By Anne Sherry, J.D.
In opening remarks at the SEC’s Small Business Forum, Martha Miller, the Advocate for Small Business Capital Formation, spoke on the need to rethink rather than remain mired in the same ideas about fixing capital-raising policy. Miller said that unlike a static fish tank, the world of entrepreneurship is more like a vast ocean subject to continuous change. The Small Business Forum is meant to hear from a group of people to spark ideas and allow for rethinking of capital formation.
Miller, who served as the Director of the Office of the Advocate for Small Business Capital Formation since its creation three years ago, announced recently that she will be leaving the SEC at the end of April. In her remarks, she said she has “learned more from engaging with people who think differently than me than those with whom I have shared perspectives.”
As an example of the constant change facing entrepreneurs, Miller noted that travel used to be a key part of capital raising, but the COVID-19 pandemic changed that. Conversations soon turned to how the world was adapting to working remotely and how the movement to address racial injustice would affect capital-raising policy. By last year’s Forum, conversations had shifted towards how to evolve going forward, rather than getting back to a pre-pandemic “normal.” Similarly, Miller said of the near future, “Whether it be the rise of Web3, new forms of financing, changing investor expectations, or illumination of social inequities, I have no doubt that the Forum will continue to be a critical venue to explore the changing tides and how we, as policymakers, should correspondingly evolve in our thinking.”
Miller said that this perhaps obvious point about constant change underscored her call to action that entrepreneurs and other capital-raising participants continually rethink. As an example, she said that many people accept the efficient markets hypothesis, suggesting that if a company is a “good one,” capital will find it, and conversely that companies struggling to raise money are “bad.” Data and experience show that often who the entrepreneur is—in terms of personal network, location, education, and demographic group—is the first hurdle to clear before investors learn what the entrepreneur is building and whether they will invest. “Many founders never get in the room to tell their story to investors because of who they are,” Miller said. “If you haven’t witnessed the exclusivity of capital raising, it’s easy to buy into the meritocracy narrative that good money will find good companies if you don’t pause to rethink. The meritocracy narrative is just not true, at least not for those who don’t ‘look the part.’”
She closed by calling on Forum attendees to listen closely when speakers offer something new that challenges an existing worldview. “If you find a puzzle piece that looks out of place, rather than casting it aside, ponder whether there are others like it, whether the complete puzzle may be bigger than the picture you’ve had to date. That is the beauty of the Forum: you will stretch, learn, and grow at the same time you are actively influencing policy,” Miller said.