roundtable 
with Commissioners, inaugural meeting 
of the Small Business Capital Formation 
Advisory Committee, and celebration  
of the 100th day of the Office .
JULY  
22
Office launches explanatory videos 
on how to comment, highlighting 
small business-related rulemakings 
in plain English .
AUGUST  
13
Advisory Committee hosts first out 
of DC meeting in Omaha, NE, making 
recommendations on open rulemakings .
AUGUST  
14
Office hosts the 38th Annual 
Government-Business Forum on 
Small Business Capital Formation in 
Omaha, NE at Creighton University .

ANNUAL REPORT: FISCAL YEAR 2019    |    5
Business Plan
Throughout the first year of our Office, we have often referred to ourselves 
as a “start-up within the government,” challenged with operationalizing and 
delivering solutions to our “customers”—small businesses and their investors—
starting from a blank slate. We began building out the Office by engaging in 
the same work that thousands of startups across the United States engage in 
each year: developing a business plan.
6
 Starting with our enabling legislation 
as guideposts, we crafted a statement of our Office’s mission to guide each 
decision we would make, keeping small businesses’ and their investors’ 
needs first of mind. Just as businesses do, we followed that by defining our 
target market and began identifying the capital formation needs of different small 
business market segments. With the mission and target market established, we outlined the products, 
programs, and services our Office would deliver, established projected launch dates, and began  
identifying critical components of each deliverable to ensure that we scale in a lean and efficient 
manner, again adopting a business-oriented mindset to solutions tailored to our target market. We 
created the business plan as a compass to guide decisions internally, as a pacesetter to keep us on track, 
and as a roadmap to guide expectations externally. Because of the premium we place on transparency, 
we put the business plan on our website to be open about our thought process and plan of action.
Outreach Activities
EVENTS/SPEAKING ENGAGEMENTS  POINTS OF CONNECTION

6  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Highlighted Engagements in Fiscal Year 2019
In addition to hundreds of meetings, phone calls, emails, and cups of coffee shared with individuals 
across the small business ecosystem, we have sought out opportunities to engage with diverse groups 
of small business thought leaders—our Office’s customers—through events, speaking engagements, 
and networks of potential beneficiaries of our Office’s products, programs and services. Some of the 
events in which we have engaged this year include:
Road to Global 
Entrepreneurship  
Summit
7
March 19, 2019
Overland Park, KS
Panel discussion alongside 
individuals from the public 
and private sector, hosted 
by the U .S . Department 
of State .
SEC Speaks 2019
9
April 8, 2019
Washington, DC 
Launch of the Office’s 
Foundational Business 
Plan
10
 and plans for 
inaugural year of the 
Office .
Investment Company 
Institute’s Small Funds 
Committee
April 30, 2019 
Washington, DC
 
Solicitation of investor 
input from smaller 
funds and investment 
companies .
Roundtable with  
Colorado Small 
Businesses and  
Investors
May 3, 2019 
Denver, CO
 
Roundtable discussion 
with small business 
owners and investors  
on pressing capital 
formation issues .
March 20, 2019 
Kansas City, MO
  
Town hall meeting with 
small business owners, 
investors, and aspiring 
entrepreneurs .
Town Hall Meeting  
at the 1 Million Cups
8
April 9, 2019 
Washington, DC
  
Discussion of the creation 
of the Office and role at 
the SEC with international 
securities regulators .
International Institute  
for Securities Market 
Growth and  
Development
11
May 3, 2019 
Denver, CO
 
Discussion of legal issues 
in small business capital 
formation in the Rockies .
Rocky Mountain  
Securities Conference
12
May 6, 2019 
Washington, DC
 
Roundtable focused  
on experiences of 
businesses and investors 
raising capital and 
investing outside of 
coastal “hot spots .”
National Small Business 
Week Roundtable on 
“Capital Formation 
Between the Coasts”
13

ANNUAL REPORT: FISCAL YEAR 2019    |    7
National Association 
of Women Business 
Owners’ Advocacy Day
14
June 4, 2019 
Washington, DC
 
Collaboration with female 
entrepreneurs on their 
national advocacy day .
38th Government-
Business Forum on 
Small Business Capital 
Formation
15
August 14, 2019
Omaha, NE
 
Hosted forum, gathering 
members of the public 
and private sectors to 
craft suggestions for 
securities policy .
U .S . Black Chambers 
10th National 
Conference
17
August 20, 2019 
National Harbor, MD
  
Panel discussion on  
the art of capital raising 
and deal activity .
Rural RISE 2019 
Summit
19
Sept. 18, 2019 
Pine Bluff, AR
 
Panel discussion 
highlighting government 
resources to empower 
rural communities to 
foster entrepreneurship .
June 10, 2019 
Washington, DC
 
Discussion with NSBA’s 
Leadership Council on 
their top issues .
National Small  
Business Association
August 15, 2019 
Omaha, NE
 
Pitched the Office  
like an entrepreneur  
at the largest Midwestern 
entrepreneurship 
conference .
Maha Discovery  
Festival
16
Sept. 17, 2019 
Little Rock, AR
 
Roundtable discussion 
with the Little Rock 
startup and fintech 
community .
The Venture Center 
Roundtable
18
Sept. 19, 2019 
New York City, NY
  
Fireside chat discussing 
issues faced by small 
reporting companies and 
their investors, and Inside 
the IceHouse podcast 
episode 
recording .
20
NYSE American  
Emerging Companies 
Summit

8  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Launch of Video Content
Small business owners and their 
investors often do not engage 
with the SEC (or other federal 
government agencies) for many 
reasons, including lack of time and 
resources. In an effort to increase 
engagement in the regulatory 
process, the Office piloted four 
videos in FY2019 that, in 3-5 
minutes, provide a high-level, plain 
English overview of a rulemaking 
topic, how it affects small business interests, and how the viewer can engage and provide feedback. 
These videos are a reflection of growing trends in information consumption, with 80% of all 
internet traffic in 2020 projected to be video.
21
 
The FY2019 videos included:
22
§	How to Comment: Engage in the Rulemaking Process
§	Harmonization of the Exempt Offering Framework
§	Accelerated Filer Proposed Amendments
§	Simplifying the M&A Accounting Rules
The videos reflect the changing nature of how people are consuming information and prioritizing 
visual content. External audiences have been far more willing to stream a short video about a 
securities law topic that they see on social media than to dig into a lengthy PDF on SEC.gov to 
find out it if is relevant to them. Going forward, the Office will continue exploring video and other 
forms of media to better engage with and inform small businesses and investors.
Small Business Forum
The Office hosted the SEC’s 38th annual Government-Business Forum on 
Small Business Capital Formation on August 14, 2019 in Omaha, Nebraska 
at the Heider College of Business at Creighton University, continuing the 
SEC’s three-year tradition of taking the Forum outside of Washington, 
DC. The Forum is a unique event where members of the private and 
public sectors converge to identify and highlight issues they experience 
in accessing capital and investing in small businesses and then formulate 
solutions on which the government can take action. The Office assumed 
responsibility for the Forum beginning in FY2019 under the Small 
Business Advocate Act. A separate report has been delivered to Congress 
summarizing the proceedings and recommendations of the participants.
23

ANNUAL REPORT: FISCAL YEAR 2019    |    9
[Top] “Capital Formation Success 
Stories from the Silicon Prairie” panelists 
and SEC Commissioners engage in a 
thoughtful dialogue about capital raising .
[Center] SEC Commissioners and  
“Harmonization: What a Concept!”  
panelists .
[Bottom left] Commissioner Rob  
Jackson visits with business owners  
and investors .
[Bottom right] Commissioner Allison 
Herren Lee talks with panelists and  
participants .



ANNUAL REPORT: FISCAL YEAR 2019    |    11
State of Small Business 
Capital Formation
T
he data provided in this Report is derived from a combination of public filings with the SEC, as 
analyzed by the SEC’s Division of Economic and Risk Analysis (DERA), and is supplemented 
with figures and findings from third parties. In doing so, we hope to provide a snapshot view of 
th e state of U.S. small business capital formation, amalgamating many important pieces of the
capital formation story into one resource to aid in evaluating the current flow of invest ment capital 
between small businesses and investors. The data supplements anecdotal evidence and helps quantify 
t
he successes and challenges in small business capital formation nationwide. Using data, we can better 
identify what tools, strategies, and approaches would be most helpful in crafting policy solutions. Unless 
otherwise indicated, the data period utilized for DERA data is July 1, 2018 to June 30, 2019.
What regulatory pathways are companies using to raise capital?
24
Private OfferingsPublic Offerings
25
Regulation D
Rule 506(b)
Private Placements
Rule 506(c)
Accredited 
Investor 
Crowdfunding
Rule 504 
Limited 
Offerings
Regulation A
Mini IPOs
Regulation CF
Crowdfunding
Initial 
Public 
Offerings
Other Registered 
Offerings, including 
Secondary Offerings
$1.4T
$1 .9M 
median
$210B
$1M 
median
$260M
$200,000 
median
$800M
$3 .7M 
median
$54M
$80,000 
median
$50B
$90M 
median
$1.2T
$313M 
median

12  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
What are the primary types of offerings and what companies are 
using them?
OFFERING TYPEIN A NUTSHELLTYPICAL CO. PROFILE
Equity Crowdfunding  
Regulation Crowdfunding
26
Raising up to $1 .07 million  
from many investors online .
Limited Offerings  
Rule 504 of Reg D
27
Raising up to $5 million from 
investors, often with whom the 
company has a relationship .
Intrastate Offerings  
Section 3(a)(11) and  
Rules 147 and 147A
28
Raising capital locally according 
to state law exemptions, which 
generally cap the offering at 
between $1 million to $5 million, 
depending on the state .
Private Placements  
Rule 506(b) of Reg D or 
Section 4(a)(2)
29
Raising unlimited capital from  
higher net worth investors 
with whom the company has a 
relationship .
Accredited Investor Crowdfunding 
Rule 506(c) of Reg D
30
Raising unlimited capital from  
higher net worth investors, often 
online, using general solicitation .
Mini Public Offering 
Regulation A
31
Raising up to $50 million from 
many investors online .
Registered Offerings (including 
Initial Public Offerings)
Securities Act of 1933
32 
Raising large amounts of capital 
through “IPOs” or secondary 
offerings through a registration 
statement filed with the SEC .
SMALL, EMERGING  
BUSINESSES
MATURE AND LATER-STAGE 
BUSINESSES
SMALL PUBLIC 
COMPANIES

ANNUAL REPORT: FISCAL YEAR 2019    |    13
How are companies using the offering types in the industries 
that raise the most capital (excluding pooled funds)?
33
BANKING
TECHNOLOGY
MANUFACTURING
REAL ESTATE
ENERGY
HEALTH CARE
REGISTERED OFFERINGS    REGULATION D     REGULATION A
0100200300400
Billions
$397B
$138B
$129B
$58B
$105B
$92B
$19B
$23B
$67B
$3B
$39B
$2B
$163M
$12M
$48M
$486M
$0M
$49M
The Office joined o
ver 300 rural capacity builders in Pine Bluff, Arkansas at Rural RISE, highlighting government resources to empower 
rural communities fostering entrepreneurship .

Where are companies raising capital?
34
The maps included in this section illustrate the concentration of estimated total capital raised under 
various different offering types by issuers that report a primary location in the U.S., with the number of 
offerings conducted indicated on each state.
$0 - $100 MILLION $100 MILLION - $1 BILLION $1 - $10 BILLION 
Over $10 BILLION
AK
22
AL
185
AR
82
AZ
416
CA
6927
CO
1103
DC
251
FL
1499
DE 
382
GA
794
HI
36
ID
81
IL
1762
IN
254
KS
145
KY
168
LA
72
ME
76
MD
535
MI
360
MN
473
MO
316
MS
34
MT
36
NC
690
ND
49
NE
51
NH
119
NM
55
NJ
659
NV
222
NY
7659
OH
638
OK
97
OR
366
PA
1133
SC
171
RI
87
CT
1083
MA
2172
SD
34
TN
345
TX
3155
UT
1501
VA
663
VT
75
WA
1358
WI
231
WV
13
WY
99
PR
50
VI
3
IA
109
GU
1
Regulation D
$10,000 - $500,000 $500,000 - $2 MILLION 
Over $2 MILLION
Equity  
Crowdfunding
AK
1
AL
0
AR
1
AZ
6
CA
85
CO
7
DC
2
FL
13
DE 
2
GA
5
HI
2
ID
1
IL
11
IN
0
KS
0
KY
3
LA
4
ME
1
MI
5
MN
2
MO
6
MS
2
MT
0
NC
2
ND
0
NE
0
NH
0
NM
0
NJ
3
NV
5
NY
44
OH
8
OK
0
OR
4
PA
16
SC
4
CT
5
SD
0
TN
5
TX
26
UT
6
VA
8
VT
1
WA
6
WI
0
WV
0
WY
0
PR
1
VI
0
IA
1
GU
0
DC
2
DE 
2
MD
3
NJ
3
RI
3
MA
25
$0 - $10,000 

$10,000 - $5 MILLIONOver $20 MILLION
Regulation A
AK
0
AL
0
AR
1
AZ
3
CA
26
CO
5
FL
10
GA
3
HI
0
ID
0
IL
4
IN
0
KS
0
KY
0
LA
1
ME
0
MI
1
MN
1
MO
0
MS
0
MT
0
NC
0
ND
0
NE
0
NH
0
NM
0
NV
1
NY
6
OH
2
OK
0
OR
0
PA
4
SC
0
SD
0
TN
0
TX
6
UT
4
VA
5
VT
0
WA
1
WI
0
WV
0
WY
0
PR
0
VI
0
IA
1
GU
0
DC
12
DE 
2
MD
2
NJ
1
RI
0
CT
1
MA
0
$0 - $300 MILLION $300 MILLION - $5 BILLION $5 - $20 BILLION 
Over $20 BILLION
Registered 
Offerings
AK
0
AL
3
AR
11
AZ
14
CA
297
CO
31
FL
72
GA
43
HI
3
ID
5
IL
78
IN
21
KS
2
KY
5
LA
5
ME
1
MI
50
MN
31
MO
14
MS
1
MT
0
NC
94
ND
0
NE
18
NH
3
NM
1
NV
26
NY
251
OH
54
OK
10
OR
8
PA
50
SC
3
SD
9
TN
42
TX
2
UT
9
VA
41
VT
1
WA
28
WI
20
WV
0
WY
6
PR
0
VI
0
IA
5
GU
0
DC
22
DE 
39
MD
34
NJ
58
RI
4
CT
37
MA
111
$0 - $10,000
$5 MILLION - $20 MILLION

16  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Small, Emerging Businesses
Companies within this segment of the market generally raise capital through some combination of 
bootstrapping, self-financing, bank debt, friends and family, crowdfunding, angel investors, and seed 
rounds. This funding is commonly used to get companies off the ground and through early prototypes.
How are early stage small businesses accessing capital?
Small businesses often bootstrap and self-finance to overcome access to capital challenges, including 
using the following overlapping resources:
35
PERSONAL FUNDS
69%
RETAINED BUSINESS EARNINGS
69%
LOAN OR LINE OF CREDIT
55%
CREDIT CARDS
52%
EQUITY FROM INVESTORS
7%
Notably, funding operations using retained business earnings is generally an option only available  
to established companies.
How are small business loans and lines of credit typically collateralized?
36
PERSONAL GUARANTEE
58%
BUSINESS ASSETS
49%
PERSONAL ASSETS
31%
ORTIONS OF FUTURE SALESP
8%
NONE
16%
“
Young small businesses are more likely to tap into informal sources of 
credit such as funding from owners or family and friends, while older 
firms are more likely to receive funding from more traditional sources .
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
37

ANNUAL REPORT: FISCAL YEAR 2019    |    17
How have community banking trends impacted emerging businesses?
Decline in Number of FDIC-Insured  
Community Banks
38
14,323
1988
9,206
1998
7,442
2008
4,979
2018
Banks are moving away from smaller-dollar 
loans, which are less profitable at scale. The 
following figures illustrate that pain point for 
smaller companies:
39
Some banks have reportedly  
reduced or eliminated loans below  
a certain threshold, typically
<$100,000
Many banks will reportedly  
not lend to businesses with  
annual revenues
<$2 million
Neither term loans based upon cash flow or 
commercial revolving lines of credit are  
available for companies that are not yet  
revenue-producing or that are temporarily  
choosing to accelerate growth at the expense  
of profitability.
40
“
Capital is the lifeblood of 
small businesses, who depend 
on credit to start, operate, 
and grow . Historically, small 
businesses relied on banks to 
access capital . But during the 
2008 financial crisis, credit 
markets froze, and banks 
temporarily stopped lending 
even to businesses with good 
credit . This crisis hit small 
businesses hard and credit 
conditions have been  
slow to recover .
KAREN G . MILLS, 
FORMER SBA 
ADMINISTRATOR
41

18  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
What is the role of angel investors?
“Angel investors” are generally high net worth individuals who provide financial backing for early-stage 
businesses, often coming from among an entrepreneur’s friends and family.
42
 They typically invest their 
own funds directly in a business located in close proximity,
43
 often using convertible debt.
44
What is the scale of angel investing in early-stage companies in 2018?
45
334,565
active angel investors
66,110
entrepreneurial ventures 
received angel funding
$23.1 billion
in total angel investments
$349,620
average angel funding round
The average angel’s individual investment is between:
46 
$5,000
and
$100,000
What does the pool of accredited investors look like?
47
Angel investors are generally  
“accredited investors,” meaning that  
they meet certain requirements for 
income or net worth set forth by the  
SEC and are eligible to participate in 
many offerings that are not available  
to non-accredited investors .
48
13% OF U.S.  
HOUSEHOLDS 
qualify as accredited
$200,000 individual income
8.9% of U.S. households
$300,000 family income 
4.6% of U.S. households
$1,000,000 net worth 
9.4% of U.S. households
 

ANNUAL REPORT: FISCAL YEAR 2019    |    19
How does household income and net worth vary by region of 
the U
 .S .?
49
WEST
Mean household  
income $108,500
Median household  
income $57,500
Mean household  
net worth $873,700
Median household  
net worth $114,300 
SOUTH
Mean household  
income $100,000
Median household  
income $51,500
Mean household  
net worth $636,900
Median household  
net worth $87,000 
MIDWEST
Mean household  
income $102,000
Median household  
income $54,700
Mean household  
net worth $658,800 
Median household  
net worth $103,200 
NORTHEAST
Mean household  
income $136,500
Median household  
income $64,400
Mean household  
net worth $851,300
Median household  
net worth $154,500 
What role do non-accredited investors play?
While there are pathways for non-accredited  
investors to participate in exempt offerings, the  
vast majority of small businesses are still  
limiting their offerings to accredited investors.
50
  
From 2015-2018, non-accredited investors  
participated in only:
51
6% of Rule 506(b) transactions
2-3% of total capital raised in transactions 
under Rule 506(b)
“
[S]o much of entrepreneurship 
happens at the local level . 
Entrepreneurs raise money 
from local investors, hire from 
the local market, and found 
companies with the people 
who live in the same area .
EWING MARION  
KAUFFMAN FOUNDATION
52

20  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
How costly is it for early-stage companies to navigate  
compliance with securities laws?
Companies spend significant money on legal fees in raising early-stage capital, in some cases amounting 
to the cost of an additional employee’s salary. One 2019 start-up guide quotes the costs as:
53
$5,000 TO $20,000
for very early stage
$20,000 TO $40,000
for a venture capital raise
The age at which companies raise capital has matured:
While in 2014 a 3-year old company was commonly raising Series A,  
in 2019 that same age company is raising angel and seed-financing .
54
“
[T]he nature of startups receiving financing is fundamentally 
changing as investors continue to concentrate capital in fewer 
yet larger deals . At the seed stage, startups historically have 
been pre-product, but today’s investors tend to prefer a more 
mature company at this stage, which typically means the 
startup should at least have a minimum viable product .
PITCHBOOK
55

ANNUAL REPORT: FISCAL YEAR 2019    |    21
Mature and Later-Stage Businesses
Companies within this segment of the market are generally growing and looking for larger amounts 
of capital that can fund operations of scale, ventures into new verticals, and preparation for public 
markets. Most often these investors are institutional in nature, whether syndicate groups, venture 
capital, private equity, or even public funds.
What is the role of venture capital (VC) in funding mature and  
later-stage businesses?
VC funds a small portion of the overall number of small businesses (approximately 0.5%), but 
those businesses tend to have outsized growth trajectories.
56
 VCs tend to fund companies with 
significant return on investment multiples, realizing profit at the company’s initial public offering  
or sale. A few statistics illustrate VC’s scale and impact on small business capital formation:
18,228 
VC deals in 2018,  
up from 6,876 in 2009
57
1,087
VC-backed IPOs  
from 2009-2018
58
Increases in the availability of VC funding in metro areas have been 
correlated with job growth:
59
10%
increase in VC  
in a metro area
2.6%
2.9%
increase in the number of small employers
increase in employment at small employers
increase in total payroll
3.9%

22  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
What is the role of private equity (PE) in funding mature and  
later-stage businesses?
PE funds tend to back companies with return prospects following restructuring, realized through 
dividends and/or sale of the target company, often funded by a combination of investor equity and 
debt. A few statistics illustrate PE’s scale and impact on small business capital formation:
10,000 
average PE yearly deal  
count for the past 5 years
60 
1,043 
PE-backed IPOs  
from 2009-2018
61
Some studies have found that PE returns have recently outperformed the public market (12% for PE 
vs. 8% for the S&P),
62
 while others have noted a greater return dispersion from private equity than 
from the public market, and mutual funds in particular.
63
When do mature and later-stage businesses enter the public 
markets following VC and PE investments?
HISTORICALLY
venture-backed tech companies raised
$100 million in total private funding
$100 million IPO
64
NOW
>90% of unicorns raise at least 
$100 million 
in a single private financing
65

ANNUAL REPORT: FISCAL YEAR 2019    |    23
In what ways do VC-and PE-backed companies enter the  
public markets?
13,695 
Companies backed by PE and late stage VC
700
of which are estimated to become the next 
immediate generation of public companies
66
44.8% 
of companies currently listed  
on the NASDAQ were formerly backed  
by PE or VC
67
From 2009 to 20
18,  
public companies acquired
11,000+  
PE and VC-backed companies  
for over $3 trillion
to serve various growth, intellectual property, 
talent and strategic needs
68

24  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Small Public Companies
Companies can access broad pools of investors when they conduct public offerings, allowing 
companies to raise large amounts of capital to fund activities such as research and development, 
capital expenditures, or debt service. Public offerings also provide liquidity to early-stage investors 
and publicity for the company’s products and services.
How has the prevalence of publicly traded companies changed  
over time?
69
Number of Domestic Listed Companies
Market Cap Listed Companies
Market Cap in Trillions (Current USD)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
$35
$30
$25
$20
$15
$10
$5
$-
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
4,397 in 2018 
8,090 in 1996 
6-7
years
average holding period  
for a company in a PE or VC portfolio prior to exit
70
Companies are increasingly going public at a later stage in their lifecycle after raising more capital  
from the private markets, providing for less growth following their IPO. In other words, companies 
are generally choosing to enter the public markets after maturing beyond the smaller reporting 
company thresholds.
71

ANNUAL REPORT: FISCAL YEAR 2019    |    25
Small Public Companies
All IPOs from July 1, 2018 through June 30, 2019:
72
204 
IPOs
$243 Million
Average Proceeds
IPOs and other registered offerings by small public companies
73
 from July 1, 2018 through  
June 30, 2019:
294 
Offerings
$47 Million
Average Proceeds
The Fortune 500 has changed dramatically  
since 1955:
74
only
12% 
remain on 
the list  
in 2014
the other 
88%  
have gone out of existence,  
merged, or fallen off the list
Small companies struggle for attention:
61%
of exchange-traded companies with  
<$100 million market capitalization have
no research coverage
75
“
The old pattern was that small companies raised small amounts 
of speculative capital from venture capitalists at speculative 
valuations, and then the ones that worked out went public at 
much higher valuations . The new pattern is that large companies 
raise large amounts of not-particularly-speculative growth capital 
from mutual funds at mature-company valuations, and then 
eventually they sort of quietly slip into being public .
MATT LEVINE, BLOOMBERG
76

26  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Founder Demographics & Capital Formation
Women-Owned Businesses
Women are founding more start-ups:
77
21.6% 
of start-ups 
in 2018
4% 
of start-ups 
in 2001
Capital used at start-up varies by gender:
78
$54,375 
for women
$80,285
for men
Women are less likely to apply for bank loans, 
despite research finding no differences in 
approval rates.
79
Women constituted
25.9%
of entrepreneurs seeking capital in 2018...
and had an investment yield rate of 
17.5%
compared to a baseline rate of 
23.2%
80

ANNUAL REPORT: FISCAL YEAR 2019    |    27
In 2018, women founding teams received less VC funding than their male peers of the approximately 
$130 billion reportedly invested:
81
All-WomenMixed-Gender
All-Male
Not Identified
One study found that companies founded or co-founded by women generate more revenue:
82
Per $1 of 
investment...
31¢ of revenue
male-only  
teams create  
female teams 
create 78¢ of 
revenue

28  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
What effect does sexual orientation have on access to capital?
Research by StartOut found that gender had a far greater effect  
on startup funding levels than sexual orientation of the founders .
83
Women Investors in Small Businesses
29.5% 
of angel investors are women
84
only
11% 
of VCs across the industry are women
85
 
71% 
of VC firms have no female partners
86

ANNUAL REPORT: FISCAL YEAR 2019    |    29
Minority-Owned Businesses
The most recent estimates show that 8 million businesses are minority owned, or 29.3% of U.S. firms.
87
Since 2007, there has been a
38% increase in the number  
of minority-owned businesses
88
Numbers of Minority-Owned Businesses
89
American Indians and  
Alaska Natives
272,919
Asian 
1,917,902
Native Hawaiians and  
other Pacific Islanders
54,749
Black
2,584,403
Latinx
3,305,873
AK
AL
AR
AZ
CA
CO
DC
FL
DE
GA
HI
ID
IL
IN
KS
KY
LA
ME
MD
MI
MN
MO
MS
MT
NC
ND
NE
NH
NM
NJ
NV
NY
OH
OK
OR
PA
SC
RI
CT
MA
SD
TN
TX
UT
VA
VT
WA
WI
WV
WY
IA
1—2 million 
500,000—999,000
100,000—499,000 
50,000—99,000 
10,000—49,000
1,000—10,000
Number of Minority-Owned Businesses by State
90

30  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
What challenges do minority-owned businesses face in 
accessing capital?
Minority-owned businesses face challenges in 
accessing loans from banks, including:
91
3X
more likely to be denied loans 
7.8%
average interest rate
(vs . 6 .4% for non-minority)
new black-owned  
businesses start  
with almost three  
times less in terms  
of overall capital
$35,205
compared with  
new white-owned  
businesses
$106,720
92
Minorities constitute
10.7% 
of entrepreneurs seeking capital in 2018 
and had an investment yield rate of 
22%
compared to a baseline rate of 
23.2%
93

ANNUAL REPORT: FISCAL YEAR 2019    |    31
Minority entrepreneurs report profitability is disproportionately impacted by lack of access  
to capital:
94
AFRICAN AMERICAN
LATINX
ASIAN-AMERICAN
WHITE
22%
15%
13%
9%
What challenges do Latinx business owners report in accessing 
debt financing?
95
Application rate for financing
47%
Latinx
40%
Non-Latinx
Likelihood of funding shortfalls
28%
Latinx
49%
Non-Latinx

32  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Founder Diversity in VC-backed Businesses:
96
1% Black
77% White
2% Middle Eastern
2% Latino
18% Asian
Minority Investors in Small Businesses
Only
5.3% 
of angel investors are minorities
97

ANNUAL REPORT: FISCAL YEAR 2019    |    33
VC Workforce Representation
98
EmployeesInvestment positions
Investment partners
BlackAsian/Pacific IslanderLatinxWhite

34  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Natural Disasters & Capital Formation
When natural disasters strike communities, they often impact the survival prospects for small 
business, who may have fewer resources to weather the challenges to rebuild the business and 
reinvigorate its customer base.
Impact of Natural Disasters on Small Businesses
99
Immediate
40% will not reopen
1 Year Later
25% will close
3 Years Later
75% without a  
 business continuity  
 plan will fail
Reported Small Businesses Losses Following Natural Disasters
100
$1-$25,000
45%
61%
$25,000+
19%
35%
ASSETS           REVENUE

ANNUAL REPORT: FISCAL YEAR 2019    |    35
How does the percentage of the population affected by natural 
disasters compare to the amount of capital being raised? 
27%
of the US population
101
 lives in an area 
that was affected by a natural disaster
102
 
over three years ending June 30, 2019
However, businesses in areas affected by natural disasters over that three year time period are 
generally raising less capital relative to the affected population:
103
Percentage of Capital Raised Over 3 Years in 
 
Areas Affected by Natural Disasters
35%
30%
25%
20%
15%
10%
5%
0%
Regulation DRegulation ARegulation CFRegistered Offerings
by Small Public 
Companies
$307B
total
$271M
total
$44M
total
$3B
total
Compared  
to 27% of 
affected 
population
“
Counties hit by severe disasters 
experienced greater out-migration, lower 
home prices and higher poverty rates .
NATIONAL BUREAU OF  
ECONOMIC RESEARCH
104

36  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Rural Communities & Capital Formation
Much of entrepreneurship happens at a local level, particularly in early stages of company formation and 
growth. The importance of local ecosystems can exacerbate company challenges in rural communities 
facing population declines, impacting access to potential angel investors, talent, and customers.
How does the rural population compare to the amount of  
capital being raised? 
19% of the U .S . population 
 lived in rural areas
105
17% of small employer firms       
 are located in rural areas
106
However, businesses in rural areas
107
 are raising less capital over three years ending June 30, 2019 
relative to affected population:
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Percentage of Capital Raised Over 3 Years in 
 
Rural Communities
Regulation DRegulation ARegulation CFRegistered Offerings
by Small Public 
Companies
$7.5B
total
$86M
total
$2.2M
total
$777M
total
Compared  
to 19% of 
affected 
population
In recent decades, startup activity has declined in rural areas:
108
20%
1977
12%
2017
RURAL             NON-RURAL

ANNUAL REPORT: FISCAL YEAR 2019    |    37
The decline in community banks in rural areas is crippling access to early-stage debt for small 
businesses.
109
 As of 2017 in the U.S.’s 1,980 rural counties:
110
115
have just  
one community  
bank branch 
625
do not have a  
locally-owned 
community bank
35
have no bank
Many angel groups are working to find investment opportunities outside of the “four hour drive 
radius” rule of thumb, such as through state-wide networks.
111
“
For venture capital, the data indicate that while the average 
deal size and concentration of deals (inputs) in rural 
geographies may be less than that of urban regions, there 
is little difference in the performance of a rural investment 
in terms of multipliers, jobs, or exit types (outcomes) .
PATRICIA SCRUGGS, WAYNE EMBREE AND ROB WILTBANK
112



ANNUAL REPORT: FISCAL YEAR 2019    |    39
Policy Recommendations
O
ver the course of the first year in operation, the Office has received feedback on various issues 
encountered by small businesses and their investors from start-up to small cap, from coast 
to coast, and across industries. The recommendations set forth in this report are proposed 
as pragmatic and principles-based solutions to the most serious issues raised with the Office. 
Our general experience has shown that where an issue affects a broad segment of the market, 
the magnitude of the issue’s impact is often greater for minority-owned and women-owned small 
businesses and investors, as well as on small businesses and investors in areas affected by natural 
disasters or in rural areas. 
Our Office is generally supportive of the current initiatives and rulemakings underway at the  
SEC as they relate to small business capital formation.
113
 We present these recommendations 
as an opportunity to distill specific marketplace calls for action that are either not a part of the 
current regulatory or congressional agenda or that are complimentary to ongoing efforts. These 
recommendations provide a focused set of five critical challenges expressed by the market, with 
corresponding background discussion, summary of issues raised, and proposed solutions.
The Office, Commissioners, and SEC staff tour an opportunity zone construction site in Omaha, NE .

40  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Modernize, Clarify, and Harmonize Exempt Offering Framework
Background
Access to capital markets is critical for much of small business financing, with investor capital playing 
separate and complimentary roles to financing from the banking sector.
114
 In meeting with businesses 
and their investors across the country about capital formation, one of the most consistent critiques 
expressed has been that the current exempt offering framework is complex and confusing. While the 
current rules contain a relatively broad “menu” of tools to raise capital, the requirements for each 
differ and in some cases conflict.
115
 This challenging regulatory puzzle is understandably difficult 
to navigate, with each puzzle piece originating at different times and in response to different policy 
demands, with origins all the way back to 1933 with the Securities Act’s passage. A complex path 
to capital to grow, scale, and mature makes it all the more challenging for companies to fulfill our 
collective expectation of new entrants joining the public markets to supplant the past two decades’ 
approximate 50% drop in listed companies.
116
 It is imperative that companies and investors have 
navigable and functional tools for the exchange of capital in early, pre-IPO stages to build the pillars 
of tomorrow’s public markets.
Issues Raised
To understand securities law compliance, marketplace participants tend to need either a law degree 
or access to sophisticated counsel who can help them navigate the rules, both of which carry a 
significant price tag and can be a barrier to entry. 
This issue is exacerbated for those without broad 
networks or without excess funds to hire counsel in 
the midst of raising capital (which naturally tends 
to occur when capital is at its scarcest). While the 
“menu” of exemptions contains many options, 
regulatory uncertainty or confusion often incents 
companies and their investors to avoid using certain 
exemptions in favor of the most common and 
well understood pathways.
117
 For example, the 
integration doctrine is used to determine when more 
than one transaction should be “integrated” and 
considered a single offering, and it entails a facts 
and circumstances analysis dating back to 1933.
118
 
Although it has been modernized and clarified 
over the years, companies and investors, as well as 
their counsel, struggle when trying to raise money 
using different offering exemptions that do not all 
allow general solicitation.
119
 When the rules confuse 
not only the actors who are directly impacted by 
the rules—namely, businesses and investors—but 
also counsel on whom they rely for expert advice, 
capital formation is negatively affected.
A small business owner in Pine Bluff, Arkansas shares 
her perspectives with the Office over coffee .

ANNUAL REPORT: FISCAL YEAR 2019    |    41
Proposed Solution: Harmonization
The SEC’s recent Harmonization Concept Release
120
 sought unprecedented feedback on the areas in  
which the exempt offering framework works effectively, as well as where it can be improved to support 
efficient flow of capital while maintaining appropriate investor protections. Many ideas have been 
proposed to modernize, clarify, and streamline the regulations on the offer and sale of securities, and  
we have overwhelmingly heard support from marketplace participants for implementing many of the 
ideas suggested. In doing so, we would prioritize the following guiding principles:
§	The rules, as well as how we at the SEC communicate compliance obligations, should be accessible  
to both companies and their investors, regardless of legal acumen.
121
 
§	The rules should allow companies to progressively and efficiently raise capital at each stage of the 
company life cycle as they grow, scale, and mature.
§	The internet and technology have revolutionized communication since the Securities Act of 1933, 
including how businesses reach customers and operate. Any changes to the rules should incorporate  
an understanding of current communication practices, while also providing flexibility for the inevitable 
evolution of tomorrow’s tools.
§	To the extent that dollar amount caps are incorporated,
122
 they should be tied to expressed marketplace 
needs for capital and provide flexibility for future review and adjustment. Caps should also take into 
consideration the varying demands for capital depending upon industry, geography, and life cycle stage.
§	In evaluating the capital formation tools and investor protective measures, Congress and the 
Commission should reexamine the principles underlying regulation of capital raising transactions in 
light of the changing needs of the market.
123
 
See also: Small Business Capital Formation Advisory Committee Recommendation.
124
Investor Participation in Private Offerings
Background
Much attention has been paid recently to investors’ access to opportunities in the private markets,  
where much of today’s companies’ “J-curve” growth is occurring prior to their IPOs, which are 
increasingly used as a liquidity rather than capital raising event. Many of the offering exemptions used  
in the private markets, whether under Rules 506(b) or 506(c) of Regulation D or under Regulation A, 
limit participation to accredited investors or contain restrictions on participation by non-accredited 
investors, including complete participation restrictions or investment limitations. The definition of 
“accredited investor” is “intended to encompass those persons whose financial sophistication and  
ability to sustain the risk of loss of investment or ability to fend for themselves render the protections  
of the Securities Act’s registration process unnecessary.”
125
 The Senate Committee on Banking, Housing, 
and Urban Affairs noted that the addition of the accredited investor definition in the Small Business 
Investment Incentive Act of 1980
126
 was intended to “give small businesses greater access to ... 
sophisticated investors without the costs associated with the registration requirements.”
127
  
 

42  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
The SEC’s current rules
128
 define a natural person as an accredited investor if that investor either:
§	earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior  
two years, and reasonably expects the same for the current year; or
§	has a net worth over $1 million, either alone or together with a spouse (excluding the value of the 
person’s primary residence).
The definition also qualifies many types of entities as accredited investors if they have assets exceeding  
$5 million. However, the definition’s enumerated list omits certain types of entities, such as American 
Indian tribal corporations, which has the practical effect of excluding otherwise sophisticated investors 
from participating in investment opportunities.
For retail investors (i.e., individuals 
buying securities for their own account), 
there are few opportunities to participate 
in the growth of the private markets via 
diversified portfolio holdings, whether 
through pooled investment vehicles 
(i.e., mutual funds or exchange-traded 
funds) or otherwise. Private funds, such 
as venture capital funds and private 
equity funds, generally operate under 
exemptions from registration, which 
limit their accessibility to most retail 
investors.
129
 Current liquidity and valuation requirements on open-end funds, the most popular fund 
type for retail investors,
130
 present challenges to significant holdings in private companies.
131
 Closed-end 
funds, such as interval funds and tender offer funds, issue shares that are not freely redeemable and thus 
not subject to the liquidity risk management rules of open-ended funds, making them better suited to hold 
interests in private companies.
132
 However, they often trade at a discount to net asset value, contributing 
to their relative lack of popularity with investors.
133
 Business development companies (BDCs)
134
 and small 
business investment companies (SBICs)
135
 are other types of funds that invest in private companies, but 
they may be more difficult for retail investors to gain exposure to in practice.
136
Issues Raised
Any changes to the definition of “accredited investor” or to retail access to private markets will have  
dual impacts on investors’ access to investment opportunities as well as the supply of capital to the 
exempt markets. Throughout our conversations in FY2019 on raising earlier stage capital from individual 
investors, whether from angels or friends and family, both businesses and investors have acknowledged 
the benefit of guardrails for retail investors, while also highlighting the imbalance of a single test based 
solely on income, net worth, or total assets. Women, minorities, and rural communities have expressed 
disproportionate challenges with the standard, which often draws a line between the investors’ network 
and qualification for the most attractive offering exemptions.
137
 The current standard arguably prioritizes 
an investor’s ability to sustain the risk of loss without sufficient consideration of an investor’s financial 
sophistication. Many have recommended creating avenues for sophisticated investors to participate in 
exempt offerings by adding alternative criteria for qualification.
The Office participated in a panel discussion on the art of capital raising  
and deal activity at the U .S . Black Chambers’ 10th National Conference .

ANNUAL REPORT: FISCAL YEAR 2019    |    43
In addition, investors—both accredited and 
non-accredited alike—have criticized their lack 
of access to high-growth potential companies 
in the private markets, who often trade on the 
public markets only after achieving most of 
their growth potential. Some have expressed 
frustration with the idea that “you have to 
be rich to get rich” under the current rules. 
For some accredited investors, they lack the 
time and resources to personally source, vet, 
and invest in a diversified portfolio of private 
companies that balances return potential with 
inevitable risk of failure of many early-stage 
businesses.
Proposed Solution: Accredited 
Investor Refinement
Adding alternative measures for evaluating investor sophistication would further Congress’s 
and the Commission’s stated goals of facilitating capital formation while providing appropriate 
protections for investors. Additional qualifying pathways to individuals being accredited based upon 
sophistication in making investment decisions could include:
§	financial professionals licensed by or registered with the SEC, state securities regulators, or 
appropriate self-regulatory organizations (e.g., FINRA); and
§	attainment of designated financial industry examinations or licenses.
Any additional means of qualifying should provide companies, investors, and their advisors with 
simplicity and certainty in ascertaining qualification to avoid inadvertent increases in transaction 
costs and thereby costs of capital. Based upon the differential access to investors, varying costs of 
living, and corresponding income and net worth levels by geography, we note that increasing the base 
income and net worth thresholds would have a disproportionate impact in more rural and emerging 
entrepreneurial ecosystems, as well as on under-represented business owners and investors.
When updating the definition of accredited investor, it would further add simplicity and clarity 
to eliminate the list of enumerated entities that may qualify if such entity has over $5 million in 
assets
139 
and instead make clear that any entity that has more than the asset threshold would qualify 
regardless of corporate form.
See also: Small Business Capital Formation Advisory Committee Recommendation,
140
 former 
Advisory Committee on Small Business Capital Formation (ACSEC) Recommendation,
141
 
Harmonization Concept Release, 2019 Small Business Forum Report and historical reports,
142
  
2017 Treasury Report.
143
“
To the extent that companies 
decide not to go public due to 
anticipated regulatory burdens, 
regulatory policy may be 
unintentionally exacerbating 
wealth inequality in the United 
States by restricting certain 
investment opportunities to  
high income and high net  
worth investors .
2017 U .S . TREASURY REPORT
138

44  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Proposed Solution: Retail Investor Access to Pooled Vehicles
Current fund rules allow investment companies to deploy limited strategies to invest in less liquid 
assets, such as private funds, as well as direct holdings in private companies. However, as the above-
referenced data indicates, the current tool set is not well-utilized. Attention should be given to 
whether that underutilization is a byproduct of market preferences or whether the fund rules make 
those vehicles less attractive for fund formation, management and investment, with corresponding 
changes to the rules suggested. While the structure of public funds investing in private funds may be 
critiqued for a double-layer of management fees, reasonable fees may be justified where they afford 
investors asset management by professionals with experience in private markets, deal terms on  
parity with other sophisticated institutional investors, and an otherwise inaccessible diversified 
portfolio of private market holdings. Efficient fee structures should be prioritized in developing 
pooled vehicle solutions.
In addition, continued focus on retail investors’ access to smaller funds—including those that invest 
primarily in smaller cap public companies, those with diversified positions including private holdings, 
as well as those focused on private market holdings—will further support competition and small 
business capital formation.
144
See also: Small Business Capital Formation Advisory Committee Recommendation,
145
 Committee on 
Capital Markets Regulation 2018 Report.
146
Engaging Investors via Finders
Background
One of the biggest challenges that small businesses face when they seek to raise capital is identifying 
and connecting with potential investors who are a good fit from market/industry experience, risk 
tolerance, and investment capability perspectives. Sometimes companies, particularly those raising 
The Office collaborates with female business owners on their national advocacy day in Washington, DC, answering 
questions about their challenges finding investors .

ANNUAL REPORT: FISCAL YEAR 2019    |    45
large amounts of capital pre-IPO, engage registered broker-dealers to line up a book of investors 
in exchange for a success or other fee. However, broker-dealers are increasingly concentrating their 
activity upstream in the market where they can offer a package of services, leaving companies 
seeking more routine introductions or relatively smaller amounts of capital (e.g., as one source noted, 
under $5 million
147
) without a connection to capital sources. Finders often bridge the gap between 
entrepreneurs who need funding and potential investors interested in supporting emerging companies 
by making introductions, often for a fee.
148
 Finders may also provide businesses with support services, 
such as consulting on market deal terms or commentary on pitch materials, generally engaging in 
activities short of what many suggest should require registration as a broker-dealer.
149
 Over the course 
of many decades and through a series of SEC no-action letters and case law, a nebulous distinction 
between finders and broker-dealers has emerged.
150
 Many proposals have been put forward to 
provide clarity on where the line should be drawn between exempt finders, on the one hand, and full 
registration as a broker-dealer, on the other.
151
Issues Raised
Locating the right investors is challenging no matter where a company is located, but that pain 
point is felt more acutely for entrepreneurs located far from the “hotspots” of VC and other 
funding sources where their network may not extend. Some demographic groups—namely women 
and minority business owners—have expressed that they face higher hurdles to connecting with 
funders based upon their network of potential investors who may not be accredited, often needing 
the support of finders to locate investors with the right investment capacity and risk tolerance. In 
short, the lack of clarity on the role for finders in matchmaking between companies and investors 
disproportionately impacts smaller companies, companies in geographic areas or segments of the 
market not served by registered broker-dealers, and companies with under-represented founders.
Proposed Solution: Clear Finders Framework
Small businesses and their investors need clarity on what role finders can play in providing 
services that fall short of requiring registration as a broker-dealer. Over the years, many potential 
solutions have been offered, from bright line exemptions to carve-outs for de minimus activity to 
“light” registration requirements.
152
 In implementing a framework for finders to support emerging 
businesses’ capital needs and provide clarity to investors participating in the market, it is critical 
that the rules be clear for marketplace participants to reduce confusion, defining in plain English the 
activities that do not trigger registration and delineating when the scope of activities rises to the level 
that registration is appropriate. The framework should make clear what offering exemptions are 
eligible, whether the introduced investors must be accredited, the nature of compensation the finder 
may receive, the types of other incidental activities that the finder may engage in on behalf of the 
business, and the respective roles of federal and state regulators. Providing a clear framework should 
bring welcomed transparency to an otherwise opaque area of the market.
153
See also: 2019 Small Business Forum Report and historical reports,
154
 ABA Report on Private 
Placement Broker-Dealers, ACSEC Finders Recommendation, 2017 Treasury Report.

46  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
Crowdfunding
Background
Crowdfunding—or the practice of raising capital in relatively small amounts from a large number of 
investors, typically over the internet—is one of the newest offering exemptions, with rules finalized 
by the SEC in 2015 following the Jumpstart Our Business Startups (JOBS) Act of 2012.
155
 This 
mode of capital raising originated overseas
156
 in the wake of the 2008 financial crisis because of the 
difficulty entrepreneurs and small businesses faced in raising funds.
157
 In a nutshell: with traditional 
banks providing fewer loans to earlier stage companies, entrepreneurs began looking elsewhere for 
capital.
158
 While some states had an intrastate crowdfunding framework prior to the JOBS Act, the 
equity crowdfunding industry did not take off until after the 2012 legislation and SEC rules that 
followed. Many online portals support companies raising capital through two different regulatory 
pathways that originated in the JOBS Act: (1) Regulation Crowdfunding under Title III (or Reg 
CF), which caps the offering at $1.07 million per year and includes other limitations on individual 
investments, and (2) Rule 506(c) general solicitation offerings to verified accredited investors, 
sometimes referred to as “accredited investor crowdfunding.”
159
 This section focuses on the Reg CF 
path for crowdfunding.
Further to the origins of the equity crowdfunding funding model, these offerings provide an 
alternative source of capital where community bank presence has waned. Some studies, as well as 
anecdotal evidence, have indicated that crowdfunding is boosting success in raising capital for certain 
demographics of entrepreneurs disproportionately to the rest of the entrepreneurial population, 
including women-owned, minority-owned, and rural businesses, as well as younger entrepreneurs.
160
 
These are populations of business owners who are notoriously underserved by traditional capital 
raising, such as through private placements to accredited investors.
161
 In other words, crowdfunding 
may be bridging the gap between entrepreneurs without broad networks of high wealth investors and 
interested backers of their companies. Feedback to our Office indicates that the primary beneficiaries 
of crowdfunding investments are twofold:
1. businesses in communities where smaller or community banks are less accessible;
162
 and
2. businesses with meaningful growth potential but who lack “venture returns” of 10x+, such as 
lifestyle, services, or retail businesses. 
For businesses in the first group, they are often raising capital below the current $1.07 million Reg 
CF offering cap, many times from a loyal customer base. This may be reflected by the $25,000 
median target amount sought by companies in Reg CF offerings,
163
 where crowdfunding is filling 
the gap left by banks for small dollar loans. However, for businesses in the second group, the current 
offering cap has been described as a deterrent or hindrance to utilization of crowdfunding in the first 
place, with those companies needing significantly more capital than the $1.07 million cap permits.
The SEC published its three-year lookback report in May 2019
164
 examining utilization of the 
nascent Reg CF exemption, showing modest adoption rates, which may be in part driven by some of 
the limitations flagged by companies, portals, and investors.

ANNUAL REPORT: FISCAL YEAR 2019    |    47
The Office hosts “Capital Formation Between the Coasts” roundtable focused on experiences of businesses and investors 
raising capital, including through crowdfunding, and investing outside of coastal “hot spots” to kick off National Small 
Business Week .
Issues Raised
Users of crowdfunding have flagged various issues with the framework as designed by both statute and 
regulation. The current constructs may unduly limit investor interest in participation. Company appetite 
for compliance costs relative to the available proceeds may point them towards offering types with 
lower compliance costs. Contrasted with their foreign counterparts, companies are raising more capital 
overseas using crowdfunding in an arguably more efficient manner.
165
 Portals, many of which are small 
businesses themselves that have raised capital to fund initial operations, have flagged the challenges 
they face with profitability of their business model given the limitations on equity compensation
166
 and 
the high costs of compliance, which may push portals to redirect their focus to other vibrant overseas 
crowdfunding markets or to other more profitable segments of the domestic market.
Proposed Solutions: Crowdfunding Updates
Changes to the current structure and requirements for Reg CF would enable companies and investors 
to use equity crowdfunding to its fullest potential. Potential solutions include:
§	Increase the total amount that companies can raise in a 12-month period from the current $1.07 
million to better align with early-stage companies’ evolving capital needs,
167
 as well as international 
practices.
168
 Trends are showing that Series A is “the new” seed funding, as companies seek 
increased capital to fund early-stage operations (e.g., in 2018 the average seed funding was $5.7 
million and average Series A round was $15.7 million, compared with 2010 averages of $1.3 
million for seed and $5.1 million for Series A
169
). An increased cap would allow companies to raise 
meaningful early-stage capital using crowdfunding rather than limiting companies’ options to a 
narrower set of exemptions. 

48  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
§	Remove the investment cap for accredited investors, which would harmonize the crowdfunding  
rules with Regulations A and D, neither of which limit investment amounts by accredited investors.
§	Reevaluate the thresholds for the various disclosure obligations, such as reviewed and audited 
financials, to appropriately tier to the capital raised and the costs incurred by companies at  
investors’ expense. For example, reporting requirements could be simplified for companies raising 
under $250,000. 
§	Enable the use of special purpose vehicles (or SPVs), which would have the potential benefits of 
cleaning up the cap tables for companies, making them more attractive to follow-on investors and 
mitigating Rule 12(g) threshold concerns, and streamlining management of investor rights, potentially 
providing a more impactful voice for investors and providing companies with a more engaged investor 
for strategic support.
§	Reevaluate the compliance requirements for portals as well as permissible types of compensation, such 
as increasing flexibility for equity compensation.
See also: Small Business Capital Formation Advisory Committee Recommendation,
170
 Association of 
Online Investment Platforms Policy Paper,
171
 2017 Treasury Report, 2019 Small Business Forum Report 
and historical reports.
172
Scaled Obligations for Smaller, Less Complex Reporting Companies
Background
The U.S. securities laws allow companies to access the public markets in exchange for disclosures to 
investors about relevant financial and operating information. Over the years, the disclosure obligations of 
public companies have evolved and 
substantially increased in breadth. In 
addition to the costs of going public, 
which cost most companies over $1 
million, companies incur significant 
ongoing compliance costs for being 
public.
173
 In one survey, two-thirds 
of CFOs estimated spending $1 
million to $1.9 million annually for 
ongoing compliance costs, allocated 
among auditing fees (32%), 
financial reporting (18%), legal 
costs (16%), regulatory compliance 
(12%), public and investor relations 
(9%), and various other expenses.
174
 
These costs are separate from the 
staffing needs of companies to 
implement compliance. Put simply, 
the reporting compliance costs—
The Office engages in a fireside chat discussion about the issues faced by small 
reporting companies and their investors at the New York Stock Exchange .

ANNUAL REPORT: FISCAL YEAR 2019    |    49
in addition to the increased costs of potential shareholder litigation—are costs unique to public 
companies that are not borne by private companies on a comparable scale.
Issues Raised
In discussing the decision to remain private 
or to embark upon an IPO, many investors 
and companies—particularly those who are 
smaller—have pointed towards balancing 
allocation of resources to compliance 
obligations versus funding innovation at 
scale.
175
 When weighing the potential costs 
of public company compliance, the impact of 
those obligations often has a relatively greater 
resource-constraining effect on smaller entities, 
many of whom lack the complexity both 
organizationally and financially that many of 
the compliance rules were drafted to address. 
This debate among marketplace participants 
on striking the right balance has occurred 
concurrently with concerns over the waning 
entrance of smaller public companies in  
recent years.
176
Proposed Solution: Continued 
Scaling Obligations
Congress and the Commission have recently 
taken actions to streamline the pathways for 
growing companies to access the public markets 
without unnecessary compliance burdens 
swaying companies’ and their investors’ 
decision to remain private.
178 
Recently, the SEC 
has embarked upon a series of rulemakings 
aimed at improving disclosures for investors 
while simplifying compliance for companies, with many of the changes aimed at improving the 
readability of disclosure documents and reducing repetition or disclosure of information that is not 
material.
179
 Many recent amendments to the rules emphasize a principles-based approach, reflecting 
the evolution of businesses and the philosophy that a one-size-fits-all approach can be both under 
and over-inclusive. The Office encourages Congress and the Commission to continue to tailor the 
disclosure and reporting framework to scale the obligations of reporting companies to the complexity 
and scale of operations in furtherance of capital formation and appropriate investor protection. 
See also: 2017 Treasury Report, 2019 Small Business Forum Report and historical reports.
180
“
Well-intentioned regulations 
aimed at protecting the public 
from the misrepresentations 
of a small number of large 
companies have unintentionally 
placed significant burdens on 
the large number of smaller 
companies . As a result, fewer 
high-growth entrepreneurial 
companies are going public 
and more are opting to 
provide liquidity and an exit 
for investors by selling out to 
larger companies . This hurts 
job creation, as the data clearly  
shows that job growth 
accelerates when companies 
go public, but often 
decelerates when companies 
are acquired .
PRESIDENT OBAMA’S 
COUNCIL ON JOBS AND 
COMPETITIVENESS  
(OCT . 2011)
177



ANNUAL REPORT: FISCAL YEAR 2019    |    51
T
he Small Business Advocate Act also established the SEC’s new Small Business Capital Formation 
Advisory Committee,
181
 which replaced the SEC’s former Advisory Committee on Small and  
Emerging Companies. The new Advisory Committee is designed to provide a formal mechanism  
for the Commission to received advice and recommendations on Commission rules, regulations,  
and policy matters related to emerging, privately held small businesses to publicly traded companies  
with less than $250 million in public market capitalization; trading in securities of such companies;  
and public reporting and corporate governance of such companies. The Office provides administrative 
support for the Advisory Committee, which otherwise functions independently.
In April 2019, the Commission appointed the inaugural members of the Advisory Committee.
182
  
The membership includes companies and investors from across a diverse set of experiences, industries, 
geographies, and company life cycle stages.
CARLA GARRETT, Chair 
Corporate Partner, Potomac Law Group PLLC 
Washington, DC
JEFFREY M . SOLOMON, Vice Chair
Chief Executive Officer, Cowen, Inc .
New York, NY
GREGORY YADLEY, Secretary
Partner, Shumaker, Loop & Kendrick, LLP
Tampa, FL
YOUNGRO LEE, Assistant Secretary
CEO and Co-Founder, NextSeed
Houston, TX
GREG DEAN*
Senior Vice President of the Office of  
Government Affairs, FINRA
Washington, DC
ROBERT FOX 
National Managing Partner, Professional  
Standards Group, Grant Thornton LLP
Chicago, IL
STEPHEN GRAHAM
Co-Chair, Fenwick & West LLP’s Life  
Sciences Practice
Seattle, WA
SARA HANKS
CEO and Co-Founder, CrowdCheck, Inc . 
Alexandria, VA
BRIAN LEVEY
Chief Business Affairs and Legal Officer,  
Upwork Inc .
Santa Clara, CA
Small Business Capital  
Formation Advisory 
Committee FY 2019 Summary

52  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
TERRY MCNEW
President and CEO, MasterCraft Boat Holdings
Vonore, TN
SAPNA MEHTA
General Counsel & Chief Compliance Officer, 
Rise of the Rest Seed Fund; Associate General 
Counsel, Revolution
Washington, DC
MARTHA LEGG MILLER*
Director, Office of the Advocate for Small  
Business Capital Formation, U .S . Securities  
& Exchange Commission
Washington, DC
KAREN G . MILLS
President, MMP Group, Inc .
Boston, MA
CATHERINE MOTT
Founder and CEO of BlueTree Capital  
Group, BlueTree Allied Angels, and BlueTree 
Venture Fund
Pittsburgh, PA
POORVI PATODIA
CEO and Founder, Biena Snacks
Allston, MA
MICHAEL S . PIECIAK*
Commissioner of the Vermont Department of 
Financial Regulation
Montpelier, VT
JASON SEATS
Chief Investment Officer, Techstars
Austin, TX
MARC OORLOFF SHARMA*
Chief Counsel of the Office of the Investor 
Advocate, U .S . Securities & Exchange Commission
Washington, DC
JOSEPH SHEPHERD*
Associate Administrator, U .S . Small Business 
Administration
Washington, DC
HANK TORBERT
President, AltaMax, LLC
New Orleans, LA
*Advisory Committee members include the SEC’s Advocate for Small Business Capital Formation and 
three non-voting members appointed by each of the SEC’s Investor Advocate, the North American 
Securities Administrators Association (NASAA), and the Small Business Administration, as well as an 
observer appointed by the Financial Industry Regulatory Authority (FINRA).

ANNUAL REPORT: FISCAL YEAR 2019    |    53
The Advisory Committee held its inaugural meeting on May 6, 2019 during National Small Business
Week and its second meeting on August 13, 2019 in Omaha, Nebraska. During the fiscal year, the
Advisory Committee put forward two recommendations
183
 to the Commission.
RECOMMENDATION RE: COMMISSION’S PROPOSAL TO AMEND FINANCIAL 
DISCLOSURE REQUIREMENTS RELATING TO ACQUISITIONS AND DISPOSI-
TIONS OF BUSINESSES
August 23, 2019
The Committee supports the Commission’s proposal to amend the financial reporting 
requirements for the acquisitions and dispositions of businesses including Rules 3-05, 3-14, 
and Article 11 of Regulation S-X, subject to following recommendations:
§	That the Commission continue to look at Regulation A companies and whether they 
warrant different treatment under these rules; and 
§	That the Commission further look at the proposed amendments to the pro forma 
financial information requirements with respect to whether the proposed addition 
of Management’s Adjustments, which are intended to reflect reasonably estimable 
synergies and transaction effects, should be optional or not required at all.
Specifically, 
§	The Committee supports the proposed amendments to the Significance Tests under 
these rules by:
	—Revising the Income Test to include the addition of a revenue component, such that 
the registrant must exceed both the revenue and net income components; and 
	—Revising the Investment Test to change the denominator of the Investment Test from 
the registrant’s total assets to the registrant’s fair market value.
§	The Committee supports the proposed amendment that would require financial 
statements of the acquired business to cover up to the two most recent fiscal years 
rather than up to the three most recent fiscal years.
COMMISSION RESPONSE
As indicated on the Fall 2019 Unified Agenda of Federal Regulatory and Deregulatory Long-term 
Actions (Fall 2019 Unified Agenda),
184
 the Division of Corporation Finance is considering recom-
mending that the Commission adopt amendments to Regulation S-X (Rule 3-05) that affect the 
disclosure of financial information of acquired businesses. Staff in the Division of Corporation 
Finance will consider this Advisory Committee recommendation in connection with this initiative.

54  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
[Top left] Members of the SEC’s Small 
Business Capital Formation Advisory 
Committee discuss capital formation 
initiatives at the Committee’s inaugural 
meeting on May 6, 2019 .
[Top right] Members Catherine Mott and 
Jason Seats discuss recent Commission 
rulemakings . 
[Center left] Chair Carla Garrett and 
Vice-Chair Jeff Solomon lead the 
Committee in the development of  
recommendations at the Committee’s 
meeting .
[Center right] Members Youngro Lee and 
Bert Fox engage in discussion with other 
Committee members . 
[Right top] Member Hank Torbert weighs 
in on recommendations with experience 
from his business operations . 
[Right bottom] Members of the Advisory 
Committee met at Creighton University in 
Omaha, NE on August 13, 2019 . 

ANNUAL REPORT: FISCAL YEAR 2019    |    55
RECOMMENDATION RE: COMMISSION’S PROPOSAL TO AMEND THE 
ACCELERATED AND LARGE ACCELERATED FILER DEFINITIONS
August 23, 2019
The Committee supports the proposal to amend the “accelerated filer” and “large 
accelerated filer” definitions such that an issuer that is eligible to be a Smaller Reporting 
Company and has less than $100 million in revenue in the most recent fiscal year shall  
be a non-accelerated filer.
However, the Committee would welcome the Commission to explore additional  
further amendments to the definitions of “accelerated filer” and “large accelerated  
filer” such that more companies could be non-accelerated filers. The Committee’s  
recommendations include: 
§	Exploring raising the revenue threshold to be a non-accelerated filer, so that issuers  
that are eligible to be a Smaller Reporting Company and have more than $100 million 
in revenues could be a non-accelerated filer. 
§	Instead of basing revenues for the non-accelerated filer test on the amount of revenues 
in the most recent fiscal year, base the revenues for the non-accelerated filer test on  
the three-year rolling average of the amount of the company’s revenues.
§	Looking at whether all Smaller Reporting Companies should be non-accelerated filers. 
The Commission should also consider input from institutional investors regarding whether 
or not the auditor attestation of SOX 404(b) is determinative in their investment decision.
COMMISSION RESPONSE
As indicated on the Fall 2019 Unified Agenda,
185
 the Division of Corporation Finance is considering 
recommending that the Commission adopt changes to the “accelerated filer” definition in Exchange 
Act Rule 12b-2 that would have the effect of reducing the number of registrants that are subject to 
the Sarbanes-Oxley Act Section 404(b) attestation requirement. Staff in the Division of Corporation 
Finance will consider this Advisory Committee recommendation in connection with this initiative.



ANNUAL REPORT: FISCAL YEAR 2019    |    57
1 See, e.g., Last Week Tonight with John Oliver, 
https://www.youtube.com/watch?v=XkLXMH-
Y LTAY.
2 The Office was established pursuant to sections 
4(j) and 40 of the Securities Exchange Act of 
1934 (15 U.S.C. §§ 78d and 78qq), as added by 
the SEC Small Business Advocate Act of 2016 
(P.L. 114-284) and amended by the Small Busi-
ness Access to Capital after a Natural Disaster 
Act (title IX of division S of Public Law 115-
141). See https://www.sec.gov/files/Small%20
Business%20Advocate%20Act%20of%20
2016-as%20amended.pdf
3 See https://www.sec.gov/files/2019%20
OASB%20Business%20Plan.pdf. 
4 The legislation that created the Office also 
established a Small Business Capital Forma-
tion Advisory Committee at the SEC.  See 15 
U.S.C. §78qq.  The Office uses the Committee’s 
parameters to define the scope of small 
businesses that it serves.
5 See supra note 3. 
6 See id. 
7 See https://www.state.gov/global-entrepreneur-
ship-summits/; see also https://www.sec.gov/
secs-small-business-advocate-meets-midwest-en-
trepreneurs. 
8 Introductory remarks published at https://www.
sec.gov/news/speech/speech-miller-032019; see 
also https://www.sec.gov/secs-small-business-ad-
vocate-meets-midwest-entrepreneurs.
9 Remarks published at https://www.sec.gov/
news/speech/miller-bolstering-capital-forma-
tion-040819. 
10 See supra note 3.
11 See https://www.sec.gov/about/offices/oia/oia_
institutes.htm. 
12 See http://cle.cobar.org/securities-conference/. 
13 See https://www.sec.gov/page/capital-forma-
tion-between-coasts.
14 Remarks published at https://www.sec.gov/
news/speech/speech-miller-060419. 
15 Opening remarks published at https://www.
sec.gov/news/public-statement/statement-mill-
er-081419. 
16 Remarks and slide deck published at https://
www.sec.gov/news/speech/sec-office-advo-
cate-small-business-capital-formation-long-ti-
tle-big-mission. 
17 See https://usblackchambers.org/conference/. 
18 See https://www.sec.gov/page/small-busi-
ness-capital-formation-runs-deep-arkansas. 
19 See https://www.ruralrise.org/; see also https://
www.sec.gov/page/small-business-capital-forma-
tion-runs-deep-arkansas.
20 https://www.theice.com/insights/conversations/
inside-the-ice-house/a-champion-for-small-busi-
nesses-in-washington. 
21 See, e.g., Amy Balliett, “The 5 Most Engaging 
Types of Marketing Content,” Inc. (Apr. 15, 
2019), https://www.inc.com/amy-balliett/5-
types-of-content-your-audiences-will-love.html. 
22 See https://www.sec.gov/page/oasb-videos. 
23 The SEC conducts the Forum annually and 
prepares a report in accordance with the Small 
Business Investment Incentive Act of 1980 [15 
U.S.C. 80c-1 (codifying section 503 of Pub. L. 
No. 96-477, 94 Stat. 2275 (1980))].
24 This graphic depicts amounts reported or esti-
mated as raised from July 1, 2018 through June 
30, 2019. Data on offerings under Regulations 
D and Crowdfunding is based on informa-
tion reported by companies and was collected 
from filings (new filings and amendments) on 
EDGAR on Forms D and C, respectively. Data 
on registered offerings was collected from 
Thomson Financial’s SDC Platinum database. 
For offerings under Regulation A, estimates 
are based on proceeds reported in filings made 
during the report period. Capital raised is based 
on information reported by companies in Forms 
1-Z, 1-K, 1-SA, 1-U, and offering circular sup-
plements pertaining to completed and ongoing 
Regulation A offerings and post-qualification 
amendments, and for companies whose shares 
have become exchange-listed, information from 
other public sources. Estimates represent a 
lower bound on the amounts raised given the 
time frames for reporting proceeds following 
completed or terminated offerings and that 
offerings qualified during the report period may 
be ongoing. For the offerings that permit pooled 
investment funds, such as Rule 506(b) and (c) 
of Regulation D and registered offerings, the 
data includes offerings conducted by pooled 
investment funds. We do not yet have data to 
provide an estimated amount raised under Sec-
tion 4(a)(2) of the Securities Act or transactions 
occurring under Rule 144A for the period under 
consideration.
25 Data for public offerings includes international 
companies.
26 17 C.F.R. § 227.100 et seq.; see https://www.
sec.gov/smallbusiness/exemptofferings/reg-
crowdfunding. 
27 17 C.F.R. § 230.504; see https://www.sec.gov/
smallbusiness/exemptofferings/rule504. 
28 Securities Act of 1933 § 3(a)(11), 17 C.F.R. § 
230.147, and 17 C.F.R. § 230.147A; see https://
www.sec.gov/smallbusiness/exemptofferings/
intrastateofferings. 
END NOTES

58  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
29 17 C.F.R. § 230.506(b); see https://www.sec.
gov/smallbusiness/exemptofferings/rule506b. 
30 17 C.F.R. § 230.506(c); see https://www.sec.gov/
smallbusiness/exemptofferings/rule506c. 
31 17 C.F.R. § 230.251 et seq.; see https://www.
sec.gov/smallbusiness/exemptofferings/rega. 
32 15 U.S.C. § 77a, et seq.; see https://www.sec.
gov/smallbusiness/goingpublic. 
33 This graphic presents capital raised in regis-
tered, Regulation D and Regulation A offerings 
across the top six industries from July 1, 2018 
through June 30, 2019. Offerings by non-
pooled investment funds in other industries 
accounted for approximately $217 billion, $45 
billion and $37 million in registered, Regulation 
D and Regulation A offerings, respectively. Reg-
ulation A and registered offerings were classified 
into industry groups based on the primary SIC 
code reported by the company.  Industry groups 
were self-reported by companies on Form D.  
Differences in data sources and definitions 
may limit the comparability of industry data. 
Offerings by pooled investment funds, which 
accounted for approximately $26 billion and 
$1.38 trillion in registered offerings and Reg-
ulation D, respectively, are excluded from this 
table. See note 24 for a description of how these 
amounts were reported or estimated.
34 The maps included in this section depict the 
amounts reported or estimated as raised by 
issuers, including pooled investment funds that 
report a primary location in the U.S., including 
U.S. territories, from July 1, 2018 through June 
30, 2019. See note 24 for a description of how 
these amounts were reported or estimated.
35 The Board of Governors of the Federal Reserve 
System, “Small Business Credit Survey: 2019 
Report on Employer Firms” (2019), https://
www.fedsmallbusiness.org/medialibrary/feds-
mallbusiness/files/2019/sbcs-employer-firms-re-
port.pdf. 
36 Id.
37 Board of Governors of the Federal Reserve Sys-
tem, “Report to the Congress on the Availability 
of Credit to Small Businesses” (Sep. 2017) at 
1, https://www.federalreserve.gov/publications/
files/sbfreport2017.pdf. 
38 Federal Deposit Insurance Corporation, “FDIC 
Community Banking Study Reference Data” 
(updated August 19, 2019), https://www.fdic.
gov/regulations/resources/cbi/data.html.
39 Karen G. Mills, Fintech, Small Business & The 
American Dream, Palgrave Macmillan (2018) at 
52.
40 Brad Feld and Jason Mendelson, Venture Deals: 
Be Smarter Than Your Lawyer and Venture 
Capitalist, John Wiley & Sons, Inc. (4
th
 ed. 
2019) at 149.
41  Mills, supra note 39, at 7.
42 Originally the term “angel” was used to 
describe patrons of Broadway Theater who pro-
vided money to support theatrical productions.
43 See Angel Capital Association, “FAQs for 
Angels and Entrepreneurs” (accessed Oct. 29, 
2019), https://www.angelcapitalassociation.org/
faqs/; see also Jason Rowley, “Where Venture 
Capitalists Invest and Why,” TechCrunch (Nov. 
9, 2017), https://techcrunch.com/2017/11/09/
local-loyalty-where-venture-capitalists-in-
vest-and-why/.
44 Feld and Mendelson, supra note 40, at 113.
45 See Jeffrey Sohl, “The Angel Market in 2018: 
More Angels Investing in More Deals at Lower 
Valuations”, Center for Venture Research 
(May 9, 2019), https://www.icoast.com/
news/2019/08/01/2investornews/the-angel-mar-
ket-in-2018-more-angels-investing-in-more-
deals-at-lower-valuations/.
46 Angel Capital Association, supra note 43; 
see also Marianne Hudson, “In-Depth Angel 
Investor Survey Sheds Light On Angel Success,” 
Forbes (Dec. 1, 2017), https://www.forbes.com/
sites/mariannehudson/2017/12/01/in-depth-
angel-investor-survey-sheds-light-on-angel-suc-
cess/.
47 Concept Release on Harmonization of Securities 
Offering Exemptions, Release No. 33-10649 
(June 18, 2019), https://www.sec.gov/rules/
concept/2019/33-10649.pdf at Table 3 (“Har-
monization Concept Release”). The underlying 
household data for this analysis was obtained 
from the Federal Reserve Board’s Survey of 
Consumer Finances for 2016, https://www.
federalreserve.gov/econresdata/scf/scfindex.htm. 
48 See 17 U.S.C. § 230.501(a); see also “Inves-
tor Participation in Private Offerings” section 
below.
49 See Harmonization Concept Release at Table 4.
50 See Feld and Mendelson, supra note 40, at 265.
51 See Harmonization Concept Release at note 
47. As a comparison point, during the same 
four-year period, non-accredited investors were 
reported as participating in over 60% of the 
Rule 504 offerings. See Harmonization Concept 
Release at note 264. Rule 504 permits com-
panies to raise up to $5 million in a 12-month 
period from an unlimited number of investors 
(without regard to whether or not those inves-
tors are accredited).
52 Ewing Marion Kauffman Foundation, “State of 
Entrepreneurship 2017 | Zero Barriers: Three 
Mega Trends Shaping the Future of Entrepre-
neurship” (2017) at 22, https://www.kauffman.
org/what-we-do/resources/state-of-entrepre-
neurship-addresses/2017-state-of-entrepreneur-
ship-address.
53 Feld and Mendelson, supra note 40, at 14.

ANNUAL REPORT: FISCAL YEAR 2019    |    59
54 PitchBook-NVCA, “2Q 2019 Venture Monitor” 
(Jul. 10, 2019) at 6, https://nvca.org/research/
pitchbook-nvca-venture-monitor/. 
55 Id.
56 See Ewing Marion Kauffman Foundation, “The 
State of Capital Access for Entrepreneurs: From 
Barriers to Potential” (Feb. 5, 2019), https://
www.kauffman.org/-/media/kauffman_org/
entrepreneurship-landing-page/capital-access/
capital_access_lab_exec_summary_final.pdf
57 Pitchbook, “Private Markets: A Decade of 
Growth” (Jul. 19, 2019), https://pitchbook.com/
news/reports/3q-2019-pitchbook-private-mar-
kets-a-decade-of-growth. 
58 Id.
59 Bhandari, Ryan, “The Opportunity Fund,” 
Third Way (Jul. 9, 2019), https://www.thirdway.
org/report/the-opportunity-fund, citing Rebel 
A. Cole, Douglas J. Cumming, and Dan Li, 
“Do Banks or VCs Spur Small Firm Growth?” 
Journal of International Financial Markets, 
Institutions and Money (Mar. 2016) at 41, 
60-72, https://papers.ssrn.com/sol3/papers.
cfm?abstract_id=2684049. “Small employer,” 
for purposes of this study, was defined as firms 
with 5-19 employees.
60    Pitchbook,    supra note 57.
61 Id.
62 Committee on Capital Markets Regulation, 
“Expanding Opportunities for Investors 
and Retirees: Private Equity” (Nov. 2018), 
https://www.capmktsreg.org/wp-content/up-
loads/2018/10/Private-Equity-Report-FINAL-1.
pdf.
63 See, e.g., McKinsey & Company, “McKinsey 
Global Private Markets Review 2019” (Feb. 
2019) at 11, https://www.mckinsey.com/indus-
tries/private-equity-and-principal-investors/
our-insights/mckinseys-private-markets-annu-
al-review. 
64    PitchBook-NVCA,    supra note 54, at 13 (Q&A 
with Sulu Mamdani, Managing Partner, SVB 
Capital).
65 Id.
66    Pitchbook,    supra note 57.
67 Id.
68 Id.
69 See World Bank Group Open Data, https://data.
worldbank.org/indicator/CM.MKT.LDOM.
NO?locations=US.
70 See, e.g., Committee on Capital Markets  
Regu lation, supra note 62; Michael Ewens 
and Joan Farre-Mensa, “The Deregulation of 
the Private Equity Mar kets and the Decline in 
IPOs,” National Bureau of Economic Research 
(Sep. 2019 working paper) at 3.
71 See, e.g., “Expanding the On-Ramp: Recom-
mendations to Help More Companies Go and 
Stay Public” (Apr. 2018) at 5-6, https://nvca.
org/wp-content/uploads/2018/04/Expanding-
The-On-Ramp-Recommendations-to-Help-
More-Companies-Go-and-Stay-Public.pdf. 
72 Data registered offerings was collected from 
Thomson Financial’s SDC Platinum database.
73 Small public companies include public com-
panies with a size less than or equal to $250 
million on the date of the offering, calculated 
by multiplying price of the company’s stock 
at the close of the day of the offering by the 
number of outstanding shares on the day of the 
offering. Data from the Center for Research in 
Securities Prices (CRSP) and Dealogic were used 
to fill in missing information from SDC Plati-
num. Mutual funds and Closed-end funds are 
excluded from the statistics. Those companies 
with missing a stock price on the offering day or 
number of outstanding shares are not included 
in the statistics.
74 “Expanding the On-Ramp,” supra note 71, at 
5-6.
75 Id.
76 Matt Levine, “The Unicorn Stampede is Com-
ing,” Bloomberg (Mar. 22, 2019), https://www.
bloomberg.com/opinion/articles/2019-03-22/
the-unicorn-stampede-is-coming.
77 Ewing Marion Kauffman Foundation, “Data 
Show that Gender-Inclusive Founding Teams 
Have Greater Success in Fundraising and 
Innovation” (Oct. 3, 2019), https://www.kauff-
manfellows.org/journal_posts/data-show-that-
gender-inclusive-founding-teams-have-greater-
success-in-fundraising-and-innovation.
78 Kauffman Foundation, supra note 56 (citing 
2004 figures).
79 Id.
80    Sohl,    supra note 45.
81 Emma Hinchcliffe, “Funding For Female 
Founders Stalled at 2.2% of VC Dollars in 
2018,” Fortune (Jan. 28, 2019), https://for-
tune.com/2019/01/28/funding-female-found-
ers-2018/.
82 See Katie Abouzahr, et. al., “Why Wom-
en-Owned Startups Are a Better Bet,” Boston 
Consulting Group (Jun. 6, 2018), https://www.
bcg.com/en-us/publications/2018/why-women-
owned-startups-are-better-bet.aspx.
83 See H. Waverly Deutsch, et al., “The State of 
LGBT Entrepreneurship in the U.S.,” StartOut 
(Jul. 2016), https://startout.org/wp-content/
uploads/2018/03/State_of_LGBT_Entrepreneur-
ship.pdf. 
84    Sohl,    supra note 45.

60  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
85 Rebecca Kaden, “How VC Can Help More 
Women Get Ahead,” Harvard Business Review 
(Oct. 1, 2019), https://hbr.org/2019/10/how-
vc-can-help-more-women-get-ahead; compare 
Deloitte University Leadership Center for Inclu-
sion, “NVCA-Deloitte Human Capital Survey,” 
2
nd
 ed. (June 2019), https://www2.deloitte.com/
us/human-capital-survey-2nd-edition (copyright 
Deloitte) (citing survey data that 45% of the 
workforce at VC firms are women, accounting 
for 21% of all investment professionals and 
14% of investment partners).
86    Kaden,    supra note 85.
87 U.S. Minority Business Development Agency, 
“Fact Sheet: U.S. Minority-Owned Firms” (Jan. 
2016), https://www.mbda.gov/sites/mbda.gov/
files/migrated/files-attachments/2012SBO_MBE-
FactSheet020216.pdf.
88 Id.
89 Id.
90 Id.
91 U.S. Minority Business Development Agency, 
“The Minority Business Development Agency: 
Vital to Making America Great” (Dec. 20, 
2018), https://www.mbda.gov/page/minori-
ty-business-development-agency-vital-mak-
ing-america-great. 
92 Kauffman Foundation, supra note 56.
93    Sohl,    supra note 45.
94 Kauffman Foundation, supra note 56.
95 Federal Reserve Bank of New York, Stanford 
Graduate School of Business, Latino Entrepre-
neurship Initiative, and Interise, “Latino-Owned 
Businesses: Shining a Light on National Trends” 
(Nov. 2018), https://www.newyorkfed.org/
medialibrary/media/smallbusiness/2017/Report-
on-Latino-Owned-Small-Businesses.pdf.
96 RateMyInvestor, Diversity in U.S. Startups, 
https://ratemyinvestor.com/pdfjs/full?file=%2F-
DiversityVCReport_Final.pdf (data in the 
report covered the period from January 2013 to 
December 2017).
97    Sohl,    supra note 45.
98 Deloitte University Leadership Center for Inclu-
sion, supra note 85. 
99 Federal Emergency Management Agency 
(FEMA), “Hurricane Ready Business Toolkit” 
(Nov. 15, 2017), https://www.fema.gov/me-
dia-library/assets/documents/152381. 
100 Federal Reserve Banks, “2017 Small Business 
Credit Survey: Report on Disaster-Affected 
Firms” (2017), https://www.fedsmallbusiness.
org/survey/2018/report-on-disaster-affect-
ed-firms.
101 Data from U.S. Census Bureau, American 
Community Survey (ACS) was used to estimate 
the population in zip codes affected by the 
natural disasters as described in infra, note 102. 
However, certain zip codes were identified as 
missing population values, so 27% is likely under-
estimated.
102 Zip codes designated as affected are defined as 
having one or more residents approved for as-
sistance under FEMA’s IHP program for natural 
disasters with classifications of Major Disaster 
Declaration and incident start dates between 
July 1, 2016 and June 30, 2019.Given the trail-
ing impact caused by natural disasters, each zip 
code affected in that three year period was in-
cluded. Classification of disaster areas are based 
on Disaster Declaration Summaries data at 
https://www.fema.gov/api/open/v1/DisasterDec-
larationsSummaries.csv, and FEMA Housing 
Assistance Program Data at https://www.fema.
gov/media-library/assets/documents/34758. 
The classification method for disaster areas is 
based on the methodology in the “2017 Small 
Business Credit Survey – Report on Disaster-Af-
fected Firms”, Federal Reserve Banks of Dallas, 
New York, Richmond, and San Francisco at 
https://www.newyorkfed.org/medialibrary/me-
dia/smallbusiness/2017/SBCS-Report-on-Disas-
ter-Affected-Firms.pdf.
103 Evaluated from July 1, 2016 to June 30, 2019 
using zip codes affected by natural disasters as 
described in supra note 102.
104 National Bureau of Economic Research, “The 
Effect of Natural Disasters on Economic Activ-
ity in US Counties: A Century of Data” (Jun. 
2019), https://www.nber.org/papers/w23410.
105 U.S. Census Bureau, ACS, “Understanding and 
Using American Community Survey Data: What 
Users of Data for Rural Areas Need to Know”, 
Section 1 (July 2019) at https://www.census.gov/
content/dam/Census/library/publications/2019/
acs/ACS_rural_handbook_2019_ch01.pdf 
(“Data from the ACS indicate that about 61 
million people, or 19 percent of the popula-
tion, lived in rural areas of the United States in 
2016.”).
106 Federal Reserve, supra note 35.
107 Classification of rural areas are based on the 
list of 2015 Q4 rural area zip codes from the 
Center for Medicare & Medicaid Services at 
https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/DMEPOSFeeSched/
DMEPOS-Fee-Schedule-Items/DME-Rural-
Zip-and-Formats.html?DLPage=1&DLEn-
tries=10&DLSort=2&DLSortDir=descending.
108 Kauffman Foundation, supra note 52, at 21; 
U.S. Census, “How Does the U.S. Census 
Bureau Define ‘Rural?’” at https://gis-portal.
data.census.gov/arcgis/apps/MapSeries/index.
html?appid=7a41374f6b03456e9d138c-
b014711e01#map; See also https://www.census.
gov/population/censusdata/urpop0090.txt. 
109 See National Community Reinvestment Co-
alition, “Final Report: Access to Capital and 
Credit in Appalachia and the Impact of the 
Financial Crisis and Recession on Commercial 
Lending and Finance in the Region” (Jul. 2013) 

ANNUAL REPORT: FISCAL YEAR 2019    |    61
(report prepared for Appalachian Regional 
Commission), https://www.arc.gov/assets/re-
search_reports/AccessToCapitalAndCreditInAp-
palachia-July2013.pdf.
110 Ruth Simon and Coulter Jones, “Goodbye, 
George Bailey: Decline of Rural Lending Crimps 
Small-Town Business,” Wall Street Journal 
(Dec. 25, 2017), https://www.wsj.com/articles/
goodbye-george-bailey-decline-of-rural-lending-
crimps-small-town-business-1514219515.
111 Rural Policy Research Institute, “Access to 
Capital in Rural America: Supporting Business 
Startup, Growth and Job Creation, Insights 
from the Field and Policy Recommendations” 
(Oct. 2012), http://www.rupri.org/Forms/Capi-
talMarkets_FieldInsights.pdf.
112 Patricia Scruggs, Wayne Embree, and Rob Wilt-
bank, “Wealth Creation in Rural Communities: 
The Role of Equity Capital in Rural Commu-
nities” (Feb. 2009), https://community-wealth.
org/sites/clone.community-wealth.org/files/
downloads/report-scruggs-et-al.pdf.
113 See Office of Information and Regulatory 
Affairs, Office of Management and Budget, 
“Fall 2019 Unified Agenda of Regulatory 
and Deregulatory Active Actions in Prerule, 
Proposed Rule and Final Rule Stages by the 
Securities and Exchange Commission,” https://
www.reginfo.gov/public/do/eAgendaMain?op-
eration=OPERATION_GET_AGENCY_RULE_
LIST&currentPub=true&agencyCode=&show-
Stage=active&agencyCd=3235&Image58.
x=44&Image58.y=11. Active regulatory actions 
are likely to occur in the next 12 months after 
publication of the Fall 2019 Unified Agenda. 
See Office of Information and Regulatory Af-
fairs, Office of Management and Budget, “Fall 
2019 Unified Agenda of Federal Regulatory 
and Deregulatory Long-term Actions by the 
Securities and Exchange Commission,” https://
www.reginfo.gov/public/do/eAgendaMain?op-
eration=OPERATION_GET_AGENCY_
RULE_LIST&currentPubId=201904&show-
Stage=longterm&agencyCd=3235&Image58.
x=33&Image58.y=11. Long-term Actions are 
items under development but for which regula-
tory action is not expected within 12 months af-
ter publication of the Fall 2019 Unified Agenda.
114 See “State of Small Business Capital Formation” 
section above.
115 Conflicts include when non-accredited inves-
tors may participate, investment or offering 
limits, when general solicitation may be used, 
and the particular itemized disclosure require-
ments under each of the exemptions, including 
Regulation A, Rules 504, 506(b) and 506(c) of 
Regulation D, and Regulation Crowdfunding. 
116 See “State of Small Business Capital Formation” 
section above.
117 For example, regulatory uncertainty has been 
cited as a possible explanation for the relatively 
low levels of utilization of Rule 506(c) offerings 
using general solicitation. See Harmonization 
Concept Release at Section II.B.2.f.
118 See, e.g., SEC Release No. 33-97 (Dec. 28, 
1933).
119 See, e.g., Final Report of the 2016 SEC Gov-
ernment-Business Forum on Small Business 
Capital Formation (Mar. 2017), https://www.
sec.gov/info/smallbus/gbfor35.pdf (“2016 Small 
Business Forum Report”); Final Report of the 
2017 SEC Government-Business Forum on 
Small Business Capital Formation (Mar. 2018), 
https://www.sec.gov/files/gbfor36.pdf (“2017 
Small Business Forum Report”).
120 See Harmonization Concept Release, which 
solicits comment on the exempt offering frame-
work generally as well as each of the following 
topics: accredited investor definition, private 
placement exemption and Rule 506 of Regula-
tion D, Regulation A, limited offerings under 
Rule 504 of Regulation D, intrastate offerings, 
Regulation Crowdfunding, integration, pooled 
investment funds, and the secondary trading of 
certain securities. 
121 See “Launch of Video Content” section above.
122 Currently offering caps exist under Rule 504 
under Regulation D ($5 million), Regulation 
Crowdfunding ($1.07 million), and Regulation 
A ($20 million for Tier 1 and $50 million for 
Tier 2). Each cap has been subject to critiques 
and calls for amendment, and some are subject 
to periodic review requirements by the Commis-
sion.
123 See Linda C. Quinn, Reforming the Securities 
Act of 1933: A Conceptual Framework, 10 In-
sights 25 (Jan. 1996), https://www.sec.gov/info/
smallbus/acsec/reformingsa33.pdf.
124 See Small Business Capital Formation Advi-
sory Committee, Recommendation Regarding 
Harmonization General Principles (Dec. 13, 
2019), https://www.sec.gov/spotlight/sbcfac/
recommendation-harmonization-general-princi-
ples.pdf. This recommendation was adopted by 
the Advisory Committee in FY2020 and is not 
included in the summary of FY2019 activities of 
the committee.
125 See, e.g., Regulation D Revisions; Exemption 
for Certain Employee Benefit Plans, Release 
No. 33-6683 (Jan. 16, 1987) [52 FR 3015 (Feb. 
2, 1987)] at note 6; see also Amendments for 
Small and Additional Issues Exemptions under 
the Securities Act (Regulation A), Release No. 
33-9741 (March 25, 2015) [80 FR 21805 (April 
20, 2015)] at note 146.
126 Small Business Incentive Act of 1980, Pub. L. 
No. 96-477, § 602, 94 Stat. 2275 (1980). See 
also 15 U.S.C. § 77b(a)(15).
127 S. Rep. No. 96-958, at 12 (1980).

62  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
128 17 C.F.R. § 230.501(a).
129 For further discussion, see Harmonization Con-
cept Release at Section IV.A.2.
130 Mutual funds make up 56% of defined contri-
bution retirement accounts and 45% of individ-
ual retirement account assets. See Investment 
Company Institute, “2019 Investment Company 
Fact Book” (Apr. 2019) at 34, https://www.ici.
org/pdf/2019_factbook.pdf. 
131 See, e.g., 17 CFR 270.22e-4 (liquidity risk man-
agement programs); see also 15 U.S.C. 80a-2(a)
(41) (defining “value”).
132 See Harmonization Concept Release at Section 
IV.A.
133 For example, as of December 31, 2018, there 
were only 250 closed-end funds, compared 
with 17,707 mutual funds and 3,371 ETFs. See 
Investment Company Institute, supra note 130, 
at 32.
134 A BDC is a type of closed-end investment com-
pany that does not register under the Investment 
Company Act, but rather elects to be subject 
to Sections 55-65 of that act. See 15 U.S.C. 
80a-2(a)(48).
135 An SBIC is a type of fund registered under the 
Small Business Investment Act of 1958 or that 
is approved by the U.S. Small Business Adminis-
tration. See 17 CFR 230.501(a)(1).
136 See Harmonization Concept Release at Section 
IV.C.
137 See, e.g., Transcript of SEC and Morehouse 
College event “REACHING NEW HEIGHTS: 
Conversations on Raising Capital for Business-
es of Color,” (Oct. 24, 2019), https://www.
sec.gov/files/Morehouse%20Conference%20
Transcript%20PDF%20-%20Revised%20
%2812.11.19%29.pdf.
138 U.S. Department of the Treasury, “A Financial 
System That Creates Economic Opportunities 
Capital Markets” (Oct. 2017) (“2017 Trea-
sury Report”) at 27, https://www.treasury.gov/
press-center/press-releases/documents/a-finan-
cial-system-capital-markets-final-final.pdf.
139 See 17 CFR 230.501(a)(1), (3) and (7).
140 See Small Business Capital Formation Advisory 
Committee Recommendation on the Accredited 
Investor Definition (Dec. 11, 2019), https://
www.sec.gov/spotlight/sbcfac/recommenda-
tion-accredited-investor.pdf. This recommenda-
tion was adopted by the Advisory Committee in 
FY2020 and is not included in the summary of 
FY2019 activities of the committee.
141 See Advisory Committee on Small and Emerg-
ing Companies, Recommendations Regarding 
the Accredited Investor Definition (Jul. 20, 
2016), https://www.sec.gov/info/smallbus/acsec/
acsec-recommendations-accredited-investor.pdf.
142 See Final Report of the 2019 SEC Govern-
ment-Business Forum on Small Business Capital 
Formation (Dec. 2019), https://www.sec.
gov/files/small-business-forum-report-2019.
pdf; Final Report of the 2018 SEC Govern-
ment-Business Forum on Small Business Capital 
Formation (Jun. 2019), https://www.sec.gov/
info/smallbus/gbfor37.pdf (“2018 Small 
Business Forum Report”); 2017 Small Business 
Forum Report; and 2016 Small Business Forum 
Report.
143 See 2017 Treasury Report at 44 et seq.
144 See SEC’s Division of Investment Management’s 
Small Fund Outreach Initiative, https://www.
sec.gov/new-smaller-fund-outreach-effort-seeks-
to-promote-choice-for-main-street-investors. 
145 See Small Business Capital Formation Advisory 
Committee Recommendation on Retail Investor 
Access to Registered Closed-End Funds Invest-
ing in Private Funds (Dec. 11, 2019), https://
www.sec.gov/spotlight/sbcfac/recommendation-
closed-end-fund-of-funds.pdf. This recommen-
dation was adopted by the Advisory Committee 
in FY2020 and is not included in the summary 
of FY2019 activities of the committee.
146 Committee on Capital Markets Regulation, 
supra note 62.
147 2017 Treasury Report at 43. 
148 See, e.g, Final Report of the Securities and 
Exchange Commission Advisory Committee 
on Small and Emerging Companies (Sept. 21, 
2017), https://www.sec.gov/info/smallbus/
acsec/acsec-final-report-2017-09.pdf at Section 
IV.1.A.
149 Broker-dealers are generally “engaged in the 
business” of “effecting transactions in securities 
for the account of others.” Securities Exchange 
Act §§ 4(a)(4) (defining “broker”) and 4(a)(5) 
(defining “dealer”).
150 See, e.g., Country Business, Inc., SEC No-Action 
Letter (Nov. 8, 2006); International Business 
Exchange Corporation, SEC No-Action Letter 
(Dec. 12, 1986); Paul Anka, SEC No-Action 
Letter (Jul. 24, 1991); AngelList LLC, SEC 
No-Action Letter (Mar. 28, 2013); FundersClub 
Inc. & FundersClub Mgm’t LLC, SEC No-Ac-
tion Letter (Mar. 26, 2013); and M&A Brokers, 
SEC No-Action Letter (Feb. 4, 2014); see also 
SEC v. Kramer, 778 F.Sup.2d 1320, 1334 (M.D. 
Fla. 2011).
151 See, e.g., SEC Government-Business Forum on 
Small Business Capital Formation historical 
reports, https://www.sec.gov/info/smallbus/
sbforumreps.htm; American Bar Association, 
“Report and Recommendations of the Task 
Force on Private Placement Broker-Dealers” 
(Jun. 20, 2005), https://www.sec.gov/info/small-
bus/2009gbforum/abareport062005.pdf (“ABA 
Report on Private Placement Broker-Deal-
ers”); SEC Advisory Committee on Small and 
Emerging Companies, “Recommendation 
Regarding Finders, Private Placement Brokers, 
and Investment Platforms Not Registered as 
Broker-Dealers” (May 10, 2017), https://www.
sec.gov/info/smallbus/acsec/acsec-recommenda-

ANNUAL REPORT: FISCAL YEAR 2019    |    63
tion-051517-finders.pdf (“ACSEC Finders Rec-
ommendation”); Unlocking Capital for Small 
Businesses Act, H.R. 6127, 115
th
 Cong. (2018), 
https://www.congress.gov/bill/115th-congress/
house-bill/6127/text; Proposed NASAA Model 
Rule Exempting Certain Merger and Acqui-
sition Brokers from Registration Pursuant to 
State Securities Acts (Jan. 2015); 2017 Trea-
sury Report at 43-44; and Gregory C. Yadley, 
“Notable by Their Absence: Finders and Other 
Financial Intermediaries in Small Business Capi-
tal Formation” (Jun. 3, 2015), https://www.sec.
gov/info/smallbus/acsec/finders-and-other-finan-
cial-intermediaries-yadley.pdf.
152 See note 151.
153 See, e.g., Faith Colish, Finders and Private 
Placement Brokers: The Missing Link and H.R. 
6127, Bloomberg Law (Nov. 14, 2018), https://
news.bloomberglaw.com/corporate-law/insight-
finders-and-private-placement-brokers-the-miss-
ing-link-and-hr-6127; Transcript of the 38th 
Annual Government-Business Forum on Small 
Business Capital Formation (Aug. 14, 2019), 
https://www.sec.gov/files/2019-sec-govern-
ment-business-forum-small-business-capital-for-
mation-transcript.pdf, at 164-166.
154 See, e.g., 2019 Small Business Forum Report; 
2018 Small Business Forum Report; 2017 Small 
Business Forum Report; and 2016 Small Busi-
ness Forum Report.
155 See Crowdfunding, Release No. 33-9974 (Oct. 
30, 2015) [80 FR 71387 (Nov. 16, 2015)].
156 Australia developed the first equity crowdfund-
ing model, followed by the United Kingdom 
and many other countries, including the United 
States. See Sam Raymond, Anthony Lambkin, 
Richard Swart, Sherwood Neiss, and Jason Best, 
“Crowdfunding’s Potential for the Developing 
World,” infoDev, Finance and Private Sector 
Development Department, World Bank (2013), 
http://documents.worldbank.org/curated/
en/409841468327411701/Crowdfundings-po-
tential-for-the-developing-world.
157 See Mills, supra note 39, at 7.
158 See id.
159 Many portals also facilitate capital formation 
under Regulation A offerings, sometimes re-
ferred to as “mini-IPOs.”
160 See, e.g., Douglas Cumming, Michele Meoli, 
and Silvio Vismara, “Does Equity Crowdfund-
ing Democratize Entrepreneurial Finance?,” 
Small Business Economics (Jun. 3, 2019), 
https://doi.org/10.1007/s11187-019-00188-z 
(reporting on international crowdfunding); see 
also Republic, “Republic Report – The Business 
of Diversity” (May 3, 2018), https://republic.
co/blog/the-business-of-diversity; cf Sifan Liu 
and Joseph Parilla, “Hidden Entrepreneurs: 
What Crowdfunding Reveals about Startups in 
Metro America,” Brookings Institute (Sep. 18, 
2018), https://www.brookings.edu/research/
hidden-entrepreneurs-what-crowdfunding-re-
veals-about-startups-in-metro-america/ (re-
garding rewards-based crowdfunding: “While 
closely tracking venture capital investment, 
Kickstarter funding has a more diverse distribu-
tion, both by gender and geography. [...] Wom-
en also enjoy higher rates of success in funding 
their projects across all project categories except 
for games.”). 
161 See, e.g., Kaden, supra note 85 (“Last year a 
mere 12% of venture capital dollars went to 
companies with a woman on the founding team,  
a decline from 15% in 2017. The numbers get 
even worse when you look at female-founded 
startups that aren’t focused on female custom-
ers: They’ve gotten less than 2% of VC invest-
ment dollars since 2014.”).
162  See Mills, supra note 39, at 52 (“Another 
factor working against small business lending 
is that the cost of loan underwriting does not 
scale with the size of the loan. In other words, 
it costs about as much for a bank to process a 
$100,000 loan as a $1 million loan. That means 
that smaller-dollar loans are less profitable for 
banks. As a result, banks are less likely to lend 
at lower dollar amounts. One response for 
a bank is to move away from small business 
lending and focus on more profitable activities. 
Some banks have reduced or eliminated loans 
below a certain threshold, typically $100,000, 
and some will not lend to small businesses with 
annual revenues of less than $2 million.”); id 
at 56 (“Three-quarters of small business loan 
applications from employer firms were for 
small-dollar loans—loans under $250,000—and 
more than half of the loan applications were for 
amounts under $100,000.”).
163 See Report to the Commission on Regulation 
Crowdfunding (Jun. 18, 2019), www.sec.gov/
smallbusiness/exemptofferings/regcrowdfund-
ing/2019Report. 
164 See id. 
165 See id at Section III.A.1.
166 See Harmonization Concept Release at Section 
II.F.1.d.
167 See supra note 53.
168 For example, the United Kingdom does not 
limit the amount a company can raise using 
crowdfunding, but does require a prospectus 
for a company to raise more than £8 million, 
matching a recent rule change by Germany. See 
Explanatory Memorandum to The Financial 
Services and Markets Act 2000 (Prospectus 
and Markets in Financial Instruments) Reg-
ulations 2018, 2018 No. 786, http://www.
legislation.gov.uk/uksi/2018/786/pdfs/uks-
iem_20180786_en.pdf; https://www.crowdfun-
dinsider.com/2018/06/135692-germany-raises-
the-equity-crowdfunding-limit-to-e8-million/; 

64  |  SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION
and Regulation (EU) 2017/1129 of the Euro-
pean Parliament and of the Council of 14 June 
2017 on the prospectus to be published when 
securities are offered to the public or admitted 
to trading on a regulated market, and repealing 
Directive 2003/71/EC, https://eur-lex.europa.
eu/legal-content/EN/TXT/HTML/?uri=CELEX-
:32017R1129&from=EN. 
169 See Connie Loizos, “A Quick Look at How 
Series A and Seed Rounds Have Ballooned 
in Recent Years, Fueled by Top Investors,” 
TechCrunch (Apr. 25, 2019), https://techcrunch.
com/2019/04/25/a-quick-look-at-how-fast-se-
ries-a-and-seed-rounds-have-ballooned-in-re-
cent-years-fueled-by-top-investors/.
170 See Small Business Capital Formation Advisory 
Committee Recommendation on Regulation 
Crowdfunding (Dec. 13, 2019), https://www.
sec.gov/spotlight/sbcfac/recommendation-regu-
lation-crowdfunding.pdf. This recommendation 
was adopted by the Advisory Committee in 
FY2020 and is not included in the summary of 
FY2019 activities of the committee.
171 See Association of Online Investment Platforms 
letter to the Commission (Jul. 5, 2019), https://
www.sec.gov/comments/s7-08-19/s70819-
5761538-186947.pdf. 
172 See 2019 Small Business Forum Report; 2018 
Small Business Forum Report; 2017 Small 
Business Forum Report; 2016 Small Business 
Forum; and Final Report of the 2015 SEC 
Government-Business Forum on Small Business 
Capital Formation (May 2015), https://www.
sec.gov/info/smallbus/gbfor34.pdf (“2015 Small 
Business Forum Report”).
173 See, e.g., PwC survey of CFOs, 83% of whom 
estimate spending more than $1 million on 
one-time costs associated with their IPOs. PwC 
Deals, “Considering an IPO to Fuel Your Com-
pany’s Future? Insight into the Costs of Going 
Public and Being Public” (Nov. 2017), https://
www.pwc.com/us/en/services/deals/library/cost-
of-an-ipo.html. 
174 Id.
175  Pitchbook,  supra note 57.
176 See “Small Public Companies” section above.
177 President Obama’s Council on Jobs and Com-
petitiveness, “Interim Report: Taking Action, 
Building Confidence: Five Common-Sense 
Initiatives to Boost Jobs and Competitiveness” 
(Oct. 2011), http://files.jobs-council.com/job-
scouncil/files/2011/10/JobsCouncil_InterimRe-
port_Oct11.pdf. 
178 See, e.g., Jumpstart Our Business Startups Act 
of 2012 (“JOBS Act”), Pub. L. No. 112-106, 
126 Stat. 306 (2012); Proposed Amendments 
to the Accelerated Filer and Large Accelerat-
ed Filer Definitions, Release No. 34-85814 
(May 9, 2019), https://www.sec.gov/rules/pro-
posed/2019/34-85814.pdf; Smaller Reporting 
Company Definition, Release No. 33-10513 
(June 28, 2018), https://www.sec.gov/rules/fi-
nal/2018/33-10513.pdf.
179 See, e.g., Proposed Modernization of Regula-
tion S-K Items 101, 103, and 105, Release No. 
33-10668 (Aug. 8, 2019), https://www.sec.gov/
rules/proposed/2019/33-10668.pdf; Proposed 
Amendments to Financial Disclosures about 
Acquired and Disposed Businesses, Release No. 
33-10635 (May 3, 2019), https://www.sec.gov/
rules/proposed/2019/33-10635.pdf; FAST Act 
Modernization and Simplification of Regulation 
S-K, Release No. 33-10618 (Mar. 20, 2019), 
https://www.sec.gov/rules/final/2019/33-10618.
pdf; Disclosure Update and Simplification, 
Release No. 33-10532 (Aug. 17, 2018), https://
www.sec.gov/rules/final/2018/33-10532.pdf; 
and Proposed Financial Disclosures about 
Guarantors and Issuers of Guaranteed Securities 
and Affiliates Whose Securities Collateralize a 
Registrant’s Securities, Release No. 33-10526 
(Jul. 24, 2018), https://www.sec.gov/rules/pro-
posed/2018/33-10526.pdf.
180 See 2019 Small Business Forum Report; 2018 
Small Business Forum Report; 2017 Small 
Business Forum Report; 2016 Small Business 
Forum Report; and 2015 Small Business Forum 
Report.
181 https://www.sec.gov/page/small-business-capi-
tal-formation-advisory-committee. 
182 See SEC Press Release 2019-61, “SEC An-
nounces Members of Small Business Capital 
Formation Advisory Committee” (Apr. 25, 
2019), https://www.sec.gov/news/press-re-
lease/2019-61. 
183 https://www.sec.gov/spotlight/sbcfac/recommen-
dations-rule-3-05-and-accelerated-filer-defini-
tion.pdf. 
184 See Office of Information and Regulatory 
Affairs, Office of Management and Bud-
get, “Fall 2019 Unified Agenda of Federal 
Regulatory and Deregulatory Long-term 
Actions by the Securities and Exchange 
Commission,” RIN 3235-AL77, https://www.
reginfo.gov/public/do/eAgendaViewRule?pu-
bId=201910&RIN=3235-AL77. 
185 See Office of Information and Regulatory 
Affairs, Office of Management and Budget, 
“Fall 2019 Unified Agenda of Federal Reg-
ulatory and Deregulatory Long-term Ac-
tions by the Securities and Exchange Com-
mission,” RIN 3235-AM41, https://www.
reginfo.gov/public/do/eAgendaViewRule?pu-
bId=201910&RIN=3235-AM41. 



OFFICE OF THE  
ADVOCATE FOR SMALL  
BUSINESS CAPITAL  
FORMATION
U.S. Securities and  
Exchange Commission
100 F Street NE
Washington, DC 20549
202.551.5407
www.sec.gov/oasb
[email protected]

ANNUAL REPORT FOR FISCAL YEAR 2019

Office of the Advocate for  

Small Business  
Capital Formation

U.S. SECURITIES AND EXCHANGE COMMISSION



ABOUT THIS REPORT + ACKNOWLEDGEMENTS
This annual report of the Office of the Advocate for Small Business Capital 
Formation for Fiscal Year 2019 is being delivered to the Committee on 
Banking, Housing, and Urban Affairs of the U.S. Senate and the Committee 
on Financial Services of the U.S. House of Representatives in accordance 
with Section 4(j) of the Securities Exchange Act of 1934 (the Exchange 
Act), as amended by the SEC Small Business Advocate Act of 2016,  
15 U.S.C. § 78d(j)(6).

Pursuant to Section 4(j)(6)(D) of the Exchange Act, this Report is provided 
directly to the committees of Congress without any prior review or 
comment from the Commission, any Commissioner, any other officer 
or employee of the Commission, or the Office of Management and 
Budget. It does not necessarily reflect the views of the Commission, the 
Commissioners, or staff of the Commission.

The work of the Office is possible only through the support of a talented 
and passionate team. While the Office has been supported by many 
colleagues across the agency during its first year in operation, we recognize 
the following team members who worked in the Office during FY2019:

Emerald Greywoode Boston-Mammah	           Jessica W. McKinney	
Colin A. Caleb	                        Jennifer Riegel
Julie Zelman Davis	                          Malika Sullivan
 
Special thanks to our colleagues within the SEC for providing resources  
for this Report, including the Division of Economic and Risk Analysis  
for providing SEC data to quantify the state of small business capital 
formation and contextualize issues, and the Office of Public Affairs 
for making our written product for this report visually engaging. We 
particularly thank the following individuals: Daniel Bresler, Vlad Ivanov, 
Andy Kim, Anzhela Knyazeva, Wei Liu, Chris Onrubia, Narahari Phatak, 
Zehra Sikandar, and John Zheng.



ANNUAL REPORT: FISCAL YEAR 2019  |   i

Message from the Advocate

“Small businesses are the backbone of our economy” is a statement so 
often repeated that it has become a standard line used almost ubiquitously 
by leaders, both political and apolitical.1 Rightly so, given the role smaller 
companies play in our economy—from being the primary job creators 
over the past two decades, to the innovators of new technologies that 
change lives, to the generators of wealth for many investors. Yet small 
businesses are often underrepresented here in Washington, DC, where 
laws and rules impacting their operations are made.

I have the opportunity of a lifetime to serve as the U.S. Securities and 
Exchange Commission’s (SEC) first Advocate for Small Business Capital 

Formation after being appointed in December 2018 and beginning to build the SEC’s newest office starting 
in January 2019.2 During our formative first year of operation, I approached building our Office with the 
only frame of reference I had coming from the private sector: like a start-up. We crafted a business plan3 
to communicate with the public our mission, vision, and approach for supporting small businesses’ capital 
formation needs, just like many start-ups do before pitching to investors. Knowing that we needed to scale 
pragmatically and efficiently, we defined our minimum viable product (or MVP) and documented the steps 
we would take to achieve full scale programming, along with a timeline to provide visibility of what you 
could expect from us and when.

At almost every event we host, we simultaneously engage with businesses and their investors, recognizing 
that the success of businesses is interwoven with the success of their investors. In speaking with new 
audiences, I often analogize our Office to a megaphone, explaining that we take the ecosystem’s voices and 
make them louder within the SEC and the broader regulatory landscape to positively impact policy. It is 
my hope that this inaugural report will do just that: take the many voices that we hear, distill them into a 
concise summary, and communicate in a compelling manner what small businesses and their investors tell 
us that they need from our capital markets.

Looking back at FY2019 and our first nine months, I am proud of what we have accomplished to date, 
and I look forward to working collaboratively with the Commission, Congress, and our agency partners to 
deliver meaningful solutions to support the backbone of our economy: small businesses. We are proud to 
be, as many a small business storefront sign says, “Open for Business.”

MARTHA LEGG MILLER
Advocate for Small Business Capital Formation

https://www.sec.gov/files/2019 OASB Business Plan.pdf


Breaking Down Our Long Title

An independent office housed 

within the U.S. Securities 

and Exchange Commission, 

created by Congress via  

special legislation

One called to use your 

voice for others, derived 

from Medieval Latin

Office of the Advocate for
Small Business Capital Formation

From start-ups to small cap, 

“small” is relative for the SEC’s 

newest Office, which supports 

emerging, privately-held 

companies up to small public 

companies

The deployment of 

productive capital by 

informed investors to  

create economic growth



ANNUAL REPORT: FISCAL YEAR 2019  |   iii

Contents

ABOUT THE OFFICE.  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   111

INAUGURAL YEAR OF THE OFFICE IN REVIEW .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                       14

STATE OF SMALL BUSINESS CAPITAL FORMATION.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                    1111

Small, Emerging Businesses.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                                  116

Mature and Later-Stage Businesses.  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  121

Small Public Companies.  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  24

Founder Demographics & Capital Formation.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                        26

Natural Disasters & Capital Formation.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                            34

Rural Communities & Capital Formation.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  36

POLICY RECOMMENDATIONS.  .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .  39

Modernize, Clarify, and Harmonize Exempt Offering Framework.  .  .  .  .  .  .  .  .  .  .  .             40

Investor Participation in Private Offerings.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                           141

Engaging Investors via Finders .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                                44

Crowdfunding.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  46

Scaled Obligations for Smaller, Less Complex Reporting Companies.  .  .  .  .  .  .  .  .  .         48

SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE.  .  .  .  .  .  .  .  .  .  .          151





ANNUAL REPORT: FISCAL YEAR 2019  |   1

About the Office

C
ongress created the Office to 
provide a dedicated champion 
to smaller companies accessing 
critical capital to build, grow, and 

thrive. The Office operates pursuant 
to sections 4(j) and 40 of the Securities 
Exchange Act of 1934 (15 U.S.C. §§ 
78d and 78qq), as added by the SEC 
Small Business Advocate Act of 2016 
(P.L. 114-284) and amended by the 
Small Business Access to Capital after a 
Natural Disaster Act (title IX of division 
S of Public Law 115-141) (collectively, 
the Small Business Advocate Act).

The Office officially commenced operations in January 2019. As an independent office reporting 
directly to the Commission, the Office is statutorily charged with the following functions: 

§	Assisting small businesses and their investors in resolving significant problems they may have 
with the SEC or with self-regulatory organizations (SRO);

§	Identifying areas in which small businesses and their investors would benefit from changes in 
SEC regulations or SRO rules;

§	Identifying problems that small businesses have with securing access to capital;
§	Analyzing the potential impact on small businesses and their investors of proposed SEC 

regulations and SRO rules;
§	Conducting outreach to small businesses and their investors to solicit views on capital  

formation issues;
§	Proposing appropriate regulatory and legislative changes to the SEC and Congress to  

mitigate problems identified with small business capital formation and to promote the interests 
of small businesses and their investors; and

§	Consulting with the Investor Advocate on such regulatory and legislative changes and other 
small business issues.

The Office also proactively works to identify any unique challenges faced by minority-owned small 
businesses, women-owned small businesses, and small businesses affected by natural disasters.

Director Martha Miller describes the role of her office at the SEC to small business  
owners and entrepreneurs in Kansas City, MO.



2  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

The Office hosted a round table in Little Rock, AR at the Venture Center, a nonprofit fintech accelerator focused on solutions 
for community banks.

Scope of Small Businesses

The Office supports a spectrum of small businesses and their investors, from emerging, privately-held 
businesses to publicly traded companies with less than $250 million in public market capitalization.4 
Based upon commonalities in sources of capital and issues faced, the Office has segmented its target 
market into three categories of businesses and their corresponding investors:

Complexity of funding sources and offering types C
a
p

it
a
l m

a
rk

e
ts

 +
 li

q
u
id

it
y

Small, emerging 
businesses

Mature and later-stage
businesses

Small reporting
companies



ANNUAL REPORT: FISCAL YEAR 2019  |   3

Our Mission

The Office’s mission is to advocate for small businesses and their investors to foster better access  
to capital markets, strengthening the voice of small business within the SEC and the broader 
regulatory landscape.

Work with small businesses 

to understand their capital 

formation issues through 

education and outreach

Analyze the potential impact of 

proposed rules and regulations 

likely to significantly affect  

small businesses

Help small businesses  

resolve issues with the SEC  

and SROs by recommending 

policy changes

Core Tenets

The Office adheres to the following core tenets in approaching its delivery of services and solutions  
to small businesses and their investors:

§	Small businesses are job creators, generators of economic opportunity, and fundamental to the 
growth of the country.

§	One size does not fit all for small businesses.
§	Good work has been done by the SEC, but we are not done and should continue to evolve as the 

market demands.
§	Small business policy should facilitate trust and confidence in capital markets to encourage 

efficient allocation of investment dollars.
§	We serve as a collaborator with, and contributor to, other SEC divisions and offices and SROs, 

not as an auditor.

Values

The Office is guided by four core values:

§	ACCESSIBILITY — We engage with both small businesses and their investors, as well as with  
the SEC, SROs, Congress, and other agencies on a regular basis through a variety of channels.

§	TRANSPARENCY — We are visible and open in our approach to supporting small businesses 
and their investors.

§	PRAGMATISM — We approach problems with a solution-oriented mindset by making  
practical, market-driven recommendations.

§	EFFICIENCY — We operate like a lean start-up, maximizing resources and focusing activities 
where the Office can have a measurable impact.



Inaugural Year of the Office in Review
LAUNCH OF THE SEC’S NEWEST OFFICE

JANUARY  
31

Martha Legg Miller was sworn in as 

the first Advocate for Small Business 

Capital Formation, with initial team 

members joining shortly thereafter.

MARCH  
18-20

Office hosts first external 

engagement events with  

entrepreneurs and investors in 

Kansas City, MO and KS.

APRIL  
8

Publication of Foundational  

Business Plan5 and roll out  

of plans for 2019 activities at 

SEC Speaks.

MAY  
6-10

National Small Business Week,  

including Small Business Roundtable 

with Commissioners, inaugural meeting 

of the Small Business Capital Formation 

Advisory Committee, and celebration  

of the 100th day of the Office.

JULY  
22

Office launches explanatory videos 

on how to comment, highlighting 

small business-related rulemakings 

in plain English.

AUGUST  
13

Advisory Committee hosts first out 

of DC meeting in Omaha, NE, making 

recommendations on open rulemakings.

AUGUST  
14

Office hosts the 38th Annual 

Government-Business Forum on 

Small Business Capital Formation in 

Omaha, NE at Creighton University.

https://www.sec.gov/files/2019%20OASB%20Business%20Plan.pdf
https://www.sec.gov/files/2019%20OASB%20Business%20Plan.pdf


ANNUAL REPORT: FISCAL YEAR 2019  |   5

Business Plan

Throughout the first year of our Office, we have often referred to ourselves 
as a “start-up within the government,” challenged with operationalizing and 
delivering solutions to our “customers”—small businesses and their investors—
starting from a blank slate. We began building out the Office by engaging in 
the same work that thousands of startups across the United States engage in 
each year: developing a business plan.6 Starting with our enabling legislation 
as guideposts, we crafted a statement of our Office’s mission to guide each 
decision we would make, keeping small businesses’ and their investors’ 
needs first of mind. Just as businesses do, we followed that by defining our 
target market and began identifying the capital formation needs of different small 
business market segments. With the mission and target market established, we outlined the products, 
programs, and services our Office would deliver, established projected launch dates, and began  
identifying critical components of each deliverable to ensure that we scale in a lean and efficient 
manner, again adopting a business-oriented mindset to solutions tailored to our target market. We 
created the business plan as a compass to guide decisions internally, as a pacesetter to keep us on track, 
and as a roadmap to guide expectations externally. Because of the premium we place on transparency, 

we put the business plan on our website to be open about our thought process and plan of action.

Outreach Activities

EVENTS/SPEAKING ENGAGEMENTS	  POINTS OF CONNECTION

https://www.sec.gov/files/2019 OASB Business Plan.pdf
https://www.sec.gov/oasb
https://www.sec.gov/files/2019%20OASB%20Business%20Plan.pdf


6  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Highlighted Engagements in Fiscal Year 2019

In addition to hundreds of meetings, phone calls, emails, and cups of coffee shared with individuals 
across the small business ecosystem, we have sought out opportunities to engage with diverse groups 
of small business thought leaders—our Office’s customers—through events, speaking engagements, 
and networks of potential beneficiaries of our Office’s products, programs and services. Some of the 
events in which we have engaged this year include:

Road to Global 
Entrepreneurship  
Summit7

March 19, 2019
Overland Park, KS

Panel discussion alongside 
individuals from the public 
and private sector, hosted 
by the U.S. Department 
of State.

SEC Speaks 20199

April 8, 2019
Washington, DC 

Launch of the Office’s 
Foundational Business 
Plan10 and plans for 
inaugural year of the 
Office.

Investment Company 

Institute’s Small Funds 

Committee

April 30, 2019 

Washington, DC

 

Solicitation of investor 

input from smaller 

funds and investment 

companies.

Roundtable with  

Colorado Small 

Businesses and  

Investors

May 3, 2019 

Denver, CO

 

Roundtable discussion 

with small business 

owners and investors  

on pressing capital 

formation issues.

March 20, 2019 

Kansas City, MO

  

Town hall meeting with 

small business owners, 

investors, and aspiring 

entrepreneurs.

Town Hall Meeting  

at the 1 Million Cups8

April 9, 2019 

Washington, DC

  

Discussion of the creation 

of the Office and role at 

the SEC with international 

securities regulators.

International Institute  

for Securities Market 

Growth and  

Development11

May 3, 2019 

Denver, CO

 

Discussion of legal issues 

in small business capital 

formation in the Rockies.

Rocky Mountain  

Securities Conference12

May 6, 2019 
Washington, DC
 
Roundtable focused  
on experiences of 
businesses and investors 
raising capital and 
investing outside of 
coastal “hot spots.”

National Small Business 

Week Roundtable on 

“Capital Formation 

Between the Coasts”13

https://www.sec.gov/files/2019%20OASB%20Business%20Plan.pdf
https://www.sec.gov/files/2019%20OASB%20Business%20Plan.pdf
https://www.sec.gov/news/speech/miller-bolstering-capital-formation-040819
https://www.sec.gov/news/speech/speech-miller-032019
https://www.sec.gov/news/speech/speech-miller-032019


ANNUAL REPORT: FISCAL YEAR 2019  |   7

National Association 

of Women Business 

Owners’ Advocacy Day14

June 4, 2019 

Washington, DC

 

Collaboration with female 

entrepreneurs on their 

national advocacy day.

38th Government-

Business Forum on 

Small Business Capital 

Formation15

August 14, 2019

Omaha, NE

 

Hosted forum, gathering 

members of the public 

and private sectors to 

craft suggestions for 

securities policy.

U.S. Black Chambers 

10th National 

Conference17

August 20, 2019 

National Harbor, MD

  

Panel discussion on  

the art of capital raising 

and deal activity.

Rural RISE 2019 

Summit19

Sept. 18, 2019 

Pine Bluff, AR

 

Panel discussion 

highlighting government 

resources to empower 

rural communities to 

foster entrepreneurship.

June 10, 2019 

Washington, DC

 

Discussion with NSBA’s 

Leadership Council on 

their top issues.

National Small  

Business Association

August 15, 2019 

Omaha, NE

 

Pitched the Office  

like an entrepreneur  

at the largest Midwestern 

entrepreneurship 

conference.

Maha Discovery  

Festival16

Sept. 17, 2019 

Little Rock, AR

 

Roundtable discussion 

with the Little Rock 

startup and fintech 

community.

The Venture Center 

Roundtable18

Sept. 19, 2019 

New York City, NY

  

Fireside chat discussing 

issues faced by small 

reporting companies and 

their investors, and Inside 

the IceHouse podcast 

episode recording.20

NYSE American  

Emerging Companies 

Summit

https://www.sec.gov/news/speech/sec-office-advocate-small-business-capital-formation-long-title-big-mission
https://www.sec.gov/news/speech/sec-office-advocate-small-business-capital-formation-long-title-big-mission
https://www.theice.com/insights/conversations/inside-the-ice-house/a-champion-for-small-businesses-in-washington
https://www.theice.com/insights/conversations/inside-the-ice-house/a-champion-for-small-businesses-in-washington
https://www.sec.gov/news/speech/speech-miller-060419
https://www.sec.gov/news/speech/speech-miller-060419
https://www.sec.gov/news/speech/speech-miller-060419
https://www.sec.gov/news/public-statement/statement-miller-081419
https://www.sec.gov/news/public-statement/statement-miller-081419
https://www.sec.gov/news/public-statement/statement-miller-081419
https://www.sec.gov/news/public-statement/statement-miller-081419


8  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Launch of Video Content

Small business owners and their 
investors often do not engage 
with the SEC (or other federal 
government agencies) for many 
reasons, including lack of time and 
resources. In an effort to increase 
engagement in the regulatory 
process, the Office piloted four 
videos in FY2019 that, in 3-5 
minutes, provide a high-level, plain 
English overview of a rulemaking 

topic, how it affects small business interests, and how the viewer can engage and provide feedback. 
These videos are a reflection of growing trends in information consumption, with 80% of all 
internet traffic in 2020 projected to be video.21

 
The FY2019 videos included:22

§	How to Comment: Engage in the Rulemaking Process
§	Harmonization of the Exempt Offering Framework
§	Accelerated Filer Proposed Amendments
§	Simplifying the M&A Accounting Rules

The videos reflect the changing nature of how people are consuming information and prioritizing 
visual content. External audiences have been far more willing to stream a short video about a 
securities law topic that they see on social media than to dig into a lengthy PDF on SEC.gov to 
find out it if is relevant to them. Going forward, the Office will continue exploring video and other 
forms of media to better engage with and inform small businesses and investors.

Small Business Forum

The Office hosted the SEC’s 38th annual Government-Business Forum on 
Small Business Capital Formation on August 14, 2019 in Omaha, Nebraska 
at the Heider College of Business at Creighton University, continuing the 
SEC’s three-year tradition of taking the Forum outside of Washington, 
DC. The Forum is a unique event where members of the private and 
public sectors converge to identify and highlight issues they experience 
in accessing capital and investing in small businesses and then formulate 
solutions on which the government can take action. The Office assumed 
responsibility for the Forum beginning in FY2019 under the Small 
Business Advocate Act. A separate report has been delivered to Congress 
summarizing the proceedings and recommendations of the participants.23

https://www.sec.gov/page/oasb-videos
https://www.sec.gov/page/oasb-videos
https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/files/small-business-forum-report-2019.pdf


ANNUAL REPORT: FISCAL YEAR 2019  |   9

[Top] “Capital Formation Success 
Stories from the Silicon Prairie” panelists 
and SEC Commissioners engage in a 
thoughtful dialogue about capital raising.

[Center] SEC Commissioners and  
“Harmonization: What a Concept!”  
panelists.

[Bottom left] Commissioner Rob  
Jackson visits with business owners  
and investors.

[Bottom right] Commissioner Allison 
Herren Lee talks with panelists and  
participants.





ANNUAL REPORT: FISCAL YEAR 2019  |   11

State of Small Business 
Capital Formation

T
he data provided in this Report is derived from a combination of public filings with the SEC, as 
analyzed by the SEC’s Division of Economic and Risk Analysis (DERA), and is supplemented 
with figures and findings from third parties. In doing so, we hope to provide a snapshot view of 
the state of U.S. small business capital formation, amalgamating many important pieces of the

capital formation story into one resource to aid in evaluating the current flow of investment capital 
between small businesses and investors. The data supplements anecdotal evidence and helps quantify 
the successes and challenges in small business capital formation nationwide. Using data, we can better 
identify what tools, strategies, and approaches would be most helpful in crafting policy solutions. Unless 
otherwise indicated, the data period utilized for DERA data is July 1, 2018 to June 30, 2019.

What regulatory pathways are companies using to raise capital?24

Private Offerings Public Offerings25

Regulation D

Rule 506(b)
Private Placements

Rule 506(c)
Accredited 

Investor 
Crowdfunding

Rule 504 
Limited 

Offerings

Regulation A
Mini IPOs

Regulation CF
Crowdfunding

Initial 
Public 

Offerings

Other Registered 
Offerings, including 
Secondary Offerings

$1.4T

$1.9M 
median

$210B

$1M 
median

$260M

$200,000 
median

$800M

$3.7M 
median

$54M

$80,000 
median

$50B

$90M 
median

$1.2T

$313M 
median



12  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What are the primary types of offerings and what companies are 
using them?

OFFERING TYPE IN A NUTSHELL TYPICAL CO. PROFILE

Equity Crowdfunding  

Regulation Crowdfunding26

Raising up to $1.07 million  

from many investors online.

Limited Offerings  

Rule 504 of Reg D27

Raising up to $5 million from 

investors, often with whom the 

company has a relationship.

Intrastate Offerings  

Section 3(a)(11) and  

Rules 147 and 147A28

Raising capital locally according 

to state law exemptions, which 

generally cap the offering at 

between $1 million to $5 million, 

depending on the state.

Private Placements  

Rule 506(b) of Reg D or 

Section 4(a)(2)29

Raising unlimited capital from  

higher net worth investors 

with whom the company has a 

relationship.

Accredited Investor Crowdfunding 

Rule 506(c) of Reg D30

Raising unlimited capital from  

higher net worth investors, often 

online, using general solicitation.

Mini Public Offering 

Regulation A31

Raising up to $50 million from 

many investors online.

Registered Offerings (including 

Initial Public Offerings)

Securities Act of 193332 

Raising large amounts of capital 

through “IPOs” or secondary 

offerings through a registration 

statement filed with the SEC.

SMALL, EMERGING  

BUSINESSES

MATURE AND LATER-STAGE 

BUSINESSES

SMALL PUBLIC 

COMPANIES



ANNUAL REPORT: FISCAL YEAR 2019  |   13

How are companies using the offering types in the industries 
that raise the most capital (excluding pooled funds)?33

BANKING

TECHNOLOGY

MANUFACTURING

REAL ESTATE

ENERGY

HEALTH CARE

REGISTERED OFFERINGS   REGULATION D   REGULATION A

0 100 200 300 400

Billions

$397B

$138B

$129B

$58B

$105B

$92B

$19B

$23B

$67B

$3B

$39B

$2B

$163M

$12M

$48M

$486M

$0M

$49M

The Office joined over 300 rural capacity builders in Pine Bluff, Arkansas at Rural RISE, highlighting government resources to empower 
rural communities fostering entrepreneurship.



Where are companies raising capital?34

The maps included in this section illustrate the concentration of estimated total capital raised under 
various different offering types by issuers that report a primary location in the U.S., with the number of 
offerings conducted indicated on each state.

$0 - $100 MILLION $100 MILLION - $1 BILLION $1 - $10 BILLION Over $10 BILLION

AK
22

AL
185

AR
82

AZ
416

CA
6927

CO
1103

DC
251

FL
1499

DE 
382

GA
794

HI
36

ID
81

IL
1762

IN
254

KS
145

KY
168

LA
72

ME
76

MD
535

MI
360

MN
473

MO
316

MS
34

MT
36

NC
690

ND
49

NE
51

NH
119

NM
55

NJ
659NV

222

NY
7659

OH
638

OK
97

OR
366

PA
1133

SC
171

RI
87

CT
1083

MA
2172

SD
34

TN
345

TX
3155

UT
1501 VA

663

VT
75

WA
1358

WI
231

WV
13

WY
99

PR
50

VI
3

IA
109

GU
1

Regulation D

$10,000 - $500,000 $500,000 - $2 MILLION Over $2 MILLION

Equity  
Crowdfunding

AK
1

AL
0

AR
1

AZ
6

CA
85

CO
7

DC
2

FL
13

DE 
2

GA
5

HI
2

ID
1

IL
11

IN
0

KS
0

KY
3

LA
4

ME
1

MI
5

MN
2

MO
6

MS
2

MT
0

NC
2

ND
0

NE
0

NH
0

NM
0

NJ
3NV

5

NY
44

OH
8

OK
0

OR
4

PA
16

SC
4

CT
5

SD
0

TN
5

TX
26

UT
6 VA

8

VT
1

WA
6

WI
0

WV
0

WY
0

PR
1

VI
0

IA
1

GU
0

DC
2

DE 
2

MD
3

NJ
3

RI
3

MA
25

$0 - $10,000$10,000 - $5 MILLION Over $20 MILLION

Regulation A

AK
0

AL
0

AR
1

AZ
3

CA
26

CO
5

FL
10

GA
3

HI
0

ID
0

IL
4

IN
0

KS
0

KY
0

LA
1

ME
0

MI
1

MN
1

MO
0

MS
0

MT
0

NC
0

ND
0

NE
0

NH
0

NM
0

NV
1

NY
6

OH
2

OK
0

OR
0

PA
4

SC
0

SD
0

TN
0

TX
6

UT
4 VA

5

VT
0

WA
1

WI
0

WV
0

WY
0

PR
0

VI
0

IA
1

GU
0

DC
12

DE 
2

MD
2

NJ
1

RI
0

CT
1

MA
0

$0 - $300 MILLION $300 MILLION - $5 BILLION $5 - $20 BILLION Over $20 BILLION

Registered 
Offerings

AK
0

AL
3

AR
11

AZ
14

CA
297

CO
31

FL
72

GA
43

HI
3

ID
5

IL
78

IN
21

KS
2

KY
5

LA
5

ME
1

MI
50

MN
31

MO
14

MS
1

MT
0

NC
94

ND
0

NE
18

NH
3

NM
1

NV
26

NY
251

OH
54

OK
10

OR
8

PA
50

SC
3

SD
9

TN
42

TX
2

UT
9 VA

41

VT
1

WA
28

WI
20

WV
0

WY
6

PR
0

VI
0

IA
5

GU
0

DC
22

DE 
39

MD
34

NJ
58

RI
4

CT
37

MA
111

$0 - $10,000 $5 MILLION - $20 MILLION



16  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Small, Emerging Businesses

Companies within this segment of the market generally raise capital through some combination of 
bootstrapping, self-financing, bank debt, friends and family, crowdfunding, angel investors, and seed 
rounds. This funding is commonly used to get companies off the ground and through early prototypes.

How are early stage small businesses accessing capital?

Small businesses often bootstrap and self-finance to overcome access to capital challenges, including 
using the following overlapping resources:35

PERSONAL FUNDS 69%

RETAINED BUSINESS EARNINGS 69%

LOAN OR LINE OF CREDIT 55%

CREDIT CARDS 52%

EQUITY FROM INVESTORS 7%

Notably, funding operations using retained business earnings is generally an option only available  
to established companies.

How are small business loans and lines of credit typically collateralized?36

PERSONAL GUARANTEE 58%

BUSINESS ASSETS 49%

PERSONAL ASSETS 31%

ORTIONS OF FUTURE SALESP 8%

NONE 16%

“Young small businesses are more likely to tap into informal sources of 

credit such as funding from owners or family and friends, while older 

firms are more likely to receive funding from more traditional sources.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM37



ANNUAL REPORT: FISCAL YEAR 2019  |   17

How have community banking trends impacted emerging businesses?

Decline in Number of FDIC-Insured  
Community Banks38

14,323

1988

9,206

1998

7,442

2008

4,979

2018

Banks are moving away from smaller-dollar 
loans, which are less profitable at scale. The 
following figures illustrate that pain point for 
smaller companies:39

Some banks have reportedly  
reduced or eliminated loans below  

a certain threshold, typically

<$100,000

Many banks will reportedly  
not lend to businesses with  

annual revenues

<$2 million

Neither term loans based upon cash flow or 
commercial revolving lines of credit are  
available for companies that are not yet  
revenue-producing or that are temporarily  
choosing to accelerate growth at the expense  
of profitability.40

“Capital is the lifeblood of 

small businesses, who depend 

on credit to start, operate, 

and grow. Historically, small 

businesses relied on banks to 

access capital. But during the 

2008 financial crisis, credit 

markets froze, and banks 

temporarily stopped lending 

even to businesses with good 

credit. This crisis hit small 

businesses hard and credit 

conditions have been  

slow to recover.

KAREN G. MILLS, 
FORMER SBA 
ADMINISTRATOR41



18  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What is the role of angel investors?

“Angel investors” are generally high net worth individuals who provide financial backing for early-stage 
businesses, often coming from among an entrepreneur’s friends and family.42 They typically invest their 
own funds directly in a business located in close proximity,43 often using convertible debt.44

What is the scale of angel investing in early-stage companies in 2018?45

334,565
active angel investors

66,110
entrepreneurial ventures 

received angel funding

$23.1 billion
in total angel investments

$349,620
average angel funding round

The average angel’s individual investment is between:46 

$5,000 and $100,000

What does the pool of accredited investors look like?47

Angel investors are generally  
“accredited investors,” meaning that  
they meet certain requirements for 
income or net worth set forth by the  
SEC and are eligible to participate in 
many offerings that are not available  
to non-accredited investors.48

13% OF U.S.  
HOUSEHOLDS 
qualify as accredited

$200,000 individual income 8.9% of U.S. households

$300,000 family income 4.6% of U.S. households

$1,000,000 net worth 9.4% of U.S. households 



ANNUAL REPORT: FISCAL YEAR 2019  |   19

How does household income and net worth vary by region of 
the U.S.?49

WEST

Mean household  
income $108,500

Median household  
income $57,500

Mean household  
net worth $873,700

Median household  
net worth $114,300 

SOUTH

Mean household  
income $100,000

Median household  
income $51,500

Mean household  
net worth $636,900

Median household  
net worth $87,000 

MIDWEST

Mean household  
income $102,000

Median household  
income $54,700

Mean household  
net worth $658,800 

Median household  
net worth $103,200 

NORTHEAST

Mean household  
income $136,500

Median household  
income $64,400

Mean household  
net worth $851,300

Median household  
net worth $154,500 

What role do non-accredited investors play?

While there are pathways for non-accredited  
investors to participate in exempt offerings, the  
vast majority of small businesses are still  
limiting their offerings to accredited investors.50  
From 2015-2018, non-accredited investors  
participated in only:51

6% of Rule 506(b) transactions

2-3% of total capital raised in transactions 
under Rule 506(b)

“[S]o much of entrepreneurship 

happens at the local level. 

Entrepreneurs raise money 

from local investors, hire from 

the local market, and found 

companies with the people 

who live in the same area.

EWING MARION  
KAUFFMAN FOUNDATION52



20  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

How costly is it for early-stage companies to navigate  
compliance with securities laws?
Companies spend significant money on legal fees in raising early-stage capital, in some cases amounting 
to the cost of an additional employee’s salary. One 2019 start-up guide quotes the costs as:53

$5,000 TO $20,000
for very early stage

$20,000 TO $40,000
for a venture capital raise

The age at which companies raise capital has matured:

While in 2014 a 3-year old company was commonly raising Series A,  
in 2019 that same age company is raising angel and seed-financing.54

“[T]he nature of startups receiving financing is fundamentally 

changing as investors continue to concentrate capital in fewer 

yet larger deals. At the seed stage, startups historically have 

been pre-product, but today’s investors tend to prefer a more 

mature company at this stage, which typically means the 

startup should at least have a minimum viable product.

PITCHBOOK55



ANNUAL REPORT: FISCAL YEAR 2019  |   21

Mature and Later-Stage Businesses

Companies within this segment of the market are generally growing and looking for larger amounts 
of capital that can fund operations of scale, ventures into new verticals, and preparation for public 
markets. Most often these investors are institutional in nature, whether syndicate groups, venture 
capital, private equity, or even public funds.

What is the role of venture capital (VC) in funding mature and  
later-stage businesses?

VC funds a small portion of the overall number of small businesses (approximately 0.5%), but 
those businesses tend to have outsized growth trajectories.56 VCs tend to fund companies with 
significant return on investment multiples, realizing profit at the company’s initial public offering  
or sale. A few statistics illustrate VC’s scale and impact on small business capital formation:

18,228 
VC deals in 2018,  

up from 6,876 in 200957

1,087
VC-backed IPOs  

from 2009-201858

Increases in the availability of VC funding in metro areas have been 
correlated with job growth:59

10%

increase in VC  
in a metro area

2.6%

2.9%

increase in the number of small employers

increase in employment at small employers

increase in total payroll3.9%



22  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What is the role of private equity (PE) in funding mature and  
later-stage businesses?

PE funds tend to back companies with return prospects following restructuring, realized through 
dividends and/or sale of the target company, often funded by a combination of investor equity and 
debt. A few statistics illustrate PE’s scale and impact on small business capital formation:

10,000 
average PE yearly deal  

count for the past 5 years60 

1,043 
PE-backed IPOs  
from 2009-201861

Some studies have found that PE returns have recently outperformed the public market (12% for PE 
vs. 8% for the S&P),62 while others have noted a greater return dispersion from private equity than 
from the public market, and mutual funds in particular.63

When do mature and later-stage businesses enter the public 
markets following VC and PE investments?

HISTORICALLY
venture-backed tech companies raised

$100 million in total private funding

$100 million IPO64

NOW
>90% of unicorns raise at least 

$100 million 
in a single private financing65



ANNUAL REPORT: FISCAL YEAR 2019  |   23

In what ways do VC-and PE-backed companies enter the  
public markets?

13,695 
Companies backed by PE and late stage VC

700

of which are estimated to become the next 
immediate generation of public companies66

44.8% 
of companies currently listed  

on the NASDAQ were formerly backed  
by PE or VC67

From 2009 to 2018,  
public companies acquired

11,000+  
PE and VC-backed companies  

for over $3 trillion

to serve various growth, intellectual property, 
talent and strategic needs68



24  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Small Public Companies

Companies can access broad pools of investors when they conduct public offerings, allowing 
companies to raise large amounts of capital to fund activities such as research and development, 
capital expenditures, or debt service. Public offerings also provide liquidity to early-stage investors 
and publicity for the company’s products and services.

How has the prevalence of publicly traded companies changed  
over time?69

N
u
m

b
e
r 

o
f 

D
o

m
e
st

ic
 L

is
te

d
 C

o
m

p
a
n
ie

s

Market Cap Listed Companies

M
a
rk

e
t 

C
a
p

 in
 T

ri
lli

o
n
s 

(C
u
rr

e
n
t 

U
S

D
)

9,000

8,000

7,000

6,000

5,000

4,000

3,000

$35

$30

$25

$20

$15

$10

$5

$-

19
80

19
82

19
84

19
86

19
88

19
90

19
92

19
94

19
96

19
98

20
00

20
02

20
04

20
06

20
08

20
10

20
12

20
14

20
16

20
18

4,397 in 2018 

8,090 in 1996 

6-7
years

average holding period  
for a company in a PE or VC portfolio prior to exit70

Companies are increasingly going public at a later stage in their lifecycle after raising more capital  
from the private markets, providing for less growth following their IPO. In other words, companies 
are generally choosing to enter the public markets after maturing beyond the smaller reporting 
company thresholds.71



ANNUAL REPORT: FISCAL YEAR 2019  |   25

Small Public CompaniesAll IPOs from July 1, 2018 through June 30, 2019:72

204 
IPOs

$243 Million
Average Proceeds

IPOs and other registered offerings by small public companies73 from July 1, 2018 through  
June 30, 2019:

294 
Offerings

$47 Million
Average Proceeds

The Fortune 500 has changed dramatically  
since 1955:74

only

12% 
remain on 
the list  
in 2014

the other 88%  
have gone out of existence,  
merged, or fallen off the list

Small companies struggle for attention:

61%

of exchange-traded companies with  
<$100 million market capitalization have

no research coverage75

“The old pattern was that small companies raised small amounts 

of speculative capital from venture capitalists at speculative 

valuations, and then the ones that worked out went public at 

much higher valuations. The new pattern is that large companies 

raise large amounts of not-particularly-speculative growth capital 

from mutual funds at mature-company valuations, and then 

eventually they sort of quietly slip into being public.

MATT LEVINE, BLOOMBERG76



26  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Founder Demographics & Capital Formation

Women-Owned Businesses

Women are founding more start-ups:77

21.6% 
of start-ups 

in 2018

4% 
of start-ups 

in 2001

Capital used at start-up varies by gender:78

$54,375 
for women

$80,285
for men

Women are less likely to apply for bank loans, 
despite research finding no differences in 
approval rates.79

Women constituted

25.9%
of entrepreneurs seeking capital in 2018…

and had an investment yield rate of 

17.5%

compared to a baseline rate of 

23.2%80



ANNUAL REPORT: FISCAL YEAR 2019  |   27

In 2018, women founding teams received less VC funding than their male peers of the approximately 
$130 billion reportedly invested:81

All-Women Mixed-Gender All-Male Not Identified

One study found that companies founded or co-founded by women generate more revenue:82

Per $1 of 
investment…

31¢ of revenue

male-only  
teams create  

female teams 
create 78¢ of 

revenue



28  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What effect does sexual orientation have on access to capital?

Research by StartOut found that gender had a far greater effect  
on startup funding levels than sexual orientation of the founders.83

Women Investors in Small Businesses

29.5% 
of angel investors are women84

only

11% 
of VCs across the industry are women85 

71% 
of VC firms have no female partners86



ANNUAL REPORT: FISCAL YEAR 2019  |   29

Minority-Owned Businesses

The most recent estimates show that 8 million businesses are minority owned, or 29.3% of U.S. firms.87

Since 2007, there has been a 38% increase in the number  
of minority-owned businesses88

Numbers of Minority-Owned Businesses89

American Indians and  
Alaska Natives

272,919

Asian 

1,917,902

Native Hawaiians and  
other Pacific Islanders

54,749

Black

2,584,403

Latinx

3,305,873

AK

AL

AR
AZ

CA
CO

DC

FL

DE

GA

HI

ID

IL IN

KS KY

LA

ME

MD

MI

MN

MO

MS

MT

NC

ND

NE

NH

NM

NJ

NV

NY

OH

OK

OR

PA

SC

RICT

MASD

TN

TX

UT

VA

VT

WA

WI

WV

WY

IA

1—2 million 

500,000—999,000

100,000—499,000 

50,000—99,000 

10,000—49,000

1,000—10,000

Number of Minority-Owned Businesses by State90



30  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What challenges do minority-owned businesses face in 
accessing capital?

Minority-owned businesses face challenges in 
accessing loans from banks, including:91

3X
more likely to be denied loans 

7.8%
average interest rate

(vs. 6.4% for non-minority)

new black-owned  
businesses start  

with almost three  
times less in terms  
of overall capital

$35,205

compared with  
new white-owned  

businesses

$106,720
92

Minorities constitute

10.7% 
of entrepreneurs seeking capital in 2018 

and had an investment yield rate of 

22%

compared to a baseline rate of 

23.2%93



ANNUAL REPORT: FISCAL YEAR 2019  |   31

Minority entrepreneurs report profitability is disproportionately impacted by lack of access  
to capital:94

AFRICAN AMERICAN

LATINX

ASIAN-AMERICAN

WHITE

22%

15%

13%

9%

What challenges do Latinx business owners report in accessing 
debt financing?95

Application rate for financing

47%

Latinx

40%

Non-Latinx

Likelihood of funding shortfalls

28%

Latinx

49%

Non-Latinx



32  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Founder Diversity in VC-backed Businesses:96

1% Black

77% White

2% Middle Eastern

2% Latino

18% Asian

Minority Investors in Small Businesses

Only

5.3% 
of angel investors are minorities97



ANNUAL REPORT: FISCAL YEAR 2019  |   33

VC Workforce Representation98

Employees Investment positions

Investment partners

Black Asian/Pacific Islander Latinx White



34  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Natural Disasters & Capital Formation

When natural disasters strike communities, they often impact the survival prospects for small 
business, who may have fewer resources to weather the challenges to rebuild the business and 
reinvigorate its customer base.

Impact of Natural Disasters on Small Businesses99

Immediate

40% will not reopen

1 Year Later

25% will close

3 Years Later

75% without a  
	 business continuity 	
	 plan will fail

Reported Small Businesses Losses Following Natural Disasters100

$1-$25,000

45%

61%

$25,000+

19%

35%

ASSETS	 REVENUEANNUAL REPORT: FISCAL YEAR 2019  |   35

How does the percentage of the population affected by natural 
disasters compare to the amount of capital being raised? 

27%
of the US population101 lives in an area 
that was affected by a natural disaster102 
over three years ending June 30, 2019

However, businesses in areas affected by natural disasters over that three year time period are 
generally raising less capital relative to the affected population:103

P
e
rc

e
n
ta

g
e
 o

f 
C

a
p

it
a
l R

a
is

e
d

 O
ve

r 
3
 Y

e
a
rs

 in
  

A
re

a
s 

A
ff

e
c
te

d
 b

y
 N

a
tu

ra
l D

is
a
st

e
rs

35%

30%

25%

20%

15%

10%

5%

0%

Regulation D Regulation A Regulation CF Registered Offerings
by Small Public 

Companies

$307B
total

$271M
total

$44M
total

$3B
total

Compared  
to 27% of 
affected 
population

“Counties hit by severe disasters 

experienced greater out-migration, lower 

home prices and higher poverty rates.

NATIONAL BUREAU OF  
ECONOMIC RESEARCH104



36  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Rural Communities & Capital Formation

Much of entrepreneurship happens at a local level, particularly in early stages of company formation and 
growth. The importance of local ecosystems can exacerbate company challenges in rural communities 
facing population declines, impacting access to potential angel investors, talent, and customers.

How does the rural population compare to the amount of  
capital being raised? 

19% of the U.S. population 
	 lived in rural areas105

17% of small employer firms 		
	 are located in rural areas106

However, businesses in rural areas107 are raising less capital over three years ending June 30, 2019 
relative to affected population:

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

P
e
rc

e
n
ta

g
e
 o

f 
C

a
p

it
a
l R

a
is

e
d

 O
ve

r 
3
 Y

e
a
rs

 in
  

R
u
ra

l C
o

m
m

u
n
it

ie
s

Regulation D Regulation A Regulation CF Registered Offerings
by Small Public 

Companies

$7.5B
total

$86M
total

$2.2M
total

$777M
total

Compared  
to 19% of 
affected 
population

In recent decades, startup activity has declined in rural areas:108

20%

1977

12%

2017

RURAL	 NON-RURAL



ANNUAL REPORT: FISCAL YEAR 2019  |   37

The decline in community banks in rural areas is crippling access to early-stage debt for small 
businesses.109 As of 2017 in the U.S.’s 1,980 rural counties:110

115
have just  

one community  
bank branch 

625
do not have a  
locally-owned 

community bank

35
have no bank

Many angel groups are working to find investment opportunities outside of the “four hour drive 
radius” rule of thumb, such as through state-wide networks.111

“For venture capital, the data indicate that while the average 

deal size and concentration of deals (inputs) in rural 

geographies may be less than that of urban regions, there 

is little difference in the performance of a rural investment 

in terms of multipliers, jobs, or exit types (outcomes).

PATRICIA SCRUGGS, WAYNE EMBREE AND ROB WILTBANK112





ANNUAL REPORT: FISCAL YEAR 2019  |   39

Policy Recommendations

O
ver the course of the first year in operation, the Office has received feedback on various issues 
encountered by small businesses and their investors from start-up to small cap, from coast 
to coast, and across industries. The recommendations set forth in this report are proposed 
as pragmatic and principles-based solutions to the most serious issues raised with the Office. 

Our general experience has shown that where an issue affects a broad segment of the market, 
the magnitude of the issue’s impact is often greater for minority-owned and women-owned small 
businesses and investors, as well as on small businesses and investors in areas affected by natural 
disasters or in rural areas. 

Our Office is generally supportive of the current initiatives and rulemakings underway at the  
SEC as they relate to small business capital formation.113 We present these recommendations 
as an opportunity to distill specific marketplace calls for action that are either not a part of the 
current regulatory or congressional agenda or that are complimentary to ongoing efforts. These 
recommendations provide a focused set of five critical challenges expressed by the market, with 
corresponding background discussion, summary of issues raised, and proposed solutions.

The Office, Commissioners, and SEC staff tour an opportunity zone construction site in Omaha, NE.



40  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Modernize, Clarify, and Harmonize Exempt Offering Framework

Background
Access to capital markets is critical for much of small business financing, with investor capital playing 
separate and complimentary roles to financing from the banking sector.114 In meeting with businesses 
and their investors across the country about capital formation, one of the most consistent critiques 
expressed has been that the current exempt offering framework is complex and confusing. While the 
current rules contain a relatively broad “menu” of tools to raise capital, the requirements for each 
differ and in some cases conflict.115 This challenging regulatory puzzle is understandably difficult 
to navigate, with each puzzle piece originating at different times and in response to different policy 
demands, with origins all the way back to 1933 with the Securities Act’s passage. A complex path 
to capital to grow, scale, and mature makes it all the more challenging for companies to fulfill our 
collective expectation of new entrants joining the public markets to supplant the past two decades’ 
approximate 50% drop in listed companies.116 It is imperative that companies and investors have 
navigable and functional tools for the exchange of capital in early, pre-IPO stages to build the pillars 
of tomorrow’s public markets.

Issues Raised
To understand securities law compliance, marketplace participants tend to need either a law degree 
or access to sophisticated counsel who can help them navigate the rules, both of which carry a 
significant price tag and can be a barrier to entry. 
This issue is exacerbated for those without broad 
networks or without excess funds to hire counsel in 
the midst of raising capital (which naturally tends 
to occur when capital is at its scarcest). While the 
“menu” of exemptions contains many options, 
regulatory uncertainty or confusion often incents 
companies and their investors to avoid using certain 
exemptions in favor of the most common and 
well understood pathways.117 For example, the 
integration doctrine is used to determine when more 
than one transaction should be “integrated” and 
considered a single offering, and it entails a facts 
and circumstances analysis dating back to 1933.118 
Although it has been modernized and clarified 
over the years, companies and investors, as well as 
their counsel, struggle when trying to raise money 
using different offering exemptions that do not all 
allow general solicitation.119 When the rules confuse 
not only the actors who are directly impacted by 
the rules—namely, businesses and investors—but 
also counsel on whom they rely for expert advice, 
capital formation is negatively affected.

A small business owner in Pine Bluff, Arkansas shares 
her perspectives with the Office over coffee.



ANNUAL REPORT: FISCAL YEAR 2019  |   41

Proposed Solution: Harmonization
The SEC’s recent Harmonization Concept Release120 sought unprecedented feedback on the areas in  
which the exempt offering framework works effectively, as well as where it can be improved to support 
efficient flow of capital while maintaining appropriate investor protections. Many ideas have been 
proposed to modernize, clarify, and streamline the regulations on the offer and sale of securities, and  
we have overwhelmingly heard support from marketplace participants for implementing many of the 
ideas suggested. In doing so, we would prioritize the following guiding principles:

§	The rules, as well as how we at the SEC communicate compliance obligations, should be accessible  
to both companies and their investors, regardless of legal acumen.121 

§	The rules should allow companies to progressively and efficiently raise capital at each stage of the 
company life cycle as they grow, scale, and mature.

§	The internet and technology have revolutionized communication since the Securities Act of 1933, 
including how businesses reach customers and operate. Any changes to the rules should incorporate  
an understanding of current communication practices, while also providing flexibility for the inevitable 
evolution of tomorrow’s tools.

§	To the extent that dollar amount caps are incorporated,122 they should be tied to expressed marketplace 
needs for capital and provide flexibility for future review and adjustment. Caps should also take into 
consideration the varying demands for capital depending upon industry, geography, and life cycle stage.

§	In evaluating the capital formation tools and investor protective measures, Congress and the 
Commission should reexamine the principles underlying regulation of capital raising transactions in 
light of the changing needs of the market.123 

See also: Small Business Capital Formation Advisory Committee Recommendation.124

Investor Participation in Private Offerings

Background
Much attention has been paid recently to investors’ access to opportunities in the private markets,  
where much of today’s companies’ “J-curve” growth is occurring prior to their IPOs, which are 
increasingly used as a liquidity rather than capital raising event. Many of the offering exemptions used  
in the private markets, whether under Rules 506(b) or 506(c) of Regulation D or under Regulation A, 
limit participation to accredited investors or contain restrictions on participation by non-accredited 
investors, including complete participation restrictions or investment limitations. The definition of 
“accredited investor” is “intended to encompass those persons whose financial sophistication and  
ability to sustain the risk of loss of investment or ability to fend for themselves render the protections  
of the Securities Act’s registration process unnecessary.”125 The Senate Committee on Banking, Housing, 
and Urban Affairs noted that the addition of the accredited investor definition in the Small Business 
Investment Incentive Act of 1980126 was intended to “give small businesses greater access to … 
sophisticated investors without the costs associated with the registration requirements.”127  
 

https://www.sec.gov/rules/concept/2019/33-10649.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-harmonization-general-principles.pdf


42  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

The SEC’s current rules128 define a natural person as an accredited investor if that investor either:

§	earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior  
two years, and reasonably expects the same for the current year; or

§	has a net worth over $1 million, either alone or together with a spouse (excluding the value of the 
person’s primary residence).

The definition also qualifies many types of entities as accredited investors if they have assets exceeding  
$5 million. However, the definition’s enumerated list omits certain types of entities, such as American 
Indian tribal corporations, which has the practical effect of excluding otherwise sophisticated investors 
from participating in investment opportunities.

For retail investors (i.e., individuals 
buying securities for their own account), 
there are few opportunities to participate 
in the growth of the private markets via 
diversified portfolio holdings, whether 
through pooled investment vehicles 
(i.e., mutual funds or exchange-traded 
funds) or otherwise. Private funds, such 
as venture capital funds and private 
equity funds, generally operate under 
exemptions from registration, which 
limit their accessibility to most retail 

investors.129 Current liquidity and valuation requirements on open-end funds, the most popular fund 
type for retail investors,130 present challenges to significant holdings in private companies.131 Closed-end 
funds, such as interval funds and tender offer funds, issue shares that are not freely redeemable and thus 
not subject to the liquidity risk management rules of open-ended funds, making them better suited to hold 
interests in private companies.132 However, they often trade at a discount to net asset value, contributing 
to their relative lack of popularity with investors.133 Business development companies (BDCs)134 and small 
business investment companies (SBICs)135 are other types of funds that invest in private companies, but 
they may be more difficult for retail investors to gain exposure to in practice.136

Issues Raised
Any changes to the definition of “accredited investor” or to retail access to private markets will have  
dual impacts on investors’ access to investment opportunities as well as the supply of capital to the 
exempt markets. Throughout our conversations in FY2019 on raising earlier stage capital from individual 
investors, whether from angels or friends and family, both businesses and investors have acknowledged 
the benefit of guardrails for retail investors, while also highlighting the imbalance of a single test based 
solely on income, net worth, or total assets. Women, minorities, and rural communities have expressed 
disproportionate challenges with the standard, which often draws a line between the investors’ network 
and qualification for the most attractive offering exemptions.137 The current standard arguably prioritizes 
an investor’s ability to sustain the risk of loss without sufficient consideration of an investor’s financial 
sophistication. Many have recommended creating avenues for sophisticated investors to participate in 
exempt offerings by adding alternative criteria for qualification.

The Office participated in a panel discussion on the art of capital raising  
and deal activity at the U.S. Black Chambers’ 10th National Conference.



ANNUAL REPORT: FISCAL YEAR 2019  |   43

In addition, investors—both accredited and 
non-accredited alike—have criticized their lack 
of access to high-growth potential companies 
in the private markets, who often trade on the 
public markets only after achieving most of 
their growth potential. Some have expressed 
frustration with the idea that “you have to 
be rich to get rich” under the current rules. 
For some accredited investors, they lack the 
time and resources to personally source, vet, 
and invest in a diversified portfolio of private 
companies that balances return potential with 
inevitable risk of failure of many early-stage 
businesses.

Proposed Solution: Accredited 
Investor Refinement
Adding alternative measures for evaluating investor sophistication would further Congress’s 
and the Commission’s stated goals of facilitating capital formation while providing appropriate 
protections for investors. Additional qualifying pathways to individuals being accredited based upon 
sophistication in making investment decisions could include:

§	financial professionals licensed by or registered with the SEC, state securities regulators, or 
appropriate self-regulatory organizations (e.g., FINRA); and

§	attainment of designated financial industry examinations or licenses.

Any additional means of qualifying should provide companies, investors, and their advisors with 
simplicity and certainty in ascertaining qualification to avoid inadvertent increases in transaction 
costs and thereby costs of capital. Based upon the differential access to investors, varying costs of 
living, and corresponding income and net worth levels by geography, we note that increasing the base 
income and net worth thresholds would have a disproportionate impact in more rural and emerging 
entrepreneurial ecosystems, as well as on under-represented business owners and investors.

When updating the definition of accredited investor, it would further add simplicity and clarity 
to eliminate the list of enumerated entities that may qualify if such entity has over $5 million in 
assets139 and instead make clear that any entity that has more than the asset threshold would qualify 
regardless of corporate form.

See also: Small Business Capital Formation Advisory Committee Recommendation,140 former 
Advisory Committee on Small Business Capital Formation (ACSEC) Recommendation,141 
Harmonization Concept Release, 2019 Small Business Forum Report and historical reports,142  
2017 Treasury Report.143

“To the extent that companies 

decide not to go public due to 

anticipated regulatory burdens, 

regulatory policy may be 

unintentionally exacerbating 

wealth inequality in the United 

States by restricting certain 

investment opportunities to  

high income and high net  

worth investors.

2017 U.S. TREASURY REPORT138

https://www.sec.gov/spotlight/sbcfac/recommendation-accredited-investor.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-recommendations-accredited-investor.pdf
https://www.sec.gov/rules/concept/2019/33-10649.pdf
https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/info/smallbus/sbforumreps.htm
https://www.treasury.gov/press-center/press-releases/documents/a-financial-system-capital-markets-final-final.pdf


44  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Proposed Solution: Retail Investor Access to Pooled Vehicles
Current fund rules allow investment companies to deploy limited strategies to invest in less liquid 
assets, such as private funds, as well as direct holdings in private companies. However, as the above-
referenced data indicates, the current tool set is not well-utilized. Attention should be given to 
whether that underutilization is a byproduct of market preferences or whether the fund rules make 
those vehicles less attractive for fund formation, management and investment, with corresponding 
changes to the rules suggested. While the structure of public funds investing in private funds may be 
critiqued for a double-layer of management fees, reasonable fees may be justified where they afford 
investors asset management by professionals with experience in private markets, deal terms on  
parity with other sophisticated institutional investors, and an otherwise inaccessible diversified 
portfolio of private market holdings. Efficient fee structures should be prioritized in developing 
pooled vehicle solutions.

In addition, continued focus on retail investors’ access to smaller funds—including those that invest 
primarily in smaller cap public companies, those with diversified positions including private holdings, 
as well as those focused on private market holdings—will further support competition and small 
business capital formation.144

See also: Small Business Capital Formation Advisory Committee Recommendation,145 Committee on 
Capital Markets Regulation 2018 Report.146

Engaging Investors via Finders

Background
One of the biggest challenges that small businesses face when they seek to raise capital is identifying 
and connecting with potential investors who are a good fit from market/industry experience, risk 
tolerance, and investment capability perspectives. Sometimes companies, particularly those raising 

The Office collaborates with female business owners on their national advocacy day in Washington, DC, answering 
questions about their challenges finding investors.

https://www.sec.gov/spotlight/sbcfac/recommendation-closed-end-fund-of-funds.pdf
https://www.capmktsreg.org/wp-content/uploads/2018/10/Private-Equity-Report-FINAL-1.pdf
https://www.capmktsreg.org/wp-content/uploads/2018/10/Private-Equity-Report-FINAL-1.pdf


ANNUAL REPORT: FISCAL YEAR 2019  |   45

large amounts of capital pre-IPO, engage registered broker-dealers to line up a book of investors 
in exchange for a success or other fee. However, broker-dealers are increasingly concentrating their 
activity upstream in the market where they can offer a package of services, leaving companies 
seeking more routine introductions or relatively smaller amounts of capital (e.g., as one source noted, 
under $5 million147) without a connection to capital sources. Finders often bridge the gap between 
entrepreneurs who need funding and potential investors interested in supporting emerging companies 
by making introductions, often for a fee.148 Finders may also provide businesses with support services, 
such as consulting on market deal terms or commentary on pitch materials, generally engaging in 
activities short of what many suggest should require registration as a broker-dealer.149 Over the course 
of many decades and through a series of SEC no-action letters and case law, a nebulous distinction 
between finders and broker-dealers has emerged.150 Many proposals have been put forward to 
provide clarity on where the line should be drawn between exempt finders, on the one hand, and full 
registration as a broker-dealer, on the other.151

Issues Raised
Locating the right investors is challenging no matter where a company is located, but that pain 
point is felt more acutely for entrepreneurs located far from the “hotspots” of VC and other 
funding sources where their network may not extend. Some demographic groups—namely women 
and minority business owners—have expressed that they face higher hurdles to connecting with 
funders based upon their network of potential investors who may not be accredited, often needing 
the support of finders to locate investors with the right investment capacity and risk tolerance. In 
short, the lack of clarity on the role for finders in matchmaking between companies and investors 
disproportionately impacts smaller companies, companies in geographic areas or segments of the 
market not served by registered broker-dealers, and companies with under-represented founders.

Proposed Solution: Clear Finders Framework
Small businesses and their investors need clarity on what role finders can play in providing 
services that fall short of requiring registration as a broker-dealer. Over the years, many potential 
solutions have been offered, from bright line exemptions to carve-outs for de minimus activity to 
“light” registration requirements.152 In implementing a framework for finders to support emerging 
businesses’ capital needs and provide clarity to investors participating in the market, it is critical 
that the rules be clear for marketplace participants to reduce confusion, defining in plain English the 
activities that do not trigger registration and delineating when the scope of activities rises to the level 
that registration is appropriate. The framework should make clear what offering exemptions are 
eligible, whether the introduced investors must be accredited, the nature of compensation the finder 
may receive, the types of other incidental activities that the finder may engage in on behalf of the 
business, and the respective roles of federal and state regulators. Providing a clear framework should 
bring welcomed transparency to an otherwise opaque area of the market.153

See also: 2019 Small Business Forum Report and historical reports,154 ABA Report on Private 
Placement Broker-Dealers, ACSEC Finders Recommendation, 2017 Treasury Report.

https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/info/smallbus/sbforumreps.htm
https://www.sec.gov/info/smallbus/2009gbforum/abareport062005.pdf
https://www.sec.gov/info/smallbus/2009gbforum/abareport062005.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-recommendation-051517-finders.pdf
https://www.treasury.gov/press-center/press-releases/documents/a-financial-system-capital-markets-final-final.pdf


46  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Crowdfunding

Background
Crowdfunding—or the practice of raising capital in relatively small amounts from a large number of 
investors, typically over the internet—is one of the newest offering exemptions, with rules finalized 
by the SEC in 2015 following the Jumpstart Our Business Startups (JOBS) Act of 2012.155 This 
mode of capital raising originated overseas156 in the wake of the 2008 financial crisis because of the 
difficulty entrepreneurs and small businesses faced in raising funds.157 In a nutshell: with traditional 
banks providing fewer loans to earlier stage companies, entrepreneurs began looking elsewhere for 
capital.158 While some states had an intrastate crowdfunding framework prior to the JOBS Act, the 
equity crowdfunding industry did not take off until after the 2012 legislation and SEC rules that 
followed. Many online portals support companies raising capital through two different regulatory 
pathways that originated in the JOBS Act: (1) Regulation Crowdfunding under Title III (or Reg 
CF), which caps the offering at $1.07 million per year and includes other limitations on individual 
investments, and (2) Rule 506(c) general solicitation offerings to verified accredited investors, 
sometimes referred to as “accredited investor crowdfunding.”159 This section focuses on the Reg CF 
path for crowdfunding.

Further to the origins of the equity crowdfunding funding model, these offerings provide an 
alternative source of capital where community bank presence has waned. Some studies, as well as 
anecdotal evidence, have indicated that crowdfunding is boosting success in raising capital for certain 
demographics of entrepreneurs disproportionately to the rest of the entrepreneurial population, 
including women-owned, minority-owned, and rural businesses, as well as younger entrepreneurs.160 
These are populations of business owners who are notoriously underserved by traditional capital 
raising, such as through private placements to accredited investors.161 In other words, crowdfunding 
may be bridging the gap between entrepreneurs without broad networks of high wealth investors and 
interested backers of their companies. Feedback to our Office indicates that the primary beneficiaries 
of crowdfunding investments are twofold:

1.	 businesses in communities where smaller or community banks are less accessible;162 and
2.	 businesses with meaningful growth potential but who lack “venture returns” of 10x+, such as 

lifestyle, services, or retail businesses. 

For businesses in the first group, they are often raising capital below the current $1.07 million Reg 
CF offering cap, many times from a loyal customer base. This may be reflected by the $25,000 
median target amount sought by companies in Reg CF offerings,163 where crowdfunding is filling 
the gap left by banks for small dollar loans. However, for businesses in the second group, the current 
offering cap has been described as a deterrent or hindrance to utilization of crowdfunding in the first 
place, with those companies needing significantly more capital than the $1.07 million cap permits.

The SEC published its three-year lookback report in May 2019164 examining utilization of the 
nascent Reg CF exemption, showing modest adoption rates, which may be in part driven by some of 
the limitations flagged by companies, portals, and investors.

http://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding/2019Report


ANNUAL REPORT: FISCAL YEAR 2019  |   47

The Office hosts “Capital Formation Between the Coasts” roundtable focused on experiences of businesses and investors 
raising capital, including through crowdfunding, and investing outside of coastal “hot spots” to kick off National Small 
Business Week.

Issues Raised
Users of crowdfunding have flagged various issues with the framework as designed by both statute and 
regulation. The current constructs may unduly limit investor interest in participation. Company appetite 
for compliance costs relative to the available proceeds may point them towards offering types with 
lower compliance costs. Contrasted with their foreign counterparts, companies are raising more capital 
overseas using crowdfunding in an arguably more efficient manner.165 Portals, many of which are small 
businesses themselves that have raised capital to fund initial operations, have flagged the challenges 
they face with profitability of their business model given the limitations on equity compensation166 and 
the high costs of compliance, which may push portals to redirect their focus to other vibrant overseas 
crowdfunding markets or to other more profitable segments of the domestic market.

Proposed Solutions: Crowdfunding Updates
Changes to the current structure and requirements for Reg CF would enable companies and investors 
to use equity crowdfunding to its fullest potential. Potential solutions include:

§	Increase the total amount that companies can raise in a 12-month period from the current $1.07 
million to better align with early-stage companies’ evolving capital needs,167 as well as international 
practices.168 Trends are showing that Series A is “the new” seed funding, as companies seek 
increased capital to fund early-stage operations (e.g., in 2018 the average seed funding was $5.7 
million and average Series A round was $15.7 million, compared with 2010 averages of $1.3 
million for seed and $5.1 million for Series A169). An increased cap would allow companies to raise 
meaningful early-stage capital using crowdfunding rather than limiting companies’ options to a 
narrower set of exemptions. 



48  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

§	Remove the investment cap for accredited investors, which would harmonize the crowdfunding  
rules with Regulations A and D, neither of which limit investment amounts by accredited investors.

§	Reevaluate the thresholds for the various disclosure obligations, such as reviewed and audited 
financials, to appropriately tier to the capital raised and the costs incurred by companies at  
investors’ expense. For example, reporting requirements could be simplified for companies raising 
under $250,000. 

§	Enable the use of special purpose vehicles (or SPVs), which would have the potential benefits of 
cleaning up the cap tables for companies, making them more attractive to follow-on investors and 
mitigating Rule 12(g) threshold concerns, and streamlining management of investor rights, potentially 
providing a more impactful voice for investors and providing companies with a more engaged investor 
for strategic support.

§	Reevaluate the compliance requirements for portals as well as permissible types of compensation, such 
as increasing flexibility for equity compensation.

See also: Small Business Capital Formation Advisory Committee Recommendation,170 Association of 
Online Investment Platforms Policy Paper,171 2017 Treasury Report, 2019 Small Business Forum Report 
and historical reports.172

Scaled Obligations for Smaller, Less Complex Reporting Companies

Background
The U.S. securities laws allow companies to access the public markets in exchange for disclosures to 
investors about relevant financial and operating information. Over the years, the disclosure obligations of 

public companies have evolved and 
substantially increased in breadth. In 
addition to the costs of going public, 
which cost most companies over $1 
million, companies incur significant 
ongoing compliance costs for being 
public.173 In one survey, two-thirds 
of CFOs estimated spending $1 
million to $1.9 million annually for 
ongoing compliance costs, allocated 
among auditing fees (32%), 
financial reporting (18%), legal 
costs (16%), regulatory compliance 
(12%), public and investor relations 
(9%), and various other expenses.174 
These costs are separate from the 
staffing needs of companies to 
implement compliance. Put simply, 
the reporting compliance costs—

The Office engages in a fireside chat discussion about the issues faced by small 
reporting companies and their investors at the New York Stock Exchange.

https://www.sec.gov/spotlight/sbcfac/recommendation-regulation-crowdfunding.pdf
https://www.sec.gov/comments/s7-08-19/s70819-5761538-186947.pdf
https://www.sec.gov/comments/s7-08-19/s70819-5761538-186947.pdf
https://www.treasury.gov/press-center/press-releases/documents/a-financial-system-capital-markets-final-final.pdf
https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/info/smallbus/sbforumreps.htm


ANNUAL REPORT: FISCAL YEAR 2019  |   49

in addition to the increased costs of potential shareholder litigation—are costs unique to public 
companies that are not borne by private companies on a comparable scale.

Issues Raised
In discussing the decision to remain private 
or to embark upon an IPO, many investors 
and companies—particularly those who are 
smaller—have pointed towards balancing 
allocation of resources to compliance 
obligations versus funding innovation at 
scale.175 When weighing the potential costs 
of public company compliance, the impact of 
those obligations often has a relatively greater 
resource-constraining effect on smaller entities, 
many of whom lack the complexity both 
organizationally and financially that many of 
the compliance rules were drafted to address. 
This debate among marketplace participants 
on striking the right balance has occurred 
concurrently with concerns over the waning 
entrance of smaller public companies in  
recent years.176

Proposed Solution: Continued 
Scaling Obligations
Congress and the Commission have recently 
taken actions to streamline the pathways for 
growing companies to access the public markets 
without unnecessary compliance burdens 
swaying companies’ and their investors’ 
decision to remain private.178 Recently, the SEC 
has embarked upon a series of rulemakings 
aimed at improving disclosures for investors 
while simplifying compliance for companies, with many of the changes aimed at improving the 
readability of disclosure documents and reducing repetition or disclosure of information that is not 
material.179 Many recent amendments to the rules emphasize a principles-based approach, reflecting 
the evolution of businesses and the philosophy that a one-size-fits-all approach can be both under 
and over-inclusive. The Office encourages Congress and the Commission to continue to tailor the 
disclosure and reporting framework to scale the obligations of reporting companies to the complexity 
and scale of operations in furtherance of capital formation and appropriate investor protection. 

See also: 2017 Treasury Report, 2019 Small Business Forum Report and historical reports.180

“Well-intentioned regulations 

aimed at protecting the public 

from the misrepresentations 

of a small number of large 

companies have unintentionally 

placed significant burdens on 

the large number of smaller 

companies. As a result, fewer 

high-growth entrepreneurial 

companies are going public 

and more are opting to 

provide liquidity and an exit 

for investors by selling out to 

larger companies. This hurts 

job creation, as the data clearly  

shows that job growth 

accelerates when companies 

go public, but often 

decelerates when companies 

are acquired.

PRESIDENT OBAMA’S 
COUNCIL ON JOBS AND 
COMPETITIVENESS  
(OCT. 2011)177

https://www.treasury.gov/press-center/press-releases/documents/a-financial-system-capital-markets-final-final.pdf
https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/info/smallbus/sbforumreps.htm




ANNUAL REPORT: FISCAL YEAR 2019  |   51

T
he Small Business Advocate Act also established the SEC’s new Small Business Capital Formation 
Advisory Committee,181 which replaced the SEC’s former Advisory Committee on Small and  
Emerging Companies. The new Advisory Committee is designed to provide a formal mechanism  
for the Commission to received advice and recommendations on Commission rules, regulations,  

and policy matters related to emerging, privately held small businesses to publicly traded companies  
with less than $250 million in public market capitalization; trading in securities of such companies;  
and public reporting and corporate governance of such companies. The Office provides administrative 
support for the Advisory Committee, which otherwise functions independently.

In April 2019, the Commission appointed the inaugural members of the Advisory Committee.182  
The membership includes companies and investors from across a diverse set of experiences, industries, 
geographies, and company life cycle stages.

CARLA GARRETT, Chair 

Corporate Partner, Potomac Law Group PLLC 

Washington, DC

JEFFREY M. SOLOMON, Vice Chair

Chief Executive Officer, Cowen, Inc.

New York, NY

GREGORY YADLEY, Secretary

Partner, Shumaker, Loop & Kendrick, LLP

Tampa, FL

YOUNGRO LEE, Assistant Secretary

CEO and Co-Founder, NextSeed

Houston, TX

GREG DEAN*

Senior Vice President of the Office of  

Government Affairs, FINRA

Washington, DC

ROBERT FOX 

National Managing Partner, Professional  

Standards Group, Grant Thornton LLP

Chicago, IL

STEPHEN GRAHAM

Co-Chair, Fenwick & West LLP’s Life  

Sciences Practice

Seattle, WA

SARA HANKS

CEO and Co-Founder, CrowdCheck, Inc. 

Alexandria, VA

BRIAN LEVEY

Chief Business Affairs and Legal Officer,  

Upwork Inc.

Santa Clara, CA

Small Business Capital  
Formation Advisory 

Committee FY 2019 Summary

https://www.sec.gov/page/small-business-capital-formation-advisory-committee
https://www.sec.gov/page/small-business-capital-formation-advisory-committee


52  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

TERRY MCNEW

President and CEO, MasterCraft Boat Holdings

Vonore, TN

SAPNA MEHTA

General Counsel & Chief Compliance Officer, 

Rise of the Rest Seed Fund; Associate General 

Counsel, Revolution

Washington, DC

MARTHA LEGG MILLER*

Director, Office of the Advocate for Small  

Business Capital Formation, U.S. Securities  

& Exchange Commission

Washington, DC

KAREN G. MILLS

President, MMP Group, Inc.

Boston, MA

CATHERINE MOTT

Founder and CEO of BlueTree Capital  

Group, BlueTree Allied Angels, and BlueTree 

Venture Fund

Pittsburgh, PA

POORVI PATODIA

CEO and Founder, Biena Snacks

Allston, MA

MICHAEL S. PIECIAK*

Commissioner of the Vermont Department of 

Financial Regulation

Montpelier, VT

JASON SEATS

Chief Investment Officer, Techstars

Austin, TX

MARC OORLOFF SHARMA*

Chief Counsel of the Office of the Investor 

Advocate, U.S. Securities & Exchange Commission

Washington, DC

JOSEPH SHEPHERD*

Associate Administrator, U.S. Small Business 

Administration

Washington, DC

HANK TORBERT

President, AltaMax, LLC

New Orleans, LA

*Advisory Committee members include the SEC’s Advocate for Small Business Capital Formation and 
three non-voting members appointed by each of the SEC’s Investor Advocate, the North American 
Securities Administrators Association (NASAA), and the Small Business Administration, as well as an 
observer appointed by the Financial Industry Regulatory Authority (FINRA).



ANNUAL REPORT: FISCAL YEAR 2019  |   53

The Advisory Committee held its inaugural meeting on May 6, 2019 during National Small Business
Week and its second meeting on August 13, 2019 in Omaha, Nebraska. During the fiscal year, the
Advisory Committee put forward two recommendations183 to the Commission.

RECOMMENDATION RE: COMMISSION’S PROPOSAL TO AMEND FINANCIAL 

DISCLOSURE REQUIREMENTS RELATING TO ACQUISITIONS AND DISPOSI-

TIONS OF BUSINESSES

August 23, 2019

The Committee supports the Commission’s proposal to amend the financial reporting 
requirements for the acquisitions and dispositions of businesses including Rules 3-05, 3-14, 
and Article 11 of Regulation S-X, subject to following recommendations:

§	That the Commission continue to look at Regulation A companies and whether they 
warrant different treatment under these rules; and 

§	That the Commission further look at the proposed amendments to the pro forma 
financial information requirements with respect to whether the proposed addition 
of Management’s Adjustments, which are intended to reflect reasonably estimable 
synergies and transaction effects, should be optional or not required at all.

Specifically, 
§	The Committee supports the proposed amendments to the Significance Tests under 

these rules by:
—— Revising the Income Test to include the addition of a revenue component, such that 
the registrant must exceed both the revenue and net income components; and 
—— Revising the Investment Test to change the denominator of the Investment Test from 
the registrant’s total assets to the registrant’s fair market value.

§	The Committee supports the proposed amendment that would require financial 
statements of the acquired business to cover up to the two most recent fiscal years 
rather than up to the three most recent fiscal years.

COMMISSION RESPONSE

As indicated on the Fall 2019 Unified Agenda of Federal Regulatory and Deregulatory Long-term 
Actions (Fall 2019 Unified Agenda),184 the Division of Corporation Finance is considering recom-
mending that the Commission adopt amendments to Regulation S-X (Rule 3-05) that affect the 
disclosure of financial information of acquired businesses. Staff in the Division of Corporation 
Finance will consider this Advisory Committee recommendation in connection with this initiative.

https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AL77
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AL77
https://www.sec.gov/spotlight/sbcfac/recommendations-rule-3-05-and-accelerated-filer-definition.pdf


54  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

[Top left] Members of the SEC’s Small 
Business Capital Formation Advisory 
Committee discuss capital formation 
initiatives at the Committee’s inaugural 
meeting on May 6, 2019.

[Top right] Members Catherine Mott and 
Jason Seats discuss recent Commission 
rulemakings. 

[Center left] Chair Carla Garrett and 
Vice-Chair Jeff Solomon lead the 
Committee in the development of  
recommendations at the Committee’s 
meeting.

[Center right] Members Youngro Lee and 
Bert Fox engage in discussion with other 
Committee members. 

[Right top] Member Hank Torbert weighs 
in on recommendations with experience 
from his business operations. 

[Right bottom] Members of the Advisory 
Committee met at Creighton University in 
Omaha, NE on August 13, 2019.ANNUAL REPORT: FISCAL YEAR 2019  |   55

RECOMMENDATION RE: COMMISSION’S PROPOSAL TO AMEND THE 

ACCELERATED AND LARGE ACCELERATED FILER DEFINITIONS

August 23, 2019

The Committee supports the proposal to amend the “accelerated filer” and “large 
accelerated filer” definitions such that an issuer that is eligible to be a Smaller Reporting 
Company and has less than $100 million in revenue in the most recent fiscal year shall  
be a non-accelerated filer.

However, the Committee would welcome the Commission to explore additional  
further amendments to the definitions of “accelerated filer” and “large accelerated  
filer” such that more companies could be non-accelerated filers. The Committee’s  
recommendations include: 

§	Exploring raising the revenue threshold to be a non-accelerated filer, so that issuers  
that are eligible to be a Smaller Reporting Company and have more than $100 million 
in revenues could be a non-accelerated filer. 

§	Instead of basing revenues for the non-accelerated filer test on the amount of revenues 
in the most recent fiscal year, base the revenues for the non-accelerated filer test on  
the three-year rolling average of the amount of the company’s revenues.

§	Looking at whether all Smaller Reporting Companies should be non-accelerated filers. 

The Commission should also consider input from institutional investors regarding whether 
or not the auditor attestation of SOX 404(b) is determinative in their investment decision.

COMMISSION RESPONSE

As indicated on the Fall 2019 Unified Agenda,185 the Division of Corporation Finance is considering 
recommending that the Commission adopt changes to the “accelerated filer” definition in Exchange 
Act Rule 12b-2 that would have the effect of reducing the number of registrants that are subject to 
the Sarbanes-Oxley Act Section 404(b) attestation requirement. Staff in the Division of Corporation 
Finance will consider this Advisory Committee recommendation in connection with this initiative.

https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AM41




ANNUAL REPORT: FISCAL YEAR 2019  |   57

1	 See, e.g., Last Week Tonight with John Oliver, 
https://www.youtube.com/watch?v=XkLXMH-
YLTAY.

2	 The Office was established pursuant to sections 
4(j) and 40 of the Securities Exchange Act of 
1934 (15 U.S.C. §§ 78d and 78qq), as added by 
the SEC Small Business Advocate Act of 2016 
(P.L. 114-284) and amended by the Small Busi-
ness Access to Capital after a Natural Disaster 
Act (title IX of division S of Public Law 115-
141). See https://www.sec.gov/files/Small%20
Business%20Advocate%20Act%20of%20
2016-as%20amended.pdf

3	 See https://www.sec.gov/files/2019%20
OASB%20Business%20Plan.pdf. 

4	 The legislation that created the Office also 
established a Small Business Capital Forma-
tion Advisory Committee at the SEC.  See 15 
U.S.C. §78qq.  The Office uses the Committee’s 
parameters to define the scope of small 
businesses that it serves.

5	 See supra note 3. 
6	 See id. 
7	 See https://www.state.gov/global-entrepreneur-

ship-summits/; see also https://www.sec.gov/
secs-small-business-advocate-meets-midwest-en-
trepreneurs. 

8	 Introductory remarks published at https://www.
sec.gov/news/speech/speech-miller-032019; see 
also https://www.sec.gov/secs-small-business-ad-
vocate-meets-midwest-entrepreneurs.

9	 Remarks published at https://www.sec.gov/
news/speech/miller-bolstering-capital-forma-
tion-040819. 

10	 See supra note 3.
11	 See https://www.sec.gov/about/offices/oia/oia_

institutes.htm. 
12	 See http://cle.cobar.org/securities-conference/. 
13	 See https://www.sec.gov/page/capital-forma-

tion-between-coasts.
14	 Remarks published at https://www.sec.gov/

news/speech/speech-miller-060419. 
15	 Opening remarks published at https://www.

sec.gov/news/public-statement/statement-mill-
er-081419. 

16	 Remarks and slide deck published at https://
www.sec.gov/news/speech/sec-office-advo-
cate-small-business-capital-formation-long-ti-
tle-big-mission. 

17	 See https://usblackchambers.org/conference/. 
18	 See https://www.sec.gov/page/small-busi-

ness-capital-formation-runs-deep-arkansas. 
19	 See https://www.ruralrise.org/; see also https://

www.sec.gov/page/small-business-capital-forma-
tion-runs-deep-arkansas.

20	 https://www.theice.com/insights/conversations/
inside-the-ice-house/a-champion-for-small-busi-
nesses-in-washington. 

21	 See, e.g., Amy Balliett, “The 5 Most Engaging 
Types of Marketing Content,” Inc. (Apr. 15, 
2019), https://www.inc.com/amy-balliett/5-
types-of-content-your-audiences-will-love.html. 

22	 See https://www.sec.gov/page/oasb-videos. 
23	 The SEC conducts the Forum annually and 

prepares a report in accordance with the Small 
Business Investment Incentive Act of 1980 [15 
U.S.C. 80c-1 (codifying section 503 of Pub. L. 
No. 96-477, 94 Stat. 2275 (1980))].

24	 This graphic depicts amounts reported or esti-
mated as raised from July 1, 2018 through June 
30, 2019. Data on offerings under Regulations 
D and Crowdfunding is based on informa-
tion reported by companies and was collected 
from filings (new filings and amendments) on 
EDGAR on Forms D and C, respectively. Data 
on registered offerings was collected from 
Thomson Financial’s SDC Platinum database. 
For offerings under Regulation A, estimates 
are based on proceeds reported in filings made 
during the report period. Capital raised is based 
on information reported by companies in Forms 
1-Z, 1-K, 1-SA, 1-U, and offering circular sup-
plements pertaining to completed and ongoing 
Regulation A offerings and post-qualification 
amendments, and for companies whose shares 
have become exchange-listed, information from 
other public sources. Estimates represent a 
lower bound on the amounts raised given the 
time frames for reporting proceeds following 
completed or terminated offerings and that 
offerings qualified during the report period may 
be ongoing. For the offerings that permit pooled 
investment funds, such as Rule 506(b) and (c) 
of Regulation D and registered offerings, the 
data includes offerings conducted by pooled 
investment funds. We do not yet have data to 
provide an estimated amount raised under Sec-
tion 4(a)(2) of the Securities Act or transactions 
occurring under Rule 144A for the period under 
consideration.

25	 Data for public offerings includes international 
companies.

26	 17 C.F.R. § 227.100 et seq.; see https://www.
sec.gov/smallbusiness/exemptofferings/reg-
crowdfunding. 

27	 17 C.F.R. § 230.504; see https://www.sec.gov/
smallbusiness/exemptofferings/rule504. 

28	 Securities Act of 1933 § 3(a)(11), 17 C.F.R. § 
230.147, and 17 C.F.R. § 230.147A; see https://
www.sec.gov/smallbusiness/exemptofferings/
intrastateofferings. 

END NOTES

https://www.youtube.com/watch?v=XkLXMHYLTAY
https://www.youtube.com/watch?v=XkLXMHYLTAY
https://www.sec.gov/files/Small%20Business%20Advocate%20Act%20of%202016-as%20amended.pdf
https://www.sec.gov/files/Small%20Business%20Advocate%20Act%20of%202016-as%20amended.pdf
https://www.sec.gov/files/Small%20Business%20Advocate%20Act%20of%202016-as%20amended.pdf
https://www.sec.gov/files/2019%20OASB%20Business%20Plan.pdf
https://www.sec.gov/files/2019%20OASB%20Business%20Plan.pdf
https://www.state.gov/global-entrepreneurship-summits/
https://www.state.gov/global-entrepreneurship-summits/
https://www.sec.gov/secs-small-business-advocate-meets-midwest-entrepreneurs
https://www.sec.gov/secs-small-business-advocate-meets-midwest-entrepreneurs
https://www.sec.gov/secs-small-business-advocate-meets-midwest-entrepreneurs
https://www.sec.gov/news/speech/speech-miller-032019
https://www.sec.gov/news/speech/speech-miller-032019
https://www.sec.gov/secs-small-business-advocate-meets-midwest-entrepreneurs
https://www.sec.gov/secs-small-business-advocate-meets-midwest-entrepreneurs
https://www.sec.gov/news/speech/miller-bolstering-capital-formation-040819
https://www.sec.gov/news/speech/miller-bolstering-capital-formation-040819
https://www.sec.gov/news/speech/miller-bolstering-capital-formation-040819
https://www.sec.gov/about/offices/oia/oia_institutes.htm
https://www.sec.gov/about/offices/oia/oia_institutes.htm
http://cle.cobar.org/securities-conference/
https://www.sec.gov/page/capital-formation-between-coasts
https://www.sec.gov/page/capital-formation-between-coasts
https://www.sec.gov/news/speech/speech-miller-060419
https://www.sec.gov/news/speech/speech-miller-060419
https://www.sec.gov/news/public-statement/statement-miller-081419
https://www.sec.gov/news/public-statement/statement-miller-081419
https://www.sec.gov/news/public-statement/statement-miller-081419
https://www.sec.gov/news/speech/sec-office-advocate-small-business-capital-formation-long-title-big-mission
https://www.sec.gov/news/speech/sec-office-advocate-small-business-capital-formation-long-title-big-mission
https://www.sec.gov/news/speech/sec-office-advocate-small-business-capital-formation-long-title-big-mission
https://www.sec.gov/news/speech/sec-office-advocate-small-business-capital-formation-long-title-big-mission
https://usblackchambers.org/conference/
https://www.sec.gov/page/small-business-capital-formation-runs-deep-arkansas
https://www.sec.gov/page/small-business-capital-formation-runs-deep-arkansas
https://www.ruralrise.org/
https://www.sec.gov/page/small-business-capital-formation-runs-deep-arkansas
https://www.sec.gov/page/small-business-capital-formation-runs-deep-arkansas
https://www.sec.gov/page/small-business-capital-formation-runs-deep-arkansas
https://www.theice.com/insights/conversations/inside-the-ice-house/a-champion-for-small-businesses-in-washington
https://www.theice.com/insights/conversations/inside-the-ice-house/a-champion-for-small-businesses-in-washington
https://www.theice.com/insights/conversations/inside-the-ice-house/a-champion-for-small-businesses-in-washington
https://www.inc.com/amy-balliett/5-types-of-content-your-audiences-will-love.html
https://www.inc.com/amy-balliett/5-types-of-content-your-audiences-will-love.html
https://www.sec.gov/page/oasb-videos
https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding
https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding
https://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding
https://www.sec.gov/smallbusiness/exemptofferings/rule504
https://www.sec.gov/smallbusiness/exemptofferings/rule504
https://www.sec.gov/smallbusiness/exemptofferings/intrastateofferings
https://www.sec.gov/smallbusiness/exemptofferings/intrastateofferings
https://www.sec.gov/smallbusiness/exemptofferings/intrastateofferings


58  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

29	 17 C.F.R. § 230.506(b); see https://www.sec.
gov/smallbusiness/exemptofferings/rule506b. 

30	 17 C.F.R. § 230.506(c); see https://www.sec.gov/
smallbusiness/exemptofferings/rule506c. 

31	 17 C.F.R. § 230.251 et seq.; see https://www.
sec.gov/smallbusiness/exemptofferings/rega. 

32	 15 U.S.C. § 77a, et seq.; see https://www.sec.
gov/smallbusiness/goingpublic. 

33	 This graphic presents capital raised in regis-
tered, Regulation D and Regulation A offerings 
across the top six industries from July 1, 2018 
through June 30, 2019. Offerings by non-
pooled investment funds in other industries 
accounted for approximately $217 billion, $45 
billion and $37 million in registered, Regulation 
D and Regulation A offerings, respectively. Reg-
ulation A and registered offerings were classified 
into industry groups based on the primary SIC 
code reported by the company.  Industry groups 
were self-reported by companies on Form D.  
Differences in data sources and definitions 
may limit the comparability of industry data. 
Offerings by pooled investment funds, which 
accounted for approximately $26 billion and 
$1.38 trillion in registered offerings and Reg-
ulation D, respectively, are excluded from this 
table. See note 24 for a description of how these 
amounts were reported or estimated.

34	 The maps included in this section depict the 
amounts reported or estimated as raised by 
issuers, including pooled investment funds that 
report a primary location in the U.S., including 
U.S. territories, from July 1, 2018 through June 
30, 2019. See note 24 for a description of how 
these amounts were reported or estimated.

35	 The Board of Governors of the Federal Reserve 
System, “Small Business Credit Survey: 2019 
Report on Employer Firms” (2019), https://
www.fedsmallbusiness.org/medialibrary/feds-
mallbusiness/files/2019/sbcs-employer-firms-re-
port.pdf. 

36	 Id.
37	 Board of Governors of the Federal Reserve Sys-

tem, “Report to the Congress on the Availability 
of Credit to Small Businesses” (Sep. 2017) at 
1, https://www.federalreserve.gov/publications/
files/sbfreport2017.pdf. 

38	 Federal Deposit Insurance Corporation, “FDIC 
Community Banking Study Reference Data” 
(updated August 19, 2019), https://www.fdic.
gov/regulations/resources/cbi/data.html.

39	 Karen G. Mills, Fintech, Small Business & The 
American Dream, Palgrave Macmillan (2018) at 
52.

40	 Brad Feld and Jason Mendelson, Venture Deals: 
Be Smarter Than Your Lawyer and Venture 
Capitalist, John Wiley & Sons, Inc. (4th ed. 
2019) at 149.

41	  Mills, supra note 39, at 7.

42	 Originally the term “angel” was used to 
describe patrons of Broadway Theater who pro-
vided money to support theatrical productions.

43	 See Angel Capital Association, “FAQs for 
Angels and Entrepreneurs” (accessed Oct. 29, 
2019), https://www.angelcapitalassociation.org/
faqs/; see also Jason Rowley, “Where Venture 
Capitalists Invest and Why,” TechCrunch (Nov. 
9, 2017), https://techcrunch.com/2017/11/09/
local-loyalty-where-venture-capitalists-in-
vest-and-why/.

44	 Feld and Mendelson, supra note 40, at 113.
45	 See Jeffrey Sohl, “The Angel Market in 2018: 

More Angels Investing in More Deals at Lower 
Valuations”, Center for Venture Research 
(May 9, 2019), https://www.icoast.com/
news/2019/08/01/2investornews/the-angel-mar-
ket-in-2018-more-angels-investing-in-more-
deals-at-lower-valuations/.

46	 Angel Capital Association, supra note 43; 
see also Marianne Hudson, “In-Depth Angel 
Investor Survey Sheds Light On Angel Success,” 
Forbes (Dec. 1, 2017), https://www.forbes.com/
sites/mariannehudson/2017/12/01/in-depth-
angel-investor-survey-sheds-light-on-angel-suc-
cess/.

47	 Concept Release on Harmonization of Securities 
Offering Exemptions, Release No. 33-10649 
(June 18, 2019), https://www.sec.gov/rules/
concept/2019/33-10649.pdf at Table 3 (“Har-
monization Concept Release”). The underlying 
household data for this analysis was obtained 
from the Federal Reserve Board’s Survey of 
Consumer Finances for 2016, https://www.
federalreserve.gov/econresdata/scf/scfindex.htm. 

48	 See 17 U.S.C. § 230.501(a); see also “Inves-
tor Participation in Private Offerings” section 
below.

49	 See Harmonization Concept Release at Table 4.
50	 See Feld and Mendelson, supra note 40, at 265.
51	 See Harmonization Concept Release at note 

47. As a comparison point, during the same 
four-year period, non-accredited investors were 
reported as participating in over 60% of the 
Rule 504 offerings. See Harmonization Concept 
Release at note 264. Rule 504 permits com-
panies to raise up to $5 million in a 12-month 
period from an unlimited number of investors 
(without regard to whether or not those inves-
tors are accredited).

52	 Ewing Marion Kauffman Foundation, “State of 
Entrepreneurship 2017 | Zero Barriers: Three 
Mega Trends Shaping the Future of Entrepre-
neurship” (2017) at 22, https://www.kauffman.
org/what-we-do/resources/state-of-entrepre-
neurship-addresses/2017-state-of-entrepreneur-
ship-address.

53	 Feld and Mendelson, supra note 40, at 14.

https://www.sec.gov/smallbusiness/exemptofferings/rule506b
https://www.sec.gov/smallbusiness/exemptofferings/rule506b
https://www.sec.gov/smallbusiness/exemptofferings/rule506c
https://www.sec.gov/smallbusiness/exemptofferings/rule506c
https://www.sec.gov/smallbusiness/exemptofferings/rega
https://www.sec.gov/smallbusiness/exemptofferings/rega
https://www.sec.gov/smallbusiness/goingpublic
https://www.sec.gov/smallbusiness/goingpublic
https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf
https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf
https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf
https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf
https://www.federalreserve.gov/publications/files/sbfreport2017.pdf
https://www.federalreserve.gov/publications/files/sbfreport2017.pdf
https://www.fdic.gov/regulations/resources/cbi/data.html
https://www.fdic.gov/regulations/resources/cbi/data.html
https://www.angelcapitalassociation.org/faqs/
https://www.angelcapitalassociation.org/faqs/
https://techcrunch.com/2017/11/09/local-loyalty-where-venture-capitalists-invest-and-why/
https://techcrunch.com/2017/11/09/local-loyalty-where-venture-capitalists-invest-and-why/
https://techcrunch.com/2017/11/09/local-loyalty-where-venture-capitalists-invest-and-why/
https://www.icoast.com/news/2019/08/01/2investornews/the-angel-market-in-2018-more-angels-investing-in-more-deals-at-lower-valuations/
https://www.icoast.com/news/2019/08/01/2investornews/the-angel-market-in-2018-more-angels-investing-in-more-deals-at-lower-valuations/
https://www.icoast.com/news/2019/08/01/2investornews/the-angel-market-in-2018-more-angels-investing-in-more-deals-at-lower-valuations/
https://www.icoast.com/news/2019/08/01/2investornews/the-angel-market-in-2018-more-angels-investing-in-more-deals-at-lower-valuations/
https://www.forbes.com/sites/mariannehudson/2017/12/01/in-depth-angel-investor-survey-sheds-light-on-angel-success/
https://www.forbes.com/sites/mariannehudson/2017/12/01/in-depth-angel-investor-survey-sheds-light-on-angel-success/
https://www.forbes.com/sites/mariannehudson/2017/12/01/in-depth-angel-investor-survey-sheds-light-on-angel-success/
https://www.forbes.com/sites/mariannehudson/2017/12/01/in-depth-angel-investor-survey-sheds-light-on-angel-success/
https://www.sec.gov/rules/concept/2019/33-10649.pdf
https://www.sec.gov/rules/concept/2019/33-10649.pdf
https://www.federalreserve.gov/econresdata/scf/scfindex.htm
https://www.federalreserve.gov/econresdata/scf/scfindex.htm
https://www.kauffman.org/what-we-do/resources/state-of-entrepreneurship-addresses/2017-state-of-entrepreneurship-address
https://www.kauffman.org/what-we-do/resources/state-of-entrepreneurship-addresses/2017-state-of-entrepreneurship-address
https://www.kauffman.org/what-we-do/resources/state-of-entrepreneurship-addresses/2017-state-of-entrepreneurship-address
https://www.kauffman.org/what-we-do/resources/state-of-entrepreneurship-addresses/2017-state-of-entrepreneurship-address


ANNUAL REPORT: FISCAL YEAR 2019  |   59

54	 PitchBook-NVCA, “2Q 2019 Venture Monitor” 
(Jul. 10, 2019) at 6, https://nvca.org/research/
pitchbook-nvca-venture-monitor/. 

55	 Id.
56	 See Ewing Marion Kauffman Foundation, “The 

State of Capital Access for Entrepreneurs: From 
Barriers to Potential” (Feb. 5, 2019), https://
www.kauffman.org/-/media/kauffman_org/
entrepreneurship-landing-page/capital-access/
capital_access_lab_exec_summary_final.pdf

57	 Pitchbook, “Private Markets: A Decade of 
Growth” (Jul. 19, 2019), https://pitchbook.com/
news/reports/3q-2019-pitchbook-private-mar-
kets-a-decade-of-growth. 

58	 Id.
59	 Bhandari, Ryan, “The Opportunity Fund,” 

Third Way (Jul. 9, 2019), https://www.thirdway.
org/report/the-opportunity-fund, citing Rebel 
A. Cole, Douglas J. Cumming, and Dan Li, 
“Do Banks or VCs Spur Small Firm Growth?” 
Journal of International Financial Markets, 
Institutions and Money (Mar. 2016) at 41, 
60-72, https://papers.ssrn.com/sol3/papers.
cfm?abstract_id=2684049. “Small employer,” 
for purposes of this study, was defined as firms 
with 5-19 employees.

60	 Pitchbook, supra note 57.
61	 Id.
62	 Committee on Capital Markets Regulation, 

“Expanding Opportunities for Investors 
and Retirees: Private Equity” (Nov. 2018), 
https://www.capmktsreg.org/wp-content/up
loads/2018/10/Private-Equity-Report-FINAL-1.
pdf.

63	 See, e.g., McKinsey & Company, “McKinsey 
Global Private Markets Review 2019” (Feb. 
2019) at 11, https://www.mckinsey.com/indus-
tries/private-equity-and-principal-investors/
our-insights/mckinseys-private-markets-annu-
al-review. 

64	 PitchBook-NVCA, supra note 54, at 13 (Q&A 
with Sulu Mamdani, Managing Partner, SVB 
Capital).

65	 Id.
66	 Pitchbook, supra note 57.
67	 Id.
68	 Id.
69	 See World Bank Group Open Data, https://data.

worldbank.org/indicator/CM.MKT.LDOM.
NO?locations=US.

70	 See, e.g., Committee on Capital Markets  
Regulation, supra note 62; Michael Ewens 
and Joan Farre-Mensa, “The Deregulation of 
the Private Equity Markets and the Decline in 
IPOs,” National Bureau of Economic Research 
(Sep. 2019 working paper) at 3.

71	 See, e.g., “Expanding the On-Ramp: Recom-
mendations to Help More Companies Go and 
Stay Public” (Apr. 2018) at 5-6, https://nvca.
org/wp-content/uploads/2018/04/Expanding-
The-On-Ramp-Recommendations-to-Help-
More-Companies-Go-and-Stay-Public.pdf. 

72	 Data registered offerings was collected from 
Thomson Financial’s SDC Platinum database.

73	 Small public companies include public com-
panies with a size less than or equal to $250 
million on the date of the offering, calculated 
by multiplying price of the company’s stock 
at the close of the day of the offering by the 
number of outstanding shares on the day of the 
offering. Data from the Center for Research in 
Securities Prices (CRSP) and Dealogic were used 
to fill in missing information from SDC Plati-
num. Mutual funds and Closed-end funds are 
excluded from the statistics. Those companies 
with missing a stock price on the offering day or 
number of outstanding shares are not included 
in the statistics.

74	 “Expanding the On-Ramp,” supra note 71, at 
5-6.

75	 Id.
76	 Matt Levine, “The Unicorn Stampede is Com-

ing,” Bloomberg (Mar. 22, 2019), https://www.
bloomberg.com/opinion/articles/2019-03-22/
the-unicorn-stampede-is-coming.

77	 Ewing Marion Kauffman Foundation, “Data 
Show that Gender-Inclusive Founding Teams 
Have Greater Success in Fundraising and 
Innovation” (Oct. 3, 2019), https://www.kauff-
manfellows.org/journal_posts/data-show-that-
gender-inclusive-founding-teams-have-greater-
success-in-fundraising-and-innovation.

78	 Kauffman Foundation, supra note 56 (citing 
2004 figures).

79	 Id.
80	 Sohl, supra note 45.
81	 Emma Hinchcliffe, “Funding For Female 

Founders Stalled at 2.2% of VC Dollars in 
2018,” Fortune (Jan. 28, 2019), https://for-
tune.com/2019/01/28/funding-female-found-
ers-2018/.

82	 See Katie Abouzahr, et. al., “Why Wom-
en-Owned Startups Are a Better Bet,” Boston 
Consulting Group (Jun. 6, 2018), https://www.
bcg.com/en-us/publications/2018/why-women-
owned-startups-are-better-bet.aspx.

83	 See H. Waverly Deutsch, et al., “The State of 
LGBT Entrepreneurship in the U.S.,” StartOut 
(Jul. 2016), https://startout.org/wp-content/
uploads/2018/03/State_of_LGBT_Entrepreneur-
ship.pdf. 

84	 Sohl, supra note 45.

https://nvca.org/research/pitchbook-nvca-venture-monitor/
https://nvca.org/research/pitchbook-nvca-venture-monitor/
https://www.kauffman.org/-/media/kauffman_org/entrepreneurship-landing-page/capital-access/capital_access_lab_exec_summary_final.pdf
https://www.kauffman.org/-/media/kauffman_org/entrepreneurship-landing-page/capital-access/capital_access_lab_exec_summary_final.pdf
https://www.kauffman.org/-/media/kauffman_org/entrepreneurship-landing-page/capital-access/capital_access_lab_exec_summary_final.pdf
https://www.kauffman.org/-/media/kauffman_org/entrepreneurship-landing-page/capital-access/capital_access_lab_exec_summary_final.pdf
https://pitchbook.com/news/reports/3q-2019-pitchbook-private-markets-a-decade-of-growth
https://pitchbook.com/news/reports/3q-2019-pitchbook-private-markets-a-decade-of-growth
https://pitchbook.com/news/reports/3q-2019-pitchbook-private-markets-a-decade-of-growth
https://www.thirdway.org/report/the-opportunity-fund
https://www.thirdway.org/report/the-opportunity-fund
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2684049
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2684049
https://www.capmktsreg.org/wp-content/up­loads/2018/10/Private-Equity-Report-FINAL-1.pdf
https://www.capmktsreg.org/wp-content/up­loads/2018/10/Private-Equity-Report-FINAL-1.pdf
https://www.capmktsreg.org/wp-content/up­loads/2018/10/Private-Equity-Report-FINAL-1.pdf
https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/mckinseys-private-markets-annual-review
https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/mckinseys-private-markets-annual-review
https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/mckinseys-private-markets-annual-review
https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/mckinseys-private-markets-annual-review
https://data.worldbank.org/indicator/CM.MKT.LDOM.NO?locations=US
https://data.worldbank.org/indicator/CM.MKT.LDOM.NO?locations=US
https://data.worldbank.org/indicator/CM.MKT.LDOM.NO?locations=US
https://nvca.org/wp-content/uploads/2018/04/Expanding-The-On-Ramp-Recommendations-to-Help-More-Companies-Go-and-Stay-Public.pdf
https://nvca.org/wp-content/uploads/2018/04/Expanding-The-On-Ramp-Recommendations-to-Help-More-Companies-Go-and-Stay-Public.pdf
https://nvca.org/wp-content/uploads/2018/04/Expanding-The-On-Ramp-Recommendations-to-Help-More-Companies-Go-and-Stay-Public.pdf
https://nvca.org/wp-content/uploads/2018/04/Expanding-The-On-Ramp-Recommendations-to-Help-More-Companies-Go-and-Stay-Public.pdf
https://www.bloomberg.com/opinion/articles/2019-03-22/the-unicorn-stampede-is-coming
https://www.bloomberg.com/opinion/articles/2019-03-22/the-unicorn-stampede-is-coming
https://www.bloomberg.com/opinion/articles/2019-03-22/the-unicorn-stampede-is-coming
https://www.kauffmanfellows.org/journal_posts/data-show-that-gender-inclusive-founding-teams-have-greater-success-in-fundraising-and-innovation
https://www.kauffmanfellows.org/journal_posts/data-show-that-gender-inclusive-founding-teams-have-greater-success-in-fundraising-and-innovation
https://www.kauffmanfellows.org/journal_posts/data-show-that-gender-inclusive-founding-teams-have-greater-success-in-fundraising-and-innovation
https://www.kauffmanfellows.org/journal_posts/data-show-that-gender-inclusive-founding-teams-have-greater-success-in-fundraising-and-innovation
https://fortune.com/2019/01/28/funding-female-founders-2018/
https://fortune.com/2019/01/28/funding-female-founders-2018/
https://fortune.com/2019/01/28/funding-female-founders-2018/
https://www.bcg.com/en-us/publications/2018/why-women-owned-startups-are-better-bet.aspx
https://www.bcg.com/en-us/publications/2018/why-women-owned-startups-are-better-bet.aspx
https://www.bcg.com/en-us/publications/2018/why-women-owned-startups-are-better-bet.aspx
https://startout.org/wp-content/uploads/2018/03/State_of_LGBT_Entrepreneurship.pdf
https://startout.org/wp-content/uploads/2018/03/State_of_LGBT_Entrepreneurship.pdf
https://startout.org/wp-content/uploads/2018/03/State_of_LGBT_Entrepreneurship.pdf


60  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

85	 Rebecca Kaden, “How VC Can Help More 
Women Get Ahead,” Harvard Business Review 
(Oct. 1, 2019), https://hbr.org/2019/10/how-
vc-can-help-more-women-get-ahead; compare 
Deloitte University Leadership Center for Inclu-
sion, “NVCA-Deloitte Human Capital Survey,” 
2nd ed. (June 2019), https://www2.deloitte.com/
us/human-capital-survey-2nd-edition (copyright 
Deloitte) (citing survey data that 45% of the 
workforce at VC firms are women, accounting 
for 21% of all investment professionals and 
14% of investment partners).

86	 Kaden, supra note 85.
87	 U.S. Minority Business Development Agency, 

“Fact Sheet: U.S. Minority-Owned Firms” (Jan. 
2016), https://www.mbda.gov/sites/mbda.gov/
files/migrated/files-attachments/2012SBO_MBE-
FactSheet020216.pdf.

88	 Id.
89	 Id.
90	 Id.
91	 U.S. Minority Business Development Agency, 

“The Minority Business Development Agency: 
Vital to Making America Great” (Dec. 20, 
2018), https://www.mbda.gov/page/minori-
ty-business-development-agency-vital-mak-
ing-america-great. 

92	 Kauffman Foundation, supra note 56.
93	 Sohl, supra note 45.
94	 Kauffman Foundation, supra note 56.
95	 Federal Reserve Bank of New York, Stanford 

Graduate School of Business, Latino Entrepre-
neurship Initiative, and Interise, “Latino-Owned 
Businesses: Shining a Light on National Trends” 
(Nov. 2018), https://www.newyorkfed.org/
medialibrary/media/smallbusiness/2017/Report-
on-Latino-Owned-Small-Businesses.pdf.

96	 RateMyInvestor, Diversity in U.S. Startups, 
https://ratemyinvestor.com/pdfjs/full?file=%2F-
DiversityVCReport_Final.pdf (data in the 
report covered the period from January 2013 to 
December 2017).

97	 Sohl, supra note 45.
98	 Deloitte University Leadership Center for Inclu-

sion, supra note 85. 
99	 Federal Emergency Management Agency 

(FEMA), “Hurricane Ready Business Toolkit” 
(Nov. 15, 2017), https://www.fema.gov/me-
dia-library/assets/documents/152381. 

100	 Federal Reserve Banks, “2017 Small Business 
Credit Survey: Report on Disaster-Affected 
Firms” (2017), https://www.fedsmallbusiness.
org/survey/2018/report-on-disaster-affect-
ed-firms.

101	 Data from U.S. Census Bureau, American 
Community Survey (ACS) was used to estimate 
the population in zip codes affected by the 
natural disasters as described in infra, note 102. 
However, certain zip codes were identified as 
missing population values, so 27% is likely under-
estimated.

102	 Zip codes designated as affected are defined as 
having one or more residents approved for as-
sistance under FEMA’s IHP program for natural 
disasters with classifications of Major Disaster 
Declaration and incident start dates between 
July 1, 2016 and June 30, 2019.Given the trail-
ing impact caused by natural disasters, each zip 
code affected in that three year period was in-
cluded. Classification of disaster areas are based 
on Disaster Declaration Summaries data at 
https://www.fema.gov/api/open/v1/DisasterDec-
larationsSummaries.csv, and FEMA Housing 
Assistance Program Data at https://www.fema.
gov/media-library/assets/documents/34758. 
The classification method for disaster areas is 
based on the methodology in the “2017 Small 
Business Credit Survey – Report on Disaster-Af-
fected Firms”, Federal Reserve Banks of Dallas, 
New York, Richmond, and San Francisco at 
https://www.newyorkfed.org/medialibrary/me-
dia/smallbusiness/2017/SBCS-Report-on-Disas-
ter-Affected-Firms.pdf.

103	 Evaluated from July 1, 2016 to June 30, 2019 
using zip codes affected by natural disasters as 
described in supra note 102.

104	 National Bureau of Economic Research, “The 
Effect of Natural Disasters on Economic Activ-
ity in US Counties: A Century of Data” (Jun. 
2019), https://www.nber.org/papers/w23410.

105	 U.S. Census Bureau, ACS, “Understanding and 
Using American Community Survey Data: What 
Users of Data for Rural Areas Need to Know”, 
Section 1 (July 2019) at https://www.census.gov/
content/dam/Census/library/publications/2019/
acs/ACS_rural_handbook_2019_ch01.pdf 
(“Data from the ACS indicate that about 61 
million people, or 19 percent of the popula-
tion, lived in rural areas of the United States in 
2016.”).

106	 Federal Reserve, supra note 35.
107	 Classification of rural areas are based on the 

list of 2015 Q4 rural area zip codes from the 
Center for Medicare & Medicaid Services at 
https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/DMEPOSFeeSched/
DMEPOS-Fee-Schedule-Items/DME-Rural-
Zip-and-Formats.html?DLPage=1&DLEn-
tries=10&DLSort=2&DLSortDir=descending.

108	 Kauffman Foundation, supra note 52, at 21; 
U.S. Census, “How Does the U.S. Census 
Bureau Define ‘Rural?’” at https://gis-portal.
data.census.gov/arcgis/apps/MapSeries/index.
html?appid=7a41374f6b03456e9d138c-
b014711e01#map; See also https://www.census.
gov/population/censusdata/urpop0090.txt. 

109	 See National Community Reinvestment Co-
alition, “Final Report: Access to Capital and 
Credit in Appalachia and the Impact of the 
Financial Crisis and Recession on Commercial 
Lending and Finance in the Region” (Jul. 2013) 

https://hbr.org/2019/10/how-vc-can-help-more-women-get-ahead
https://hbr.org/2019/10/how-vc-can-help-more-women-get-ahead
https://www2.deloitte.com/us/human-capital-survey-2nd-edition
https://www2.deloitte.com/us/human-capital-survey-2nd-edition
https://www.mbda.gov/sites/mbda.gov/files/migrated/files-attachments/2012SBO_MBEFactSheet020216.pdf
https://www.mbda.gov/sites/mbda.gov/files/migrated/files-attachments/2012SBO_MBEFactSheet020216.pdf
https://www.mbda.gov/sites/mbda.gov/files/migrated/files-attachments/2012SBO_MBEFactSheet020216.pdf
https://www.mbda.gov/page/minority-business-development-agency-vital-making-america-great
https://www.mbda.gov/page/minority-business-development-agency-vital-making-america-great
https://www.mbda.gov/page/minority-business-development-agency-vital-making-america-great
https://www.newyorkfed.org/medialibrary/media/smallbusiness/2017/Report-on-Latino-Owned-Small-Businesses.pdf
https://www.newyorkfed.org/medialibrary/media/smallbusiness/2017/Report-on-Latino-Owned-Small-Businesses.pdf
https://www.newyorkfed.org/medialibrary/media/smallbusiness/2017/Report-on-Latino-Owned-Small-Businesses.pdf
https://ratemyinvestor.com/pdfjs/full?file=%2FDiversityVCReport_Final.pdf
https://ratemyinvestor.com/pdfjs/full?file=%2FDiversityVCReport_Final.pdf
https://www.fema.gov/media-library/assets/documents/152381
https://www.fema.gov/media-library/assets/documents/152381
https://www.fedsmallbusiness.org/survey/2018/report-on-disaster-affected-firms
https://www.fedsmallbusiness.org/survey/2018/report-on-disaster-affected-firms
https://www.fedsmallbusiness.org/survey/2018/report-on-disaster-affected-firms
https://www.fema.gov/api/open/v1/DisasterDeclarationsSummaries.csv
https://www.fema.gov/api/open/v1/DisasterDeclarationsSummaries.csv
https://www.fema.gov/media-library/assets/documents/34758
https://www.fema.gov/media-library/assets/documents/34758
https://www.newyorkfed.org/medialibrary/media/smallbusiness/2017/SBCS-Report-on-Disaster-Affected-Firms.pdf
https://www.newyorkfed.org/medialibrary/media/smallbusiness/2017/SBCS-Report-on-Disaster-Affected-Firms.pdf
https://www.newyorkfed.org/medialibrary/media/smallbusiness/2017/SBCS-Report-on-Disaster-Affected-Firms.pdf
https://www.nber.org/papers/w23410
https://www.census.gov/content/dam/Census/library/publications/2019/acs/ACS_rural_handbook_2019_ch01.pdf
https://www.census.gov/content/dam/Census/library/publications/2019/acs/ACS_rural_handbook_2019_ch01.pdf
https://www.census.gov/content/dam/Census/library/publications/2019/acs/ACS_rural_handbook_2019_ch01.pdf
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule-Items/DME-Rural-Zip-and-Formats.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule-Items/DME-Rural-Zip-and-Formats.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule-Items/DME-Rural-Zip-and-Formats.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule-Items/DME-Rural-Zip-and-Formats.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule-Items/DME-Rural-Zip-and-Formats.html?DLPage=1&DLEntries=10&DLSort=2&DLSortDir=descending
https://gis-portal.data.census.gov/arcgis/apps/MapSeries/index.html?appid=7a41374f6b03456e9d138cb014711e01#map
https://gis-portal.data.census.gov/arcgis/apps/MapSeries/index.html?appid=7a41374f6b03456e9d138cb014711e01#map
https://gis-portal.data.census.gov/arcgis/apps/MapSeries/index.html?appid=7a41374f6b03456e9d138cb014711e01#map
https://gis-portal.data.census.gov/arcgis/apps/MapSeries/index.html?appid=7a41374f6b03456e9d138cb014711e01#map
https://www.census.gov/population/censusdata/urpop0090.txt
https://www.census.gov/population/censusdata/urpop0090.txt


ANNUAL REPORT: FISCAL YEAR 2019  |   61

(report prepared for Appalachian Regional 
Commission), https://www.arc.gov/assets/re-
search_reports/AccessToCapitalAndCreditInAp-
palachia-July2013.pdf.

110	 Ruth Simon and Coulter Jones, “Goodbye, 
George Bailey: Decline of Rural Lending Crimps 
Small-Town Business,” Wall Street Journal 
(Dec. 25, 2017), https://www.wsj.com/articles/
goodbye-george-bailey-decline-of-rural-lending-
crimps-small-town-business-1514219515.

111	 Rural Policy Research Institute, “Access to 
Capital in Rural America: Supporting Business 
Startup, Growth and Job Creation, Insights 
from the Field and Policy Recommendations” 
(Oct. 2012), http://www.rupri.org/Forms/Capi-
talMarkets_FieldInsights.pdf.

112	 Patricia Scruggs, Wayne Embree, and Rob Wilt-
bank, “Wealth Creation in Rural Communities: 
The Role of Equity Capital in Rural Commu-
nities” (Feb. 2009), https://community-wealth.
org/sites/clone.community-wealth.org/files/
downloads/report-scruggs-et-al.pdf.

113	 See Office of Information and Regulatory 
Affairs, Office of Management and Budget, 
“Fall 2019 Unified Agenda of Regulatory 
and Deregulatory Active Actions in Prerule, 
Proposed Rule and Final Rule Stages by the 
Securities and Exchange Commission,” https://
www.reginfo.gov/public/do/eAgendaMain?op-
eration=OPERATION_GET_AGENCY_RULE_
LIST&currentPub=true&agencyCode=&show-
Stage=active&agencyCd=3235&Image58.
x=44&Image58.y=11. Active regulatory actions 
are likely to occur in the next 12 months after 
publication of the Fall 2019 Unified Agenda. 
See Office of Information and Regulatory Af-
fairs, Office of Management and Budget, “Fall 
2019 Unified Agenda of Federal Regulatory 
and Deregulatory Long-term Actions by the 
Securities and Exchange Commission,” https://
www.reginfo.gov/public/do/eAgendaMain?op-
eration=OPERATION_GET_AGENCY_
RULE_LIST&currentPubId=201904&show-
Stage=longterm&agencyCd=3235&Image58.
x=33&Image58.y=11. Long-term Actions are 
items under development but for which regula-
tory action is not expected within 12 months af-
ter publication of the Fall 2019 Unified Agenda.

114	 See “State of Small Business Capital Formation” 
section above.

115	 Conflicts include when non-accredited inves-
tors may participate, investment or offering 
limits, when general solicitation may be used, 
and the particular itemized disclosure require-
ments under each of the exemptions, including 
Regulation A, Rules 504, 506(b) and 506(c) of 
Regulation D, and Regulation Crowdfunding. 

116	 See “State of Small Business Capital Formation” 
section above.

117	 For example, regulatory uncertainty has been 
cited as a possible explanation for the relatively 
low levels of utilization of Rule 506(c) offerings 
using general solicitation. See Harmonization 
Concept Release at Section II.B.2.f.

118	 See, e.g., SEC Release No. 33-97 (Dec. 28, 
1933).

119	 See, e.g., Final Report of the 2016 SEC Gov-
ernment-Business Forum on Small Business 
Capital Formation (Mar. 2017), https://www.
sec.gov/info/smallbus/gbfor35.pdf (“2016 Small 
Business Forum Report”); Final Report of the 
2017 SEC Government-Business Forum on 
Small Business Capital Formation (Mar. 2018), 
https://www.sec.gov/files/gbfor36.pdf (“2017 
Small Business Forum Report”).

120	 See Harmonization Concept Release, which 
solicits comment on the exempt offering frame-
work generally as well as each of the following 
topics: accredited investor definition, private 
placement exemption and Rule 506 of Regula-
tion D, Regulation A, limited offerings under 
Rule 504 of Regulation D, intrastate offerings, 
Regulation Crowdfunding, integration, pooled 
investment funds, and the secondary trading of 
certain securities. 

121	 See “Launch of Video Content” section above.
122	 Currently offering caps exist under Rule 504 

under Regulation D ($5 million), Regulation 
Crowdfunding ($1.07 million), and Regulation 
A ($20 million for Tier 1 and $50 million for 
Tier 2). Each cap has been subject to critiques 
and calls for amendment, and some are subject 
to periodic review requirements by the Commis-
sion.

123	 See Linda C. Quinn, Reforming the Securities 
Act of 1933: A Conceptual Framework, 10 In-
sights 25 (Jan. 1996), https://www.sec.gov/info/
smallbus/acsec/reformingsa33.pdf.

124	 See Small Business Capital Formation Advi-
sory Committee, Recommendation Regarding 
Harmonization General Principles (Dec. 13, 
2019), https://www.sec.gov/spotlight/sbcfac/
recommendation-harmonization-general-princi-
ples.pdf. This recommendation was adopted by 
the Advisory Committee in FY2020 and is not 
included in the summary of FY2019 activities of 
the committee.

125	 See, e.g., Regulation D Revisions; Exemption 
for Certain Employee Benefit Plans, Release 
No. 33-6683 (Jan. 16, 1987) [52 FR 3015 (Feb. 
2, 1987)] at note 6; see also Amendments for 
Small and Additional Issues Exemptions under 
the Securities Act (Regulation A), Release No. 
33-9741 (March 25, 2015) [80 FR 21805 (April 
20, 2015)] at note 146.

126	 Small Business Incentive Act of 1980, Pub. L. 
No. 96-477, § 602, 94 Stat. 2275 (1980). See 
also 15 U.S.C. § 77b(a)(15).

127	 S. Rep. No. 96-958, at 12 (1980).

https://www.arc.gov/assets/research_reports/AccessToCapitalAndCreditInAppalachia-July2013.pdf
https://www.arc.gov/assets/research_reports/AccessToCapitalAndCreditInAppalachia-July2013.pdf
https://www.arc.gov/assets/research_reports/AccessToCapitalAndCreditInAppalachia-July2013.pdf
https://www.wsj.com/articles/goodbye-george-bailey-decline-of-rural-lending-crimps-small-town-business-1514219515
https://www.wsj.com/articles/goodbye-george-bailey-decline-of-rural-lending-crimps-small-town-business-1514219515
https://www.wsj.com/articles/goodbye-george-bailey-decline-of-rural-lending-crimps-small-town-business-1514219515
http://www.rupri.org/Forms/CapitalMarkets_FieldInsights.pdf
http://www.rupri.org/Forms/CapitalMarkets_FieldInsights.pdf
https://community-wealth.org/sites/clone.community-wealth.org/files/downloads/report-scruggs-et-al.pdf
https://community-wealth.org/sites/clone.community-wealth.org/files/downloads/report-scruggs-et-al.pdf
https://community-wealth.org/sites/clone.community-wealth.org/files/downloads/report-scruggs-et-al.pdf
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=3235&Image58.x=44&Image58.y=11
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=3235&Image58.x=44&Image58.y=11
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=3235&Image58.x=44&Image58.y=11
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=3235&Image58.x=44&Image58.y=11
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=3235&Image58.x=44&Image58.y=11
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=3235&Image58.x=44&Image58.y=11
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPubId=201904&showStage=longterm&agencyCd=3235
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPubId=201904&showStage=longterm&agencyCd=3235
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPubId=201904&showStage=longterm&agencyCd=3235
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPubId=201904&showStage=longterm&agencyCd=3235
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPubId=201904&showStage=longterm&agencyCd=3235
https://www.reginfo.gov/public/do/eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPubId=201904&showStage=longterm&agencyCd=3235
https://www.sec.gov/info/smallbus/gbfor35.pdf
https://www.sec.gov/info/smallbus/gbfor35.pdf
https://www.sec.gov/files/gbfor36.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-harmonization-general-principles.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-harmonization-general-principles.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-harmonization-general-principles.pdf


62  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

128	 17 C.F.R. § 230.501(a).
129	 For further discussion, see Harmonization Con-

cept Release at Section IV.A.2.
130	 Mutual funds make up 56% of defined contri-

bution retirement accounts and 45% of individ-
ual retirement account assets. See Investment 
Company Institute, “2019 Investment Company 
Fact Book” (Apr. 2019) at 34, https://www.ici.
org/pdf/2019_factbook.pdf. 

131	 See, e.g., 17 CFR 270.22e-4 (liquidity risk man-
agement programs); see also 15 U.S.C. 80a-2(a)
(41) (defining “value”).

132	 See Harmonization Concept Release at Section 
IV.A.

133	 For example, as of December 31, 2018, there 
were only 250 closed-end funds, compared 
with 17,707 mutual funds and 3,371 ETFs. See 
Investment Company Institute, supra note 130, 
at 32.

134	 A BDC is a type of closed-end investment com-
pany that does not register under the Investment 
Company Act, but rather elects to be subject 
to Sections 55-65 of that act. See 15 U.S.C. 
80a-2(a)(48).

135	 An SBIC is a type of fund registered under the 
Small Business Investment Act of 1958 or that 
is approved by the U.S. Small Business Adminis-
tration. See 17 CFR 230.501(a)(1).

136	 See Harmonization Concept Release at Section 
IV.C.

137	 See, e.g., Transcript of SEC and Morehouse 
College event “REACHING NEW HEIGHTS: 
Conversations on Raising Capital for Business-
es of Color,” (Oct. 24, 2019), https://www.
sec.gov/files/Morehouse%20Conference%20
Transcript%20PDF%20-%20Revised%20
%2812.11.19%29.pdf.

138	 U.S. Department of the Treasury, “A Financial 
System That Creates Economic Opportunities 
Capital Markets” (Oct. 2017) (“2017 Trea-
sury Report”) at 27, https://www.treasury.gov/
press-center/press-releases/documents/a-finan-
cial-system-capital-markets-final-final.pdf.

139	 See 17 CFR 230.501(a)(1), (3) and (7).
140	 See Small Business Capital Formation Advisory 

Committee Recommendation on the Accredited 
Investor Definition (Dec. 11, 2019), https://
www.sec.gov/spotlight/sbcfac/recommenda-
tion-accredited-investor.pdf. This recommenda-
tion was adopted by the Advisory Committee in 
FY2020 and is not included in the summary of 
FY2019 activities of the committee.

141	 See Advisory Committee on Small and Emerg-
ing Companies, Recommendations Regarding 
the Accredited Investor Definition (Jul. 20, 
2016), https://www.sec.gov/info/smallbus/acsec/
acsec-recommendations-accredited-investor.pdf.

142	 See Final Report of the 2019 SEC Govern-
ment-Business Forum on Small Business Capital 
Formation (Dec. 2019), https://www.sec.
gov/files/small-business-forum-report-2019.

pdf; Final Report of the 2018 SEC Govern-
ment-Business Forum on Small Business Capital 
Formation (Jun. 2019), https://www.sec.gov/
info/smallbus/gbfor37.pdf (“2018 Small 
Business Forum Report”); 2017 Small Business 
Forum Report; and 2016 Small Business Forum 
Report.

143	 See 2017 Treasury Report at 44 et seq.
144	 See SEC’s Division of Investment Management’s 

Small Fund Outreach Initiative, https://www.
sec.gov/new-smaller-fund-outreach-effort-seeks-
to-promote-choice-for-main-street-investors. 

145	 See Small Business Capital Formation Advisory 
Committee Recommendation on Retail Investor 
Access to Registered Closed-End Funds Invest-
ing in Private Funds (Dec. 11, 2019), https://
www.sec.gov/spotlight/sbcfac/recommendation-
closed-end-fund-of-funds.pdf. This recommen-
dation was adopted by the Advisory Committee 
in FY2020 and is not included in the summary 
of FY2019 activities of the committee.

146	 Committee on Capital Markets Regulation, 
supra note 62.

147	 2017 Treasury Report at 43. 
148	 See, e.g, Final Report of the Securities and 

Exchange Commission Advisory Committee 
on Small and Emerging Companies (Sept. 21, 
2017), https://www.sec.gov/info/smallbus/
acsec/acsec-final-report-2017-09.pdf at Section 
IV.1.A.

149	 Broker-dealers are generally “engaged in the 
business” of “effecting transactions in securities 
for the account of others.” Securities Exchange 
Act §§ 4(a)(4) (defining “broker”) and 4(a)(5) 
(defining “dealer”).

150	 See, e.g., Country Business, Inc., SEC No-Action 
Letter (Nov. 8, 2006); International Business 
Exchange Corporation, SEC No-Action Letter 
(Dec. 12, 1986); Paul Anka, SEC No-Action 
Letter (Jul. 24, 1991); AngelList LLC, SEC 
No-Action Letter (Mar. 28, 2013); FundersClub 
Inc. & FundersClub Mgm’t LLC, SEC No-Ac-
tion Letter (Mar. 26, 2013); and M&A Brokers, 
SEC No-Action Letter (Feb. 4, 2014); see also 
SEC v. Kramer, 778 F.Sup.2d 1320, 1334 (M.D. 
Fla. 2011).

151	 See, e.g., SEC Government-Business Forum on 
Small Business Capital Formation historical 
reports, https://www.sec.gov/info/smallbus/
sbforumreps.htm; American Bar Association, 
“Report and Recommendations of the Task 
Force on Private Placement Broker-Dealers” 
(Jun. 20, 2005), https://www.sec.gov/info/small-
bus/2009gbforum/abareport062005.pdf (“ABA 
Report on Private Placement Broker-Deal-
ers”); SEC Advisory Committee on Small and 
Emerging Companies, “Recommendation 
Regarding Finders, Private Placement Brokers, 
and Investment Platforms Not Registered as 
Broker-Dealers” (May 10, 2017), https://www.
sec.gov/info/smallbus/acsec/acsec-recommenda-

https://www.ici.org/pdf/2019_factbook.pdf
https://www.ici.org/pdf/2019_factbook.pdf
https://www.sec.gov/files/Morehouse%20Conference%20Transcript%20PDF%20-%20Revised%20%2812.11.19%29.pdf
https://www.sec.gov/files/Morehouse%20Conference%20Transcript%20PDF%20-%20Revised%20%2812.11.19%29.pdf
https://www.sec.gov/files/Morehouse%20Conference%20Transcript%20PDF%20-%20Revised%20%2812.11.19%29.pdf
https://www.sec.gov/files/Morehouse%20Conference%20Transcript%20PDF%20-%20Revised%20%2812.11.19%29.pdf
https://www.treasury.gov/press-center/press-releases/documents/a-financial-system-capital-markets-final-final.pdf
https://www.treasury.gov/press-center/press-releases/documents/a-financial-system-capital-markets-final-final.pdf
https://www.treasury.gov/press-center/press-releases/documents/a-financial-system-capital-markets-final-final.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-accredited-investor.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-accredited-investor.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-accredited-investor.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-recommendations-accredited-investor.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-recommendations-accredited-investor.pdf
https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/files/small-business-forum-report-2019.pdf
https://www.sec.gov/info/smallbus/gbfor37.pdf
https://www.sec.gov/info/smallbus/gbfor37.pdf
https://www.sec.gov/new-smaller-fund-outreach-effort-seeks-to-promote-choice-for-main-street-investors
https://www.sec.gov/new-smaller-fund-outreach-effort-seeks-to-promote-choice-for-main-street-investors
https://www.sec.gov/new-smaller-fund-outreach-effort-seeks-to-promote-choice-for-main-street-investors
https://www.sec.gov/spotlight/sbcfac/recommendation-closed-end-fund-of-funds.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-closed-end-fund-of-funds.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-closed-end-fund-of-funds.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-final-report-2017-09.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-final-report-2017-09.pdf
https://www.sec.gov/info/smallbus/sbforumreps.htm
https://www.sec.gov/info/smallbus/sbforumreps.htm
https://www.sec.gov/info/smallbus/2009gbforum/abareport062005.pdf
https://www.sec.gov/info/smallbus/2009gbforum/abareport062005.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-recommendation-051517-finders.pdf
https://www.sec.gov/info/smallbus/acsec/acsec-recommendation-051517-finders.pdf


ANNUAL REPORT: FISCAL YEAR 2019  |   63

tion-051517-finders.pdf (“ACSEC Finders Rec-
ommendation”); Unlocking Capital for Small 
Businesses Act, H.R. 6127, 115th Cong. (2018), 
https://www.congress.gov/bill/115th-congress/
house-bill/6127/text; Proposed NASAA Model 
Rule Exempting Certain Merger and Acqui-
sition Brokers from Registration Pursuant to 
State Securities Acts (Jan. 2015); 2017 Trea-
sury Report at 43-44; and Gregory C. Yadley, 
“Notable by Their Absence: Finders and Other 
Financial Intermediaries in Small Business Capi-
tal Formation” (Jun. 3, 2015), https://www.sec.
gov/info/smallbus/acsec/finders-and-other-finan-
cial-intermediaries-yadley.pdf.

152	 See note 151.
153	 See, e.g., Faith Colish, Finders and Private 

Placement Brokers: The Missing Link and H.R. 
6127, Bloomberg Law (Nov. 14, 2018), https://
news.bloomberglaw.com/corporate-law/insight-
finders-and-private-placement-brokers-the-miss-
ing-link-and-hr-6127; Transcript of the 38th 
Annual Government-Business Forum on Small 
Business Capital Formation (Aug. 14, 2019), 
https://www.sec.gov/files/2019-sec-govern-
ment-business-forum-small-business-capital-for-
mation-transcript.pdf, at 164-166.

154	 See, e.g., 2019 Small Business Forum Report; 
2018 Small Business Forum Report; 2017 Small 
Business Forum Report; and 2016 Small Busi-
ness Forum Report.

155	 See Crowdfunding, Release No. 33-9974 (Oct. 
30, 2015) [80 FR 71387 (Nov. 16, 2015)].

156	 Australia developed the first equity crowdfund-
ing model, followed by the United Kingdom 
and many other countries, including the United 
States. See Sam Raymond, Anthony Lambkin, 
Richard Swart, Sherwood Neiss, and Jason Best, 
“Crowdfunding’s Potential for the Developing 
World,” infoDev, Finance and Private Sector 
Development Department, World Bank (2013), 
http://documents.worldbank.org/curated/
en/409841468327411701/Crowdfundings-po-
tential-for-the-developing-world.

157	 See Mills, supra note 39, at 7.
158	 See id.
159	 Many portals also facilitate capital formation 

under Regulation A offerings, sometimes re-
ferred to as “mini-IPOs.”

160	 See, e.g., Douglas Cumming, Michele Meoli, 
and Silvio Vismara, “Does Equity Crowdfund-
ing Democratize Entrepreneurial Finance?,” 
Small Business Economics (Jun. 3, 2019), 
https://doi.org/10.1007/s11187-019-00188-z 
(reporting on international crowdfunding); see 
also Republic, “Republic Report – The Business 
of Diversity” (May 3, 2018), https://republic.
co/blog/the-business-of-diversity; cf Sifan Liu 
and Joseph Parilla, “Hidden Entrepreneurs: 
What Crowdfunding Reveals about Startups in 
Metro America,” Brookings Institute (Sep. 18, 

2018), https://www.brookings.edu/research/
hidden-entrepreneurs-what-crowdfunding-re-
veals-about-startups-in-metro-america/ (re-
garding rewards-based crowdfunding: “While 
closely tracking venture capital investment, 
Kickstarter funding has a more diverse distribu-
tion, both by gender and geography. […] Wom-
en also enjoy higher rates of success in funding 
their projects across all project categories except 
for games.”). 

161	 See, e.g., Kaden, supra note 85 (“Last year a 
mere 12% of venture capital dollars went to 
companies with a woman on the founding team,  
a decline from 15% in 2017. The numbers get 
even worse when you look at female-founded 
startups that aren’t focused on female custom-
ers: They’ve gotten less than 2% of VC invest-
ment dollars since 2014.”).

162 	See Mills, supra note 39, at 52 (“Another 
factor working against small business lending 
is that the cost of loan underwriting does not 
scale with the size of the loan. In other words, 
it costs about as much for a bank to process a 
$100,000 loan as a $1 million loan. That means 
that smaller-dollar loans are less profitable for 
banks. As a result, banks are less likely to lend 
at lower dollar amounts. One response for 
a bank is to move away from small business 
lending and focus on more profitable activities. 
Some banks have reduced or eliminated loans 
below a certain threshold, typically $100,000, 
and some will not lend to small businesses with 
annual revenues of less than $2 million.”); id 
at 56 (“Three-quarters of small business loan 
applications from employer firms were for 
small-dollar loans—loans under $250,000—and 
more than half of the loan applications were for 
amounts under $100,000.”).

163	 See Report to the Commission on Regulation 
Crowdfunding (Jun. 18, 2019), www.sec.gov/
smallbusiness/exemptofferings/regcrowdfund-
ing/2019Report. 

164	 See id. 
165	 See id at Section III.A.1.
166	 See Harmonization Concept Release at Section 

II.F.1.d.
167	 See supra note 53.
168	 For example, the United Kingdom does not 

limit the amount a company can raise using 
crowdfunding, but does require a prospectus 
for a company to raise more than £8 million, 
matching a recent rule change by Germany. See 
Explanatory Memorandum to The Financial 
Services and Markets Act 2000 (Prospectus 
and Markets in Financial Instruments) Reg-
ulations 2018, 2018 No. 786, http://www.
legislation.gov.uk/uksi/2018/786/pdfs/uks-
iem_20180786_en.pdf; https://www.crowdfun-
dinsider.com/2018/06/135692-germany-raises-
the-equity-crowdfunding-limit-to-e8-million/; 

https://www.sec.gov/info/smallbus/acsec/acsec-recommendation-051517-finders.pdf
https://www.congress.gov/bill/115th-congress/house-bill/6127/text
https://www.congress.gov/bill/115th-congress/house-bill/6127/text
https://www.sec.gov/info/smallbus/acsec/finders-and-other-financial-intermediaries-yadley.pdf
https://www.sec.gov/info/smallbus/acsec/finders-and-other-financial-intermediaries-yadley.pdf
https://www.sec.gov/info/smallbus/acsec/finders-and-other-financial-intermediaries-yadley.pdf
https://news.bloomberglaw.com/corporate-law/insight-finders-and-private-placement-brokers-the-missing-link-and-hr-6127
https://news.bloomberglaw.com/corporate-law/insight-finders-and-private-placement-brokers-the-missing-link-and-hr-6127
https://news.bloomberglaw.com/corporate-law/insight-finders-and-private-placement-brokers-the-missing-link-and-hr-6127
https://news.bloomberglaw.com/corporate-law/insight-finders-and-private-placement-brokers-the-missing-link-and-hr-6127
https://www.sec.gov/files/2019-sec-government-business-forum-small-business-capital-formation-transcript.pdf
https://www.sec.gov/files/2019-sec-government-business-forum-small-business-capital-formation-transcript.pdf
https://www.sec.gov/files/2019-sec-government-business-forum-small-business-capital-formation-transcript.pdf
http://documents.worldbank.org/curated/en/409841468327411701/Crowdfundings-potential-for-the-developing-world
http://documents.worldbank.org/curated/en/409841468327411701/Crowdfundings-potential-for-the-developing-world
http://documents.worldbank.org/curated/en/409841468327411701/Crowdfundings-potential-for-the-developing-world
https://doi.org/10.1007/s11187-019-00188-z
https://republic.co/blog/the-business-of-diversity
https://republic.co/blog/the-business-of-diversity
https://www.brookings.edu/research/hidden-entrepreneurs-what-crowdfunding-reveals-about-startups-in-metro-america/
https://www.brookings.edu/research/hidden-entrepreneurs-what-crowdfunding-reveals-about-startups-in-metro-america/
https://www.brookings.edu/research/hidden-entrepreneurs-what-crowdfunding-reveals-about-startups-in-metro-america/
http://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding/2019Report
http://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding/2019Report
http://www.sec.gov/smallbusiness/exemptofferings/regcrowdfunding/2019Report
http://www.legislation.gov.uk/uksi/2018/786/pdfs/uksiem_20180786_en.pdf
http://www.legislation.gov.uk/uksi/2018/786/pdfs/uksiem_20180786_en.pdf
http://www.legislation.gov.uk/uksi/2018/786/pdfs/uksiem_20180786_en.pdf
https://www.crowdfundinsider.com/2018/06/135692-germany-raises-the-equity-crowdfunding-limit-to-e8-million/
https://www.crowdfundinsider.com/2018/06/135692-germany-raises-the-equity-crowdfunding-limit-to-e8-million/
https://www.crowdfundinsider.com/2018/06/135692-germany-raises-the-equity-crowdfunding-limit-to-e8-million/


64  |   SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

and Regulation (EU) 2017/1129 of the Euro-
pean Parliament and of the Council of 14 June 
2017 on the prospectus to be published when 
securities are offered to the public or admitted 
to trading on a regulated market, and repealing 
Directive 2003/71/EC, https://eur-lex.europa.
eu/legal-content/EN/TXT/HTML/?uri=CELEX-
:32017R1129&from=EN. 

169	 See Connie Loizos, “A Quick Look at How 
Series A and Seed Rounds Have Ballooned 
in Recent Years, Fueled by Top Investors,” 
TechCrunch (Apr. 25, 2019), https://techcrunch.
com/2019/04/25/a-quick-look-at-how-fast-se-
ries-a-and-seed-rounds-have-ballooned-in-re-
cent-years-fueled-by-top-investors/.

170	 See Small Business Capital Formation Advisory 
Committee Recommendation on Regulation 
Crowdfunding (Dec. 13, 2019), https://www.
sec.gov/spotlight/sbcfac/recommendation-regu-
lation-crowdfunding.pdf. This recommendation 
was adopted by the Advisory Committee in 
FY2020 and is not included in the summary of 
FY2019 activities of the committee.

171	 See Association of Online Investment Platforms 
letter to the Commission (Jul. 5, 2019), https://
www.sec.gov/comments/s7-08-19/s70819-
5761538-186947.pdf. 

172	 See 2019 Small Business Forum Report; 2018 
Small Business Forum Report; 2017 Small 
Business Forum Report; 2016 Small Business 
Forum; and Final Report of the 2015 SEC 
Government-Business Forum on Small Business 
Capital Formation (May 2015), https://www.
sec.gov/info/smallbus/gbfor34.pdf (“2015 Small 
Business Forum Report”).

173	 See, e.g., PwC survey of CFOs, 83% of whom 
estimate spending more than $1 million on 
one-time costs associated with their IPOs. PwC 
Deals, “Considering an IPO to Fuel Your Com-
pany’s Future? Insight into the Costs of Going 
Public and Being Public” (Nov. 2017), https://
www.pwc.com/us/en/services/deals/library/cost-
of-an-ipo.html. 

174	 Id.
175	 Pitchbook, supra note 57.
176	 See “Small Public Companies” section above.
177	 President Obama’s Council on Jobs and Com-

petitiveness, “Interim Report: Taking Action, 
Building Confidence: Five Common-Sense 
Initiatives to Boost Jobs and Competitiveness” 
(Oct. 2011), http://files.jobs-council.com/job-
scouncil/files/2011/10/JobsCouncil_InterimRe-
port_Oct11.pdf. 

178	 See, e.g., Jumpstart Our Business Startups Act 
of 2012 (“JOBS Act”), Pub. L. No. 112-106, 
126 Stat. 306 (2012); Proposed Amendments 
to the Accelerated Filer and Large Accelerat-

ed Filer Definitions, Release No. 34-85814 
(May 9, 2019), https://www.sec.gov/rules/pro-
posed/2019/34-85814.pdf; Smaller Reporting 
Company Definition, Release No. 33-10513 
(June 28, 2018), https://www.sec.gov/rules/fi-
nal/2018/33-10513.pdf.

179	 See, e.g., Proposed Modernization of Regula-
tion S-K Items 101, 103, and 105, Release No. 
33-10668 (Aug. 8, 2019), https://www.sec.gov/
rules/proposed/2019/33-10668.pdf; Proposed 
Amendments to Financial Disclosures about 
Acquired and Disposed Businesses, Release No. 
33-10635 (May 3, 2019), https://www.sec.gov/
rules/proposed/2019/33-10635.pdf; FAST Act 
Modernization and Simplification of Regulation 
S-K, Release No. 33-10618 (Mar. 20, 2019), 
https://www.sec.gov/rules/final/2019/33-10618.
pdf; Disclosure Update and Simplification, 
Release No. 33-10532 (Aug. 17, 2018), https://
www.sec.gov/rules/final/2018/33-10532.pdf; 
and Proposed Financial Disclosures about 
Guarantors and Issuers of Guaranteed Securities 
and Affiliates Whose Securities Collateralize a 
Registrant’s Securities, Release No. 33-10526 
(Jul. 24, 2018), https://www.sec.gov/rules/pro-
posed/2018/33-10526.pdf.

180	 See 2019 Small Business Forum Report; 2018 
Small Business Forum Report; 2017 Small 
Business Forum Report; 2016 Small Business 
Forum Report; and 2015 Small Business Forum 
Report.

181	 https://www.sec.gov/page/small-business-capi-
tal-formation-advisory-committee. 

182	 See SEC Press Release 2019-61, “SEC An-
nounces Members of Small Business Capital 
Formation Advisory Committee” (Apr. 25, 
2019), https://www.sec.gov/news/press-re-
lease/2019-61. 

183	 https://www.sec.gov/spotlight/sbcfac/recommen-
dations-rule-3-05-and-accelerated-filer-defini-
tion.pdf. 

184	 See Office of Information and Regulatory 
Affairs, Office of Management and Bud-
get, “Fall 2019 Unified Agenda of Federal 
Regulatory and Deregulatory Long-term 
Actions by the Securities and Exchange 
Commission,” RIN 3235-AL77, https://www.
reginfo.gov/public/do/eAgendaViewRule?pu-
bId=201910&RIN=3235-AL77. 

185	 See Office of Information and Regulatory 
Affairs, Office of Management and Budget, 
“Fall 2019 Unified Agenda of Federal Reg-
ulatory and Deregulatory Long-term Ac-
tions by the Securities and Exchange Com-
mission,” RIN 3235-AM41, https://www.
reginfo.gov/public/do/eAgendaViewRule?pu-
bId=201910&RIN=3235-AM41. 

https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32017R1129&from=EN
https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32017R1129&from=EN
https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32017R1129&from=EN
https://techcrunch.com/2019/04/25/a-quick-look-at-how-fast-series-a-and-seed-rounds-have-ballooned-in-recent-years-fueled-by-top-investors/
https://techcrunch.com/2019/04/25/a-quick-look-at-how-fast-series-a-and-seed-rounds-have-ballooned-in-recent-years-fueled-by-top-investors/
https://techcrunch.com/2019/04/25/a-quick-look-at-how-fast-series-a-and-seed-rounds-have-ballooned-in-recent-years-fueled-by-top-investors/
https://techcrunch.com/2019/04/25/a-quick-look-at-how-fast-series-a-and-seed-rounds-have-ballooned-in-recent-years-fueled-by-top-investors/
https://www.sec.gov/spotlight/sbcfac/recommendation-regulation-crowdfunding.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-regulation-crowdfunding.pdf
https://www.sec.gov/spotlight/sbcfac/recommendation-regulation-crowdfunding.pdf
https://www.sec.gov/comments/s7-08-19/s70819-5761538-186947.pdf
https://www.sec.gov/comments/s7-08-19/s70819-5761538-186947.pdf
https://www.sec.gov/comments/s7-08-19/s70819-5761538-186947.pdf
https://www.sec.gov/info/smallbus/gbfor34.pdf
https://www.sec.gov/info/smallbus/gbfor34.pdf
https://www.pwc.com/us/en/services/deals/library/cost-of-an-ipo.html
https://www.pwc.com/us/en/services/deals/library/cost-of-an-ipo.html
https://www.pwc.com/us/en/services/deals/library/cost-of-an-ipo.html
http://files.jobs-council.com/jobscouncil/files/2011/10/JobsCouncil_InterimReport_Oct11.pdf
http://files.jobs-council.com/jobscouncil/files/2011/10/JobsCouncil_InterimReport_Oct11.pdf
http://files.jobs-council.com/jobscouncil/files/2011/10/JobsCouncil_InterimReport_Oct11.pdf
https://www.sec.gov/rules/proposed/2019/34-85814.pdf
https://www.sec.gov/rules/proposed/2019/34-85814.pdf
https://www.sec.gov/rules/final/2018/33-10513.pdf
https://www.sec.gov/rules/final/2018/33-10513.pdf
https://www.sec.gov/rules/proposed/2019/33-10668.pdf
https://www.sec.gov/rules/proposed/2019/33-10668.pdf
https://www.sec.gov/rules/proposed/2019/33-10635.pdf
https://www.sec.gov/rules/proposed/2019/33-10635.pdf
https://www.sec.gov/rules/final/2019/33-10618.pdf
https://www.sec.gov/rules/final/2019/33-10618.pdf
https://www.sec.gov/rules/final/2018/33-10532.pdf
https://www.sec.gov/rules/final/2018/33-10532.pdf
https://www.sec.gov/rules/proposed/2018/33-10526.pdf
https://www.sec.gov/rules/proposed/2018/33-10526.pdf
https://www.sec.gov/page/small-business-capital-formation-advisory-committee
https://www.sec.gov/page/small-business-capital-formation-advisory-committee
https://www.sec.gov/news/press-release/2019-61
https://www.sec.gov/news/press-release/2019-61
https://www.sec.gov/spotlight/sbcfac/recommendations-rule-3-05-and-accelerated-filer-definition.pdf
https://www.sec.gov/spotlight/sbcfac/recommendations-rule-3-05-and-accelerated-filer-definition.pdf
https://www.sec.gov/spotlight/sbcfac/recommendations-rule-3-05-and-accelerated-filer-definition.pdf
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AL77
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AL77
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AL77
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AM41
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AM41
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201910&RIN=3235-AM41




OFFICE OF THE  

ADVOCATE FOR SMALL  

BUSINESS CAPITAL  

FORMATION

U.S. Securities and  

Exchange Commission

100 F Street NE

Washington, DC 20549

202.551.5407

www.sec.gov/oasb

[email protected]