Empowering Entrepreneurs: Removing Barriers to Capital Access for Small... (EventID=115289)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinanci... Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Wednesday, February 8, 2023, at 2:00 p.m. (ET) Subcommittee on Capital Markets Chair Wagner and Ranking Member Sherman will host a hearing entitled, “Empowering Entrepreneurs: Removing Barriers to Capital Access for Small Businesses." ___________________________________ Witnesses for this one-panel hearing will be: • Mac Conwell, Founder and Managing Partner, RareBreed Ventures • Deborah Gladney, Co-Founder, WorkTorch • Doug Ellenoff, Partner, Ellenoff Grossman & Schole LLP • Darcy Howe, Founder and Managing Director, KCRise Fund ___________________________________ The JOBS Act’s Efforts to Empower Small Businesses and Entrepreneurs Nearly eleven years ago, a divided Congress passed the Jumpstart Our Business Startups Act, or JOBS Act of 2012, to facilitate capital formation for small companies and entrepreneurs. To encourage more small-cap IPOs, Title I created a new “Emerging Growth Company” (EGC) designation and an IPO “on ramp” for companies to gradually begin complying with public company regulatory requirements. Title II eased the process by which startups market their securities by extending the Rule 506 offering exemption to securities marketed through a general solicitation or advertising if the purchaser is an accredited investor. Title III allowed startups to raise funds through a new equity crowdfunding exemption. Title IV required the SEC to add a class of securities that would be exempt from registration for offerings up to $50 million. Titles V and VI raised the thresholds for mandatory registration as a public company so private companies would not be forced to go public until they were ready. Thanks to the bipartisan JOBS Act, small businesses and entrepreneurs can raise capital more easily than ever before. The JOBS Act’s updates to offering exemptions and the new crowdfunding exemption have opened more pathways for companies and entrepreneurs to raise capital, and companies are taking advantage of these enhancements. For example, from July 1, 2021 to June 30, 2022, issuers relying on exemptions in Rule 506 raised more than $2.3 trillion, compared to the $126 billion raised in IPOs in the same period. In addition, the number and size of Regulation Crowdfunding offerings continues to increase, creating new jobs and benefiting communities outside traditional capital raising hubs. In fact, as of June 2022, 160,000 workers were employed by businesses that raised funds under Regulation Crowdfunding. These statistics underscore the importance of the private markets as a source of capital for millions American small businesses that are not publicly traded companies. Despite the JOBS Act’s success, regulatory and other barriers continue to impede small business growth, which hinders the United States’ competitiveness at home and abroad. These burdens negatively impact smaller businesses, which make up 99 percent of all enterprises in the U.S. and employ almost half of our workforce. Prior to the COVID-19 pandemic, small businesses were more successful at obtaining loans, lines of credits, and cash advances with 81% of small-business applicants being approved for at least some of the funds for which they applied. However, after March 1, 2020, only 70 percent of small businesses received partial approval for funds. In 2021, approval rates dropped further to 68 percent.7 The percentage of small businesses that experienced financial hardships increased from 66 percent to 80 percent between 2019 and 2020. Committee Republicans believe that entrepreneurs and founders should raise money with as little friction as possible. As a result, Congress and regulators must adopt common sense, forward-thinking policies that reduce barriers and increase access to capital raising opportunities for American entrepreneurs. By providing companies and entrepreneurs options to raise capital, we will increase American competitiveness, economic growth, and job creation. Legislative Proposals • H.R. ____, the “Improving Crowdfunding Opportunities Act” This bill preempts state regulation of secondary transactions involving crowdfunding vehicles and clarifies legal liability for crowdfunding portals. It also increases the allowable aggregate amount companies can raise in any 12-month period from $5 million to $10 million and allows all non-accredited investors to invest up to 10% of the greater of their annual income or net worth. This bill also allows investment companies to participate in crowdfunding offerings and increases the offering size threshold under which an issuer may meet its financial statement requirements.... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=410112