By John Filar Atwood
There has been a clear shift and increase in funding through the exempt offering framework used by small businesses, with exempt offerings raising $2.9 trillion in 2018, according to Martha Miller, SEC Advocate for Small Business Capital Formation. In remarks at a recent conference for entrepreneurs, she noted that the amount raised in exempt offerings by small businesses last year was $1.5 trillion more than the amount generated by registered IPOs and public offerings.
Small businesses as big businesses. Taken as a whole, she said, small businesses are big business. They create a majority of net new jobs in the country, she noted, and can create wealth for those who invest and support the growth of promising companies along their path to success.
Miller said that this view informs her office’s approach to advocating for small businesses and their investors to foster better access to capital markets. Among other things, she said, it is her mission to strengthen the voice of small business within the SEC and in the broader regulatory landscape.
She is aware that small businesses face significant challenges in accessing capital. Miller noted that four out of five entrepreneurs do not access bank loans or venture capital in funding their companies. More than two-thirds of small business founders rely instead on personal or family savings for startup capital. In short, she said, there is a gap between the role of small businesses in creating jobs, innovation and wealth, and the accessibility of capital to do so.
Role of the Office of the Advocate for Small Business Capital Formation. Miller said that her office was formed to help address that gap and to be the voice of small business at the SEC. To do that, she and her staff start with the entire marketplace as the initial customer and build solutions that work for the broader ecosystem, she stated. This requires the staff to take the pulse of diverse, representative groups of thought leaders with a wide range of experience, locations and size.
Miller said her office uses three key channels of communications: inbound inquiries, connections to thought leaders, and outreach to target customers. The office is only seven months old, she noted, but has operationalized quickly. Of primary interest to the office is quality resolution of issues, engaging new voices and perspectives, bringing small business perspectives to the rulemaking process early and often, and producing practical, solution-oriented proposals for policy change, Miller said.
In her view, it is critical for her office to get input and buy-in through feedback. Rather than just telling people what the plans are for her office, Miller said the staff asks people what is the largest problem that her office can help solve. The answers allow the staff to hone and sometimes redirect its focus based upon the expressed customer need, she noted.
Miller said that her office is incrementally adapting rather than aiming for transformational adaptation out of the gate. In addition, as a small scaling office, she and her staff are aware of their particular niche in small business capital formation and are willing to help others navigate to the right resources, whether they are provided by another office at the SEC or by a separate agency, she concluded.