SmallBiz Essentials: Did You Know the SEC Has a Small Business Advocacy Office?

Welcome to the SEC Small Business Advocacy Office’s new blog where we’ll share some fundamental capital-raising concepts.

The SEC’s Office of the Advocate for Small Business Capital Formation has a long name, but the team thinks it comes with a big mission. To understand what we in that office do, it helps to understand the role of the SEC as a whole. The SEC has a three-part mission: (1) protect investors, (2) maintain fair, orderly, and efficient markets; and (3) facilitate capital formation.

Created by Congress as an independent office, we opened our doors in 2019 with the mission to advocate within the SEC and externally for practical solutions to challenges faced by small businesses and their investors in raising capital. For us, “small business” includes everything from very small startups to smaller public companies with up to $250M in market cap—a wide range. 

What Do We Do?  

Our work consists of two intertwined streams: outreach and policy. Part of our outreach work entails “going on tour” and engaging with groups across the country—whether virtually or in-person—to hear their feedback on capital formation. We talk to small businesses and their investors, as well as third-party organizations that support these businesses.

What we learn from those with “boots on the ground” informs another part of our outreach work: our educational resources. These online tools are designed to assist not only small businesses and their investors on their capital-raising journey, but also parties that work with them—advisors, accelerators, and more. The tools provide brief summaries—like a study guide—to help familiarize users with the broader capital-raising framework and hone questions they may have about their particular circumstances.

Our outreach efforts also inform the policy aspect of our advocacy efforts. The office monitors SEC rules to see how they are working and ways they may be improved, making sure the voices of small businesses and their investors are reflected in the SEC’s rulemaking process. In addition, we make recommendations to Congress and the Commission based on information we learn from engaging with our stakeholders.  

Have You Checked Out Our Annual Report?  

We are required to provide an Annual Report to Congress that includes our Office’s policy recommendations. The Report is designed to be a useful and digestible—but comprehensive—snapshot of the state of capital formation each year, reflecting SEC data as well as third-party data on capital-raising trends.

The Report digs into what’s happening across company life cycles, from early-stage startups pursuing exempt offerings, to mature and later-stage companies, as well as companies considering an IPO and small public companies, including whether and how the public markets are serving or could better serve smaller companies.

Based on that data—and the feedback we gather throughout the year—the Office makes a series of policy recommendations to the Commission and to Congress.

What educational resources do we offer?

We structure our resources to cater to varying levels of familiarity with securities laws, but they are not intended to replace quality advisors or the actual text of the rules and laws they highlight. Our tools are designed to provide a high-level summary of issues while allowing users to find and dig deeper into more complex resources.

We offer a Roadmap of funding options—from savings to grants to loans to capital from investors, with links to other resources. Similarly, our Glossary helps decipher the often-confusing language of capital raising. Each term in the Glossary provides a high-level definition but also links to other resources on the topic.

Our suite of Building Blocks, a series of one-pagers, offers overviews of common topics or questions that arise. These include topics like “How do I know when I am  ready to raise capital from investors?” and “What does it mean to be a public company? ”

For those trying to decipher the capital-raising framework, our interactive Navigator tool is a great first step. It asks a series of basic questions to help identify what type of offerings might be more relevant based on the company’s needs. Companies are rarely jumping straight from an initial bank loan to an IPO, so we try to offer a way to parse through the various exempt pathways that companies can use to raise money from investors.

We’ve also created Capital Trends maps, which provide data on where capital is being raised across the country under various offering pathways, and a variety of short videos summarizing proposed and adopted capital-raising rules and their impact on small businesses, exploring resources for small businesses and their investors, or sharing engaging stories of successes and challenges across the small business ecosystem.  

Find all of these resources and more on sec.gov by clicking on Small Businesses on the top right corner of the page.