U.S. SECURITIES AND EXCHANGE COMMISSION

ANNUAL REPORT FOR FISCAL YEAR 2021

Office of the Advocate for 

Small Business 

Capital Formation
ABOUT THIS REPORT + ACKNOWLEDGEMENTS

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

for Fiscal Year 2021 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 our talented and 

passionate colleagues across the agency. The Office owes special thanks to our colleagues 

who provided resources for this Report, including the Division of Economic and Risk 

Analysis for providing 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, Vladimir Ivanov, Andy Kim, Angela Huang, Olga Itenberg, Rey-Er Lee, Wei Liu, 

Richard Oliver, Chris Onrubia, Zehra Sikandar, and Huaiqiang (John) Zheng.
ANNUAL REPORT: FISCAL YEAR 2021 | i

Message from the Advocate

This has been a year of challenges as well as growth for so many in the 

capital raising ecosystem. Arguably the entire world paid more attention 

to the intricacies of innovation than ever before, listening to every update 

on vaccine trials, approval processes, manufacturing scale, and distribution 

logistics. We all had a proverbial magnifying glass in hand, examining 

innovation at each step of the way. It is for that reason that the visual theme 

of this year’s report is “innovation up close,” presenting an up close view 

of the intricacies of the technologies, developments, and growth happening 

around us thanks to entrepreneurs and investors working together.

More broadly, in 2021 we saw the increased attention on racial equity creating ripple effects in capital 

formation; however, much more work remains. The past year was also a banner year for capital raising, 

whether looking at the venture capital dollars invested into growth companies, the exit activity of later 

stage companies into the public markets, or the reinvestment of investors’ returns put back into new funds 

that will support the companies of tomorrow. However, those headlines only tell part of the story: that of 

the companies who beat the odds and make the headlines. For every one of those, there are countless other 

entrepreneurs who are struggling to navigate the inside baseball world of capital raising, to bridge outside 

of their personal networks to sophisticated investors, to build a first-time fund in the middle of the country, 

or to determine which exit path makes the most sense for their company. We are acutely aware of the 

challenges these entrepreneurs face, staring at a system that holds promise trapped behind closed doors.

In 2021 we were thrilled to collaborate with Chair Gensler and Commissioners Peirce, Roisman, Lee, and 

Crenshaw on outreach events and policy matters. Looking ahead to 2022, we will continue to advocate 

for solutions to improve the capital raising opportunities for the dreamers, builders, doers, creators, and 

investors who you don’t see in the headlines today, but whose names we hope you read about in the future. 

We look forward to collaborating with Congress, the Commission, and our many partners on pragmatic 

solutions to improve the capital raising ecosystem for all.

Finally, to the readers of this report, I want to say thank you. Thank you for caring about the opportunities 

for entrepreneurs to partner with investors to bring innovations to market. Your commitment to supporting 

capital raising opportunities is what makes our team’s advocacy work so impactful, and we are grateful for 

your partnership and support.

MARTHA LEGG MILLER

Director

Office of the Advocate for Small Business 

Capital Formation
Office of the Advocate for

Small Business Capital Formation

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

The deployment of 

productive capital by 

informed investors to 

create economic growth

From start-ups to small cap, 

“small” is relative for the Office, 

which supports emerging, 

privately-held companies up to 

small public companies

Breaking Down Our Long Title
ANNUAL REPORT: FISCAL YEAR 2021 | iii

Contents

ABOUT THE OFFICE 111

HIGHLIGHTS FROM FISCAL YEAR 2021 114

STATE OF SMALL BUSINESS CAPITAL FORMATION . .

Small and Emerging Businesses 20

Mature and Later-Stage Businesses 26

Small Public Companies 33

Women Business Owners and Investors .

Minority Business Owners and Investors 48

Natural Disaster Areas 54

Rural Communities 56

POLICY RECOMMENDATIONS 61

Entrepreneurs need support navigating complex securities laws 61

Founders need bridges from their personal networks to savvy investors 63

Diversifying capital allocators requires supporting emerging fund managers .

Smaller public companies are integral to a vibrant public market .

SMALL BUSINESS CAPITAL FORMATION ADVISORY COMMITTEE 

FY2021 SUMMARY 170

ENDNOTES . 

ANNUAL REPORT: FISCAL YEAR 2021 | 1

T

he Office advocates for solutions to address challenges faced by small businesses and their 

investors raising and deploying capital. “Small business” for the Office spans from early-stage 

start-ups raising seed capital, to later-stage private companies whose founders and investors are 

seeking liquidity in the public markets, all the way to smaller public companies. Congress established the Office via the bipartisan SEC Small Business Advocate Act of 2016 as an independent office 

within the U.S. Securities and Exchange Commission (SEC) that reports to the entire Commission as 

well as to multiple committees of Congress.

The Office approaches its advocacy mission by: 

§	Engaging with small businesses and their investors to understand their most pressing capital 

raising issues; 

§	Identifying unique capital raising challenges faced by minority-owned, women-owned, rural, and 

natural disaster-affected small businesses and their investors; 

§	Analyzing the potential impact of policy changes likely to significantly affect small businesses and 

their investors; and 

§	Advocating to Congress and the Commission for policy changes.

Mission

We champion pragmatic solutions so that small businesses—from startups to smaller public 

companies—and their investors can build great companies together using our capital markets. 

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.

§	INCLUSIVITY — We encourage people to speak openly and contribute authentically to 

facilitate greater trust and collaboration.

§	PRAGMATISM — We approach problems with a solution-oriented mindset to make 

practical recommendations.

§	EFFICIENCY — We operate like a lean start-up, maximizing resources and focusing activities 

where the Office can have a meaningful impact.

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

JENNY RIEGEL

Policy Manager

MALIKA SULLIVAN

Executive Assistant

MARTHA LEGG 

MILLER

Director

JULIE ZELMAN 

DAVIS

Senior Special Counsel

AMY REISCHAUER

Strategic Engagement 

Advisor

COLIN A. CALE

Attorney

JESSICA W

MCKINNEY

Special Counsel

SEBASTIAN GOMEZ 

ABERO

Deputy Director

Our Advocacy Team

SARAH R. KENYON

Capital Formation Analyst

JENNY J. CHO

Special Counsel

TODD VANLAERE

Law Clerk
ANNUAL REPORT: FISCAL YEAR 2021 | 3

Strategic Plan for 2021-2025

Earlier this year, our Office developed a 2021-2025 Strategic Plan to guide our team’s decisions and 

align actions with mission execution. The Office made the plan publicly available in furtherance 

of our core values, outlining four key goals, with strategies and initiatives underpinning each. A 

summary of the contents of the strategic plan is included below:

GOAL 1

Engage with small businesses and their investors to solicit views on relevant 

capital raising issues

Strategy 1.1: Conduct outreach with diverse audiences.

Strategy 1.2: Host the SEC’s annual Small Business Forum.

GOAL 2

Educate small businesses and their investors about capital raising rules to 

reduce barriers to entry and increase compliance

Strategy 2.1: Develop accessible educational materials about capital raising.

Strategy 2.2: Optimize content and delivery based upon changes in market needs 

and preferences.

GOAL 3

Collaborate on pragmatic policy solutions to address capital raising 

challenges faced by small businesses and their investors

Strategy 3.1: Assist small businesses and their investors in resolving issues encountered 

with the SEC or self-regulatory organizations (SRO).

Strategy 3.2: Analyze data on capital raising to identify trends and gaps in funding, 

including for underrepresented and rural founders, and in areas affected by 

natural disasters.

Strategy 3.3: Promote practical policy solutions for Commission or Congressional action 

to address capital raising challenges.

Strategy 3.4: Deliver annual reports to Congress and the Commission that advocate for 

capital raising solutions.

Strategy 3.5: Support the SEC’s Small Business Capital Formation Advisory Committee 

in providing advice to the Commission on capital raising policy.

GOAL 4

Empower a mission-driven team to leverage varied perspectives to solve the 

complex problems of an evolving and increasingly diverse capital market

Strategy 4.1: Advance diversity, equity, and inclusion (DE&I) throughout 

Office operations.

Strategy 4.2: Foster a culture of connectivity, collegiality, and collaboration among 

Office staff.
4 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Hosted our second 

annual Capital Call 

to discuss what’s 

happening with capital 

raising from startup to 

small cap, taking live 

questions from the 

audience on our annual 

report to Congress

Highlights from FY2021

While we look forward to the day we can gather safely in person, we have continued to seek opportunities to engage with diverse audiences across the small business ecosystem through virtual events 

and speaking engagements to share information about our Office’s products, programs, and services 

and to hear from small businesses, their investors, and other thought leaders in the market. Some of 

the events in which we have engaged this year include:

Co-hosted a panel 

of women of color 

entrepreneurs and 

investors discussing 

challenges, successes, 

and ways to improve 

access to capital for 

minority and women 

entrepreneurs with the 

Atlanta and Los Angeles 

regional offices

Gathered feedback 

from the Coalition to 

Advance Arkansas 

Entrepreneurship on 

increasing early-stage 

financing activity in 

the state

Launched three-part 

series on diversifying 

opportunity in venture 

capital, exploring the 

role emerging funds 

and their investors 

play in funding underestimated founders 

and empowering a new 

generation of investment decision makers

Q1 FY2021 Q2 FY2021

Virtual panel on 

late-stage private 

and smaller public 

companies focusing 

on the impact of 

COVID-19 on smaller 

businesses and the 

disparate impacts 

on women-owned, 

minority-owned, and 

rural businesses

Joined Oregon RAIN 

investors to discuss 

recent changes to the 

accredited investor 

definition

During National 

Entrepreneurship 

Week, participated in 

a panel on how federal 

agencies are addressing 

the complex issues 

COVID-19 brings to 

entrepreneurship in 

communities of all sizes

Engaged with venture 

capital, private equity, 

and corporate and 

angel investors at the 

Southern Capital Forum, 

discussing access to 

capital in the Southeast
ANNUAL REPORT: FISCAL YEAR 2021 | 5

Led the SEC’s 40th 

annual Small Business 

Forum over four days, 

featuring the topics 

Finding Your First 

Dollars, Doing Your 

Diligence, Diversifying 

Capital Allocators, and 

Small Cap Insights

Presented at Kenan 

Institute’s Frontiers 

of Entrepreneurship 

Conference on unique 

challenges facing 

entrepreneurs from 

diverse backgrounds 

in accessing resources, 

expertise, and funding

Q3 FY2021 Q4 FY2021

Televised interview 

with Faith Bautista of 

the National Diversity 

Coalition on Spectrum 

TV: Owning a Piece 

of America, focusing 

on access to capital 

and small business 

creation in low-and 

moderate-income and 

minority communities 

in Southern California

Partnered with our 

New York and San 

Francisco regional 

offices on a multi-panel 

event focusing on Tech 

Entrepreneurs of Color: 

Taking the Pulse of 

Capital Raising in New 

York and California

Hosted a Spanishlanguage “charla” event 

with the University 

of Puerto Rico and 

local entrepreneurs 

and investors to share 

educational resources 

and learn about capital 

raising challenges

Joined the SEC’s 

Office of Minority 

and Women Inclusion 

and Office of Investor 

Education and 

Advocacy to share 

resources with the 

Minority Business 

Development Agency’s 

Enterprising Women 

of Color program

Spoke at the Women 

of Color and Capital 

Conference, convening 

diverse women 

entrepreneurs and 

professionals to learn 

about money, finance, 

capital, and investing
6 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Outreach and Engagement

Through our outreach events, we engage with small businesses and their investors from around 

the country to hear their perspectives on issues facing the small business ecosystem, from regulatory 

policy, to changing trends in capital raising, to unique challenges and opportunities of demographic 

groups and different geographic regions. The insight we gain at our public events from small 

business ecosystem participants provides timely, practical feedback to inform the Commission’s 

policymaking.

Our outreach engages speakers and audiences from

coast to coast

EVENT SPEAKERS EVENT CO-HOSTS AND PARTNERS ADVISORY COMMITTEE MEMBERS
ANNUAL REPORT: FISCAL YEAR 2021 | 7

Monday, May 24

Finding Your First Dollars

Navigating Your Way to 

Raise Early Rounds

Tuesday, May 25

Doing Your Diligence

How Savvy Early-Stage Investors 

Build Diversified Portfolios

Wednesday, May 26

Diversifying Capital Allocators

Tools for Emerging and Smaller 

Funds and Their Managers

Thursday, May 27

Small Cap Insights

Perspectives on Smaller 

Public Companies

40th Small Business Forum

The SEC’s annual Small Business Forum is a unique event where members of the public and private 

sectors gather to provide feedback to improve capital raising policy.1 The Forum covers a broad range 

of issues affecting small businesses and their investors, from early-stage entrepreneurial ventures to 

smaller public companies. 

This year marked the 40th Forum, which the Office hosted virtually over four days from May 24 

to May 27, 2021. Each day featured a different topic, with speakers highlighting success stories, as 

well as areas for policy improvement. At the end of each day’s session, participants prioritized policy 

recommendations on that topic to be submitted to the SEC and to Congress. Video archives of each 

day’s events are available in the Forum video gallery. 

On September 27, 2021, the Office delivered the 2021 Forum Report to Congress, which summarizes 

the Forum proceedings, including the recommendations developed by participants for changes needed 

to the capital raising framework and the Commission’s responses to the recommendations.
8 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Educational Content

We hear from many people in the small business ecosystem struggling to navigate the complex capital 

raising framework.2 As part of our efforts to make pathways to raising capital more accessible to small 

businesses and their investors, we have developed a number of digital resources. 

Cutting Through the Jargon

This year, we launched a curated glossary of key terminology used in capital raising, from seed capital 

through later-stage deals. The full glossary is on the new Capital Raising hub online, with a few 

highlighted terms below.

Dilution

[noun] | dih-loo-shuhn |

Dilution occurs when a company issues new 

shares of stock, leaving the existing stockholders 

with a smaller percentage ownership interest 

in the company

Diversification

[noun] | duh-vur-suh-fuh-kay-shuhn |

Diversification is an investment strategy to reduce 

the impact of any single loss by allocating 

investments across multiple asset classes, 

categories, or companies. Investors in early-stage

companies often use portfolio diversification, 

whether through pooled investment vehicles or 

as an individual angel investor

Liquidity

[noun] | li-kwid-i-tee |

Liquidity refers to how easily or quickly a security 

can be bought or sold in a secondary market

without significantly impacting its trading price

Securities of private companies are generally 

illiquid assets because there are typically fewer 

buyers and sellers, and resale restrictions 

pursuant to Securities Act Rule 144 may apply to 

securities acquired in an exempt offering

Portfolio Company

[noun] | pawrt-foh-lee-oh kuhm-puh-nee |

A portfolio company is an operating company 

that has received an investment from a fund

A portfolio company generally represents one 

of several investments for a fund (for example, 

a venture capital fund or a private equity fund)

Series Round

[noun] | seer-eez round |

Companies typically raise money from investors 

in a series of funding rounds, in which investors, 

often including venture capital funds, provide 

money in exchange for preferred stock

Series rounds may also be broken into earlystage (Series A and B) and late-stage (Series C+)

While the use of proceeds varies, commonly:

(1) Series A often supports a company 

with an initial customer base and proof 

of concept

(2) Series B often supports a company 

scaling production and expanding 

customer base

(3) Series C often supports companies 

optimizing operations in preparation 

of a future initial public offering
ANNUAL REPORT: FISCAL YEAR 2021 | 9

Interactive Tools on the New Capital Raising Hub

The interactive Navigator is designed to 

help users narrow down their options 

for how to raise capital based on their 

expressed needs

We recently launched a new suite of 

content for entrepreneurs and their 

investors on sec.gov/capitalraisin

The Capital Trends maps allow users to 

engage with data on where capital is 

being raised across the country

ANNUAL REPORT: FISCAL YEAR 2021 | 11

State of Small Business 

Capital Formation

Initial Public 

Offerings

$317B

($225M median)

Rule 506(c)

$124B

($850,000 median)

Rule 506(b)

Private Placements

$1.9T

($1.8M median

Other Exempt 

Offerings4

$1.3T

Regulation A

$1.7B

($2.3M median

Crowdfunding

$174M

($130,000 median)

Rule 504

$313M

($160,000 median)

Other Registered

Offerings

$1.4T

($350M median)

What regulatory pathways are companies using to 

raise capital?3

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. Unless otherwise indicated, the data 

period utilized for DERA data is July 1, 2020 to June 30, 2021. Using data, we can better identify what 

tools, strategies, and approaches would be most helpful in crafting policy solutions.
12 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What pathways are available to raise capital from investors?

EXEMPT OFFERINGS

Offerings conducted pursuant to an exemption from registration are often referred to as exempt offerings. 

There are multiple exemptions available for small businesses looking to raise capital from investors.

Rule 506(b) Private Placements allow companies to raise unlimited 

capital from investors with whom the company has a relationship 

and who meet certain wealth thresholds or have certain professional 

credentials. A company cannot use general solicitation in a 506(b)

private placement

5

Rule 506(c) General Solicitation Offerings allow companies to 

raise unlimited capital by broadly soliciting investors who meet 

certain wealth thresholds or have certain professional credentials

6

Rule 504 Limited Offerings allow companies to raise up to $10 

million in a 12-month period, in many cases from investors with 

whom the company has a relationship

7

Regulation Crowdfunding Offerings allow eligible companies to 

raise up to $5 million in investment capital in a 12-month period 

from investors online via a registered funding portal

8

Intrastate Offerings allow companies to raise capital within a 

single state according to state law. Many states limit the offering

to between $1 million to $5 million in a 12-month period

9

Rule 506(b) Private 

Placements

Rule 506(c) General 

Solicitation Offerings

Rule 504

Limited Offerings

Regulation 

Crowdfunding

Intrastate 

Offerings
ANNUAL REPORT: FISCAL YEAR 2021 | 13

REGISTERED PUBLIC OFFERINGS 

A registered public offering is commonly used to describe an offer and sale of securities that has 

been registered under the Securities Act. Companies must file a registration statement with the SEC 

and may not sell the securities until the SEC declares the registration statement effective.

In a stable world, it’s best to be data-driven. In a changing world, it’s

better to be data-informed. Data can reveal patterns from the past. I

takes judgment to predict how those patterns will evolve in the future

Data shouldn’t guide decisions. They should inform decision

 ADAM GRANT13

“

Regulation A Offerings (sometimes called a “mini-IPO”) allow 

eligible companies to raise up to $20 million in a 12-month period in 

a Tier 1 offering and up to $75 million in a 12-month period in a Tier 

2 offering through a process similar to, but less extensive than, a 

registered offering

10

Registered Offerings allow companies to raise unlimited capital 

through initial public offerings or secondary offerings using a 

registration statement filed with the SEC

11

Initial Public Offerings provide an initial pathway for companies to 

raise unlimited capital from the general public through a registered 

offering. After its IPO, the company will be a public company with

ongoing public reporting requirements

12

Regulation A

“Mini-IPO”

Registered 

Offering

Initial Public 

Offering (IPO)
Where are companies raising capital?14

The following maps illustrate the concentration of estimated total capital raised under various offering 

types by issuers that report a primary location in the U.S., with the number of offerings conducted 

indicated on each state.

AK

19

AL

245

AR

139

AZ

483

CA

6077

CO

1080

DC

232

FL

1536

DE

497

GA

632

HI

33

ID

123

IL

1102

IN

239

KS

138

KY

115

LA

86

ME

87

MD

505

MI

335

MN

391

MO

224

MS

37

MT

62

NC

672

ND

39

NE

60

NH

62

NM

57

NJ

603 NV

300

NY

5212

OH

451

OK

93

OR

298

PA

739

SC

167

RI

69

CT

588

MA

1654

SD

45

TN

286

TX

2859

UT

1628 VA

591

VT

40

WA

3722

WI

207

WV

12

WY

149

PR

58

VI

4

IA

96

GU

0

Regulation D

NONE LESS THAN $500,000 $500,000 - $1 MILLION $1 MILLION - $5 MILLION OVER $5 MILLION

Regulation 

Crowdfunding

AK

0

AL

2

AR

0

AZ

6

CA

115

CO

12

DC

2

FL

34

DE

6

GA

11

HI

2

ID

6

IL

10

IN

5

KS

2

KY

3

LA

1

ME

1

MD

7

MI

8

MN

3

MO

1

MS

0

MT

2

NC

8

ND

0

NE

0

NH

5

NM

4

NJ

12 NV

6

NY

62

OH

21

OK

0

OR

6

PA

43

SC

6

RI

1

CT

5

MA

40

SD

0

TN

6

TX

30

UT

5 VA

6

VT

2

WA

12

WI

2

WV

0

WY

1

PR

2

VI

0

IA

0

GU

0

NONE LESS THAN $1 BILLION $1 BILLION - $5 BILLION $5 BILLION - $20 BILLION OVER $20 BILLION
Regulation A

Registered 

Offerings

AK

0

AL

0

AR

0

AZ

5

CA

48

CO

4

DC

6

FL

23

DE

1

GA

4

HI

1

ID

1

IL

2

IN

0

KS

0

KY

1

LA

0

ME

0

MD

0

MI

3

MN

1

MO

0

MS

0

MT

0

NC

1

ND

1

NE

1

NH

0

NM

0

NJ

4 NV

14

NY

59

OH

2

OK

0

OR

1

PA

2

SC

0

RI

0

CT

4

MA

1

SD

0

TN

1

TX

9

UT

1 VA

3

VT

0

WA

2

WI

0

WV

0

WY

2

PR

0

VI

0

IA

0

GU

0

AK

0

AL

8

AR

6

AZ

32

CA

613

CO

66

DC

22

FL

137

DE

29

GA

76

HI

0

ID

1

IL

109

IN

42

KS

4

KY

5

LA

10

ME

3

MD

41

MI

53

MN

50

MO

31

MS

8

MT

1

NC

98

ND

0

NE

17

NH

5

NM

7

NJ

86 NV

44

NY

527

OH

50

OK

16

OR

5

PA

102

SC

2

RI

11

CT

54

MA

189

SD

1

TN

32

TX

247

UT

19 VA

51

VT

1

WA

59

WI

9

WV

2

WY

3

PR

1

VI

0

IA

5

GU

0

NONE LESS THAN $5 MILLION $5 MILLION - $20 MILLION $20 MILLION - $75 MILLION OVER $75 MILLION

NONE LESS THAN $1 BILLION $1 BILLION - $5 BILLION $5 BILLION - $20 BILLION OVER $20 BILLION
16 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

REGISTERED OFFERINGS REGULATION D REGULATION A

How are different industries using the top 3 offering pathways to 

raise capital (excluding pooled funds)?15

What is happening in Regulation Crowdfunding? 

2020 was a record year for crowdfunding

1,151

offerings, up 61% 

from the prior year16

$232.9M

in capital 

commitments, up 86% 

from the prior year17

64%

average success 

rate for campaigns18

40%

of founders were 

women or minorities19

The number of crowdfunding offerings has increased over time

20

150

125

100

75

50

25

0

Monthly Number of New Form C Filings

7/19

8/19

9/19

10/19

11/19

12/19

1/20

2/20

3/20

4/20

5/20

6/20

7/20

8/20

9/20

10/20

11/20

12/20

1/21

2/21

3/21

4/21

5/21

6/21

$6B

$600K

$92B

$183M

$325M

$109M

$82M

$755M

$155M

BANKING AND 

FINANCIAL SERVICES

TECHNOLOGY

HEALTH CARE

ENERGY

MANUFACTURING

REAL ESTATE

BUSINESS SERVICES

HOSPITALITY, RETAILING, 

RESTAURANTS

$525B

$298B

$130B

$132B

$133B

$86B

$97B

$57B

$49B

$41B

$41M

$38B

$3B

$48B

$3B
ANNUAL REPORT: FISCAL YEAR 2021 | 17

What is happening with Regulation D offerings?

Pooled funds continue to be the dominant users of Regulation D

21

What are the top industries raising capital through Regulation D 

(excluding pooled funds)?22 New Offerings

8,000 

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Q3 Q4 Q1 Q2 Q3 Q4 Q1

2019 2020

Amounts Raised by Pooled Funds

New Offerings by Pooled Funds New Offerings by Other Issuers

Amounts Raised by Other Issuers

Q2

2021

$324B $319B

$418B

$263B

$344B $305B

$669B

$406B

$48B $42B

$47B

$39B

$46B

$61B

$89B

$92B

July 2019 - June 2020 July 2020 - June 2021

Technology

Banking and Financial Services

Real Estate

Health Care

Energy

$2.6B $92

$33B

$49B

$22B

$38B

$45B

$1.2B $41

$24B

$6B

$7B
18 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What is happening with Regulation A offerings? 

Though variable across quarters, the number of offerings and amounts 

sought have continued to climb

23

100

80

60

40

20

0

Number of Offerings

Q3 Q4 Q1 Q2 Q3 Q4 Q1

2019 2020

Amounts Sought in Qualified Offerings New Offerings

Q2

2021

$841M

$968M $901M

$394M

$1.3

$690M

$1.4

$1.1

What are the top industries seeking capital through Regulation A?24

July 2019 - June 2020 July 2020 - June 2021

Real Estate

Technology

Banking and Financial Services

Business Services

Health Care

Manufacturing

$2.6B $923

$755M

$56M

$325M

$162M

$18M

$183M

$155M

$53M

$109M

$51M

$82M
ANNUAL REPORT: FISCAL YEAR 2021 | 19

What is happening with IPO activity?

2020 and the beginning of 2021 saw a marked increase in IPO activity

25 

3.6x more offerings 2.8x more capital

$60B

$50B

$40B

$30B

$20B

$10B

$B

160

140

120

100

80

60

40

20

0

Total IPO Proceeds Number of IPOs

Offering Proceeds

Number of Offerings

7/19

8/19

9/19

10/19

11/19

12/19

1/20

2/20

3/20

4/20

5/20

6/20

7/20

8/20

9/20

10/20

11/20

12/20

1/21

2/21

3/21

4/21

5/21

6/21

How does the past year’s IPO activity compare to the year prior 

(excluding pooled funds)?26

What are the top industries raising capital in IPOs (excluding pooled funds)?27

July 2019 - June 2020 July 2020 - June 2021

Technology

Business Services

Health Care

Banking and Financial Services

Manufacturing

Hospitality, Retailing, Restaurant

$7B

$57B

$8B

$28B

$7B

$16B

$6B

$12B

$1B

$5B

$13B

$7B
20 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Small and Emerging Businesses

T

his segment of companies includes both high-growth startups that raise capital to get off the 

ground and launch early prototypes, as well as small businesses that create local jobs but may 

not fit the high-growth model that is the typical target of venture capital (VC) investments.28

Entrepreneurship rates dipped in 2020 in response to the 

COVID-19 pandemic

While many press stories have featured entrepreneurs creating new businesses out of necessity or 

newfound opportunity in response to COVID-19, both the total entrepreneurial activity rate and 

the established business ownership rates dipped in 2020.29

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

Total Entrepreneurial Activity Rate Established Business Ownership Rate

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

In spite of the decline in overall entrepreneurship numbers, a record-breaking

1 million new “high propensity businesses,”

meaning those likely to hire employees, were formed in the first six months of 2021

30

Support for small businesses is critical, as they remain the primary 

generator of net new jobs in the country from 1995-2020

31

Small Businesses

12.7 million net new jobs (62%

Large Businesses

7.9 million net new jobs (38%
ANNUAL REPORT: FISCAL YEAR 2021 | 21

Early-stage entrepreneurs report struggles as they build 

new companies

Equity investments remain only a small portion of external 

capital funding for small businesses38

Loan or Line of Credit

Credit Card

Trade Credit

Merchant Cash Advance

Leasing

Equity Investment

Factoring

Other

89%

21%

8%

8%

7%

6%

3%

3%

COVID-19 emergency assistance played a critical role in funding 

small businesses

of employer firms 

applying for PPP 

loans reported receipt 

of funding

37

96%

of employer firms 

sought emergency 

assistance funding, the 

vast majority of which 

applied for Paycheck 

Protection Program 

(PPP) loans

36

91%

Challenges with information, education, or knowledge negatively impact

1⁄2 of new entrepreneurs,

more than twice the rate for entrepreneurs with mature businesses

32

Challenges with networks and connections impact

1⁄2 of entrepreneurs with newer businesses

compared to 1⁄3 of entrepreneurs with mature businesses

33

Bank loans or venture capital are only used by

17% of entrepreneurs 

to launch a business

34

Running out of cash and an inability to raise new capital is the 

number 1 reason startups fail

35

Startup 

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

Small businesses encounter varying degrees of success in meeting their 

funding needs through debt financing

39

Access to credit from lenders is vital for the survival and growth of many small businesses.40

However, emerging businesses typically have minimal or no collateral and lack sufficient earnings 

histories, tax returns, and performance track records for bank underwriting.41

Small businesses seek financial services from a wide variety of service 

providers, with 83% of firms using either a large or small bank

44

Discouraged borrowers report not applying for a small business loan 

for a variety of reasons

42

In the absence of business collateral, banks often rely on personal wealth information about the 

founder or entrepreneur to determine loan default probability.43

Weak cash flow 44%

Insufficient collateral 41%

Too much existing debt 36%

Low credit score 33%

Insufficient credit history 23%

Large bank 49%

Small bank 45%

Financial services company 23%

Credit union 12%

Online lender/fintech company 11%

Finance company 8%

Alternative financial source 3%

CDFI 2%

Other 6%

Does not use financial services 7%

37% of firms sought financing 

(excluding emergency funding applications) 63% did not apply

Received 

None 

9%

Received 

Some 

8%

Received 

Most 

6%

Received All 

14%

Sufficient financing 

33%

Debt averse 

16%

Discouraged

8%

Other 

6%

23% 

shortfall

47%

needs 

met

30%

unmet 

needs
ANNUAL REPORT: FISCAL YEAR 2021 | 23

Angel investors are a significant source of early-stage capital

Angel investors are generally high-net-worth individuals who invest their own money directly in 

emerging businesses, typically in early funding rounds. Most angel investors are accredited investors, 

and many are current or former entrepreneurs themselves.

334,680 active angel investors45

(3.5% increase from 2019

64,480 entrepreneurial ventures received angel funding46

(1.2% increase from 2019

$25.3 billion in total angel investments47

(6% increase from 2019)

$392,025 average angel funding round48

(4.8% increase

19 deals on average per angel investor49

(up from 14 deals in 2019)

<$200,000 per investment

for over 70% of angel deals50

$4.7 million per year invested across multiple companies 

by average angel group51

6x leverage of angel investments by portfolio companies 

in follow-on funding52

30% of deals included an angel seat on the board 

of the portfolio company53

Half of angel investments are in seed and Series A 

rounds, where angels have the greatest impact54

Angel 

investment 

at scale 

in 2020
24 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

How is seed funding changing?

The seed round is typically a company’s first funding round, often raised from friends and family, 

angel investors, or early-stage funds in exchange for a convertible note. Capital at this stage is often 

used for product development and market research.55

Diversification is the primary risk mitigation technique for seed 

investors. Most seed firms make a lot of smaller bets relative to their 

fund size — for instance, a modern seed fund might be $250 million and 

make 50 to 80 investments, spreading the risk wide

 TECHCRUNCH56

“

In recent years, the seed stage has begun attracting large, multi-stage 

institutional investors eager for earlier deal exposure

57

As a result, the first half of 2021 has already surpassed the total angel 

and seed deal value of every year prior to 2017, with more than

$7.0 billion in capital invested

58

Angel and seed deal sizes continue to creep higher with earlier 

investments by institutional and later-stage players

59

*As of June 30, 2021

Angel and seed deal activity by deal count

$25M+

$10M-$25M

$5M-$10M

$1M-$5M

$500K-$1M

Under $500K

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2019

2021*

2018

2020
ANNUAL REPORT: FISCAL YEAR 2021 | 25

Both individual angels and angel groups tend to focus on their local communities

The distance between lead investors and the target company averages only 

37 miles

62

Angel and seed deals have expanded beyond tech hubs, but remain 

very localized

The scale of local angel investment activity is closely correlated with the areas with the highest 

VC activity.60 More than one-third of angel and seed deals occurred in areas other than the top 10 

funding hubs.61

By deal count and value, both angel and seed activity have increased 

in 2021

63

Q1 Q2 Q3 Q4 Q1 Q2

Angel Deal Value

Angel Deal Count Seed Deal Count

Seed Deal Value

$0.6

$1.9

$0.6

$1.8

$0.5

$2.2

$0.9

$2.4

$1.0

$2.3

$1.1

$2.6

2020 2021

881

727 763

816 788

714

537

397

451

587

653 618
26 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Mature and Later-Stage 

Businesses 

C

ompanies 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 their investors are institutional in nature, whether VC funds, private equity 

funds, or increasingly crossover investors from the public market.

Although concentrated in tech hubs, growth startups backed by 

VC exist across the country

The below map illustrates the concentration of estimated VC deal value in 2020, with the number of 

VC deals indicated on each state.64

AK

6

AL

32

AR

23

AZ

131

CA

4,143

CO

380

DC

87

FL

317

DE

149

GA

213

HI

11

ID

29

IL

329

IN

142

KS

20

KY

49

LA

18

ME

36

MD

154

MI

161

MN

130

MO

83

MS

5

MT

26

NC

221

ND

8

NE

28

NH

32

NM

26

NJ

157 NV

55

NY

1,485

OH

163

OK

28

OR

136

PA

315

SC

44

RI

30

CT

136

MA

866

SD

4

TN

101

TX

624

UT

158 VA

176

WA

417

WI

96

WV

4

WY

14

PR

6

VI

IA

41

GU

Less than $100 MILLION $100 MILLION - $500 MILLION $500 MILLION - $1.5 BILLIO

Over $1.5 BILLION No dat

VT

24
ANNUAL REPORT: FISCAL YEAR 2021 | 27

How are mature and growth companies interacting with 

VC investors?

Network connections are still the dominant source of VC deal flow

VCs are more likely to connect with new startups by relying on their existing networks for leads 

and introductions, leaving few opportunities for entrepreneurs without personal or professional 

network connections.65

In-Network Out-of-Network 

Portfolio 

Company 

Referrals

8%

Other Investors

20%

Former Colleagues and 

Work Acquaintances

30%

VC-Initiated Contact

30%

Cold Email 

Pitches

10%

For entrepreneurs who do pitch to VC investors, the odds of 

securing funding are exceedingly low66

As we look forward over the next decade, the reality is we can’t just continue 

to invest in the communities and ecosystems that have driven a lot of the 

economic upside that we have seen over the last 20 years that tech has been 

driving. We are going to have to seed and start to invest in communities in

flyover states, tier two markets that will become tier one, and in different 

communities themselves. An emerging manager is a key part of that because

networks ultimately are a fundamental part of this ecosystem

 FREDERIK GROCE67

“

101

Opportunities Considered

VC Deal Funnel

28

Meeting with Management

10

Reviewed at a Partner Meeting

4.

Proceed to Due Diligence

1.

Negotiation of Term Sheet

1

Closed Funding

100 other companies 

were passed over.

For every company in 

which a VC invests,
28 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

VC deal value has surged in recent years and is on track for 

a record-breaking 2021

68

Traditional VC investors are active advisers to their portfolio companies, 

providing an array of services

69

Deal Value Deal Count

*As of June 30, 2021

11,066

2017

$88B

10,165

2016

$82B

11,302

2015

$85B

10,693

2014

$74B

9,494

2013

$48B

8,026

2012

$42B

6,897

2011

$45B

11,521

2018

$143B

12,449

2019

$142B

12,084

2020

$164B

7,058

2021*

$150B

Strategic Guidance, 87%

Connections to Other Investors, 72%

Connections to Customers, 69%

Operational Guidance, 65%

Substantial Weekly Interaction, 60%

Help Hiring Board Members, 58%

Help Hiring Employees, 46%

Raising a Series B seems to be the most uncertain point in a typical startup 

journey. Not only do Series B rounds take 100 days longer to close on average

than Series A rounds do, they have the highest variance of any raising event

 CARTA70

“
ANNUAL REPORT: FISCAL YEAR 2021 | 29

How is VC investment activity changing? 

Last year the pandemic forced many firms to focus their attention on later-stage businesses at 

the expense of angel/seed and early-stage businesses.71 However, early-stage deals have rebounded 

to new heights, with a median Series A round raising $10 million in Q2 2021.72

2021 is on track to break records across each stage of VC investment

73

Fundraising by new and emerging managers has not kept pace with 

record levels of overall venture fundraising

74

*As of June 30, 2021

$7B $34B

$109B

$11B $44B

$110B

$10B

$46B

$86B

$10B $42B

$91B

2017 2018 2019 2020 2021*

$8B $31B

$50B

Angel & Seed Early-Stage (Series A and B) Later-Stage (Series C and Up)

Emerging Firm Fund Value

Emerging Firm Fund Count Established Firm Fund Count

Established Firm Fund Value

*As of June 30, 2021

2017

$20B $23B $27B $46B $26B $36B

2018

$24B

2019

$57B

2020

$19B

2021*

$55B

Both the number of 

funds closed and the 

amount of capital 

raised by first-time 

funds in 2020 are the 

lowest since 2017

75

However, first-time 

funds as a 

percentage of all VC 

funds announced in 

2021 to date are up

76

240 238 249

163

291

452 457

410

190

148
30 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What trends are shaping the investment activities of limited 

partners (LP) in VC funds?

Recent portfolio company exits have fueled reinvestments by LPs into 

new VC vehicles

Liquidity events reached record heights in 2020, with total exit value of $287.5 billion.77

Family offices and high net worth individuals are the dominant backers 

of new and emerging fund managers, especially on Fund 1

78

Family Offices and High Net Worth Individuals Institutional Limited Partners

Fund 1

67%

Fund 2

50%

Fund 3

50%

Money 

returned 

to VC fund 

investors 

on exit

Investors 

reinvest 

with established 

managers

VC firms return to 

market with new, 

often larger, funds at 

a faster pace
ANNUAL REPORT: FISCAL YEAR 2021 | 31

What is the impact of nontraditional investors on mature and 

later-stage fundraising?

Over the last few years, nontraditional investors—generally firms and institutions not labeled as 

VCs—have increasingly crossed over from the public markets to also invest in mature and later-stage 

financing rounds, often with dramatic impacts on company valuation and deal size.79

Traditional VC Investors Nontraditional VC Investors

Angel 

Investors

Venture 

Capital 

Firms

Private 

Equity 

Funds

Corporate 

Venture 

Investors

Hedge 

Funds

Mutual 

Funds

Other Asset 

Managers

Crossover Investors

Crossover investors are typically buy-side public equity asset managers that 

also invest in privately backed companies. By incorporating private companies

into their investment strategy, crossover investors can invest earlier in the 

company life cycle, thereby acquiring larger equity stakes in promising 

startups with the hope of seeking venture-level returns

 PITCHBOOK80

“

Nontraditional investor participation is driving up median pre-money 

valuations in later-stage VC deals

81

Traditional VC Investor Deals Nontraditional VC Investor Deals Nontraditional VC Investor Deal Count

$25M

$66M

$29M

$75M

$33M

$91M

$37M

$100M

$35M

$116M

$54M

$236M

*As of June 30, 2021

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

$25M

$89M

$27M

$79M

$26M

$63M

$25M

$57M

$28M

$60M

710 735

901

940

1043

684

780

718

563

516

421
32 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Crossover investors bring other strategic value to companies besides 

capital, preparing them for entry into the public market

82

A significant percentage of companies going public in 2020 were 

backed by crossover investors

83

74%

IPOs by Count

77%

IPOs by Value

strategic valuation

giving credibility to the 

cap table from public 

market investors

streamlined IPO

with access to board 

members, advisors, and 

public market expertise

credibility

before companies 

begin testing the 

IPO waters

diligence signals

for potential IPO 

investors

Venture-backed exit activity in the first half of 2021 has already surpassed the 

2020 high water mark by nearly 30%, fueled predominantly by public listings

84

*As of June 30, 2021

Acquisitions Buyouts Public Listings Deal Count

$56B

2016

$13B

$40B

2017

$50B

2015

$38B

$30B

2014

$63B

$44B

2013

$27B

$42B

2012

$37B

$91B

2011

$28B

$38B

2010

$27B

$13B

$31B

*2021

$334B

$68B $8B

2020

$208B

$12B

$61B

2019

$193B

$8B

$60B

2018

$56B

$8B

$10B $4B

$5B

$5B

$3B $1B $3B $1B

1,085

955

1,000

1,127 1,173

1,059

1,109

926

879

748 730 699
ANNUAL REPORT: FISCAL YEAR 2021 | 33

Small Public Companies

C

ompanies 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 U.S. publicly-traded companie

changed over time?85

The number of publicly-traded companies has declined since its 1997 peak preceding the dot-com 

bubble. Recently, the rate of increase in publicly-traded companies has gone up significantly due to 

the thriving IPO market.

However, looking at number of listed companies in isolation misses the 

bigger picture on public market trends

Even after adjusting 

for inflation, the 

market capitalization

of public companies 

has continued to soar 

to new heights

When taking into consideration the mergers of private 

companies into public companies 

rather than those companies 

going public directly, the listing 

gap is actually much smaller

86

Number of Domestic Listed Companies

Market Capitalization in Trillions (Current USD)

8,000

7,500

7,000

6,500

6,000

5,500

5,000

4,500

4,000

3,500

3,000

$50

$45

$40

$35

$30

$25

$20

$15

$10

$5

$0

Market Capitalization Number of Domestic Listed Companies

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

4,071 in 2021*

7,414 in 1997

*As of Sept. 30, 202
34 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

What are the different pathways to going public? 

Besides the record-breaking number of deals and amounts raised in traditional IPOs over the last 

year, companies have also been using different routes, such as direct listings and SPACs, to go public. 

While these alternative pathways have become popular in recent years, many factors play into 

which pathway a company chooses.

What is it? A private company raises capital by selling newly-issued 

shares to investment banks (underwriters), which they then sell primarily 

to institutional investors

Why choose this path? An IPO is the traditional way for companies to go 

public. Companies may choose this path to have more control over their

initial investor base and obtain an underwriter’s assistance in marketing 

and managing initial trading volume

What to consider? The transaction costs, including underwriter fees, are 

high, and the process typically takes a long time

What is it? A SPAC goes public as a shell company using an IPO

Generally within two years, a SPAC combines with a private company 

(target) via a de-SPAC merger, with the resulting company becoming 

public and receiving a combination of the SPAC’s IPO proceeds and 

additional capital from a private financing

Why choose this path? By going public via SPAC, companies can have 

certainty as to the amount raised, potentially a shorter timeframe than the 

traditional IPO process, and a strategic partnership with an experienced 

management team that sponsors put together

What to consider? The overall transaction costs for target companies can 

be high, and they must also consider equity dilution from sponsors and 

other private financing investors, which is why SPACs tend to draw bigger 

companies looking to go public

87

What is it? A private company becomes public, typically without 

raising new funds in the process, by allowing existing shareholders 

to sell shares directly to the public

Why choose this path? Historically, a few large, consumer-facing 

companies have chosen this path due to potentially lower transaction 

costs and other business-specific reasons

What to consider? With no underwriters involved, companies will have 

no control over their initial investor base and may face trading volume 

challenges, which is why companies that choose this path are often ones that 

have strong brand recognition that can generate sufficient market interest

Traditional Initial 

Public Offering (IPO)

Special Purpose 

Acquisition Company 

(SPAC)

Direct Listing
ANNUAL REPORT: FISCAL YEAR 2021 | 35

How are the dynamics changing for companies going public? 

The past year has marked one of the busiest years for the public market. From July 1, 2020 through 

June 30, 2021, there were:88

1,005 Entrants into the Public Market

average proceeds of $318M

429 non-SPAC IPOs

average proceeds of $359M

569 SPAC offerings

average proceeds of $286M

7 Direct Listings

The number of IPOs has varied over the last decade; however, VC-backed 

companies continue to be the majority of exchange-listed IPOs

89

36

11

54

9

80

9

74

97

13

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

65

8

111

17

64

12

45

3

40

4

VC-backed IPOs Growth Capital-backed IPOs Buyout-backed IPOs Other IPOs

13

18

15

22

21

38

36

28

17

15

25

30

25

33

24

40

46

17

20

11

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

Investors are increasingly focused on environmental, social, and 

governance (ESG) considerations for public companies

ESG considerations are becoming more important for many public companies, with investors increasingly focused on them and expecting newly-public companies to communicate how ESG is incorporated into their business plans and operations.90

Stakeholders—including investors, exchanges, and customers—are 

driving public companies to focus on diversity and inclusion both 

internally and externally

In recent years, companies have been seeking to support diversity and inclusion by increasingly hiring 

IPO underwriters classified as minority-, women-, or veteran-owned firms.94

ESG SPACs

In 2020, more than 20 

SPACs with an ESG focus 

have launched, raising 

more than $5 billion in 

the aggregate

91 

Investor Demand

Millennials are driving change, with 

95% interested in sustainable investing 

and 41% already invested in companies 

that have goals of producing positive 

ESG outcomes, compared to 28% of 

individuals in general

92

ESG-Aligned Capital

Having strong ESG credentials 

can help attract ESG-aligned 

capital from private and public 

investors focused on sustainability, 

while also increasing access and 

valuation in debt capital markets

93 

7

68

7

99

24

110

28

101

64

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

6

112

39

167

31

127

13

80

14

67

IPOs with Underrepresented Underwriters Other Exchange-Listed IPOs

84
ANNUAL REPORT: FISCAL YEAR 2021 | 37

How do small public company trends compare to the public 

markets at large?

While the press often covers deals by large public companies or 

“unicorn” private companies, small public companies have also seen 

growth in equity offering activity over the last year

95

While industry trends remain relatively consistent with the prior year, 

business services and technology saw the most dramatic increases 

among equity offerings by small public companies

96

July 2019 - June 2020 July 2020 - June 2021

Health Care

Business Services

Technology

Real Estate

Manufacturing

Hospitality, Retailing, Restaurants

$3.1

$4.2

$1.5

$4.0

$0.7

$2.3

$0.3

$0.7

$0.2

$0.6

$0.3

$0.7

Total Proceeds Number of Offerings

Q3 Q4 Q1 Q2 Q3 Q4 Q1

2019 2020

Q2

2021

$2.5B $4.2B $2.9B $3.5B $7.2B $14.3B $25.

77

107 113

161 159

182

296

129

766 offerings

average proceeds $72M

458 offerings

average proceeds $29M
38 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Small public companies are seeing an increasing number of retail 

investors in their shareholder base

Nearly 30% of public companies have seen an increase in retail investment in the past 12 months, 

while more than 25% of companies have seen an increase from three years ago.97

Stock prices vary significantly by market capitalization, with smaller 

companies tending to have smaller prices

99

Institutional Shareholders Retail/Individuals Shareholders Other

On average, small public 

companies have the 

largest percentage of 

retail investors,

more than twice the 

percentage of larger 

companies, as well as the 

smallest percentage of 

institutional investors

98

Small Cap Mid-Cap Large Cap Mega-Cap

61%

10%

29%

66%

11%

23%

62%

11%

27%

45%

23%

32%

Micro Cap

(<$200M)

Small Cap

($200M 

to <$1B)

Mid Cap

($1B to 

<$10B)

Large Cap

(≥$10B)

Under $5

46%

$5 to $10

27%

$10 to $50

26%

1%

1%

Under $5

14%

$10 to $50

63%

4% $5 to $10

19%

2%

5% $10 to $50

55%

$50 to $100

26%

Over $100

11%

$10 to $50

21%

$50 to $100

27%

Over $100

34%
ANNUAL REPORT: FISCAL YEAR 2021 | 39

Women Business Owners 

and Investors

Trends in Women-Owned Business Formation and Ownership

Women own

1.1 million employer firms

across the country

101

of new entrepreneurs in 2020 were women.41% 10

Women-owned firms 

employed 10.1 million workers

across the country

102

By share of employer firms, women owners are underrepresented in 

every demographic group

103

25.5

African 

American/Black

White American Indian 

and Alaska Native

Asian 

American/

Pacific Islander

Hispanic/Latino

26.8

36.8% 34.

19.8
40 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Women entrepreneurs often wear multiple hats, bearing significant 

household responsibilities outside of running their businesses

104

The COVID-19 pandemic has disproportionately impacted womenfounders, particularly those with family care responsibilities

105

The pandemic decimated many service sector businesses, where women tend to own more 

businesses.106 On top of steep job losses overall, women founders share unequal family care 

responsibilities.107 A recent survey of founder-caregivers found dramatic differences in the child and 

family-care burden carried by women vs. men founders.108

Despite taking on these additional hours of caregiving, women-owned businesses report no greater 

negative impact to their revenue vs. men founders.109

11% of women founders reported 7+ hours 

daily of family care responsibilities pre-COVID

reported being the sole provider 

in their household

1 in 4 3 in 4

reported their income contributes to at least 

half of their household finances

0% of men founders reported 7+ hours daily 

of family care responsibilities pre-COVID

During the pandemic that burden increased to 

56% of women founders

During the pandemic that burden increased to

11% of men founders
ANNUAL REPORT: FISCAL YEAR 2021 | 41

Capital Raising Trends for Women-Owned Businesses

Although underrepresentation by gender persists, the investment 

yield rate among those who do seek angel funding has trended up

Women constituted 

33.6%

of entrepreneurs seeking angel capital 

in 2020 (up from 27.6% in 2019)

and had an investment yield rate of 

28.1% 

(up from 21.4% in 2019), compared

to a baseline rate of 30.8

110 

For every dollar raised by men-CEOs in 2020,

women-CEOs raised 93 cents

111

There are many reasons why female founders routinely receive less venture 

capital than their male counterparts, ranging from sexism and structural bias 

to the pandemic causing cautious investors to revert to existing white and 

male networks. One clear catalyst for change, though, is having more diverse

decision-makers on boards and cap tables. By stopping money from being

handled by the same people, the next generation of investors will be able to 

break some of the gender gap in fundraising

 TECHCRUNCH112

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

While VC investments have soared to record heights in 2020 and 2021, 

women-founded companies have raised less money relative to men, 

and attracted a smaller share of total VC investment

113

of venture dollars went to women-only founding teams in 

2020 (down from 3.3% in 2019), and 10.8% went to women

men co-founding teams (down from 11.9% in 2019).2.3% 1

In the first half of 2021, women founders and co-founders raised 

$25.12 billion in venture funding, 

more than the total amount raised in any prior year, 

reflecting the blistering rate of capital raising more broadly in 2021

115

Women-led companies raised venture funding across a variety 

of sectors in 2020, concentrated most heavily in healthcare and 

information technology

116

Healthcare

Information Technology

Consumer Products and Services (B2C)

Business Products and Services (B2B)

Materials and Resources

Financial Services

Energy

1%

4%

8% 3%

41%

27%

17%
ANNUAL REPORT: FISCAL YEAR 2021 | 43

In recent years, women founders have faced a widening gap in earlystage, pre-money, VC valuations compared to all U.S. compani

117

The financing of the later stage, late-stage venture capital, and private equity 

is almost no different from the early stages where women are still faced with 

conversations being very different from the ones men have to deal with

 LAKSHMI BALACHANDRA119

“

All U.S. companies Women-founded compani

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

*As of Sept. 30, 202

$18M

$16M

$22M

$22M

$26M

$25M

$30M

$26M

$46M

$40M

$17M

$17M

$15M

$15M

$14M

$12M

$11M

$11M

$10M

$9M

$9M

$7M

$8M

$6M

Among the women in 2020 who did raise capital, the women-only 

founders raised less per funding round than their men counterparts

118

Women-Only Founders Mixed Gender Founding Teams Men-Only Founders

Seed Early-Stage Late-Stage

Median Average

$1.8

$1.0M $1.

$0.9

$20M

$11M

$16M

$8M

$90M

$50M

$47M

$30M

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

Investors penalize women-founders for perceived “lack of industry fit.

When women-founders raise capital in industries dominated by men, they both raise less capital and 

retain less equity than their men counterparts, evidence of investor bias continuing to hold women 

back in obtaining funding.120

Despite challenges in securing funding, women-owned businesses 

continue to outperform the overall VC market

Women-founded companies are exiting and returning capital to investors one year faster on average 

than men-founded companies:122

The benefit of a gender diversity helps mixed-gender teams raise funding, but 

only when they are led by a male CEO. The consistently lower funding allocation,

both in total and on average, to mixed-gender teams when they are led by 

women CEOs points to the severity of gender bias in startup capital allocation

CHRISTOPHER CASSION, ET AL

121

“

YEARS

6.6 for women-founded 

companies, vs

YEARS

7.7

for all VC-backed 

companies in the 

U.S. in 20

71% 71%

64%

76%

67%

74%

Women-Dominated 

Industries

Men-Dominated 

Industries

All Industries

Women CEOs Men CEOs Women CEOs Men CEOs

Average Funding Average Retained Equity

$14.2

$19.3

Women-Dominated 

Industries

Men-Dominated 

Industries

$2.1

$21.8
ANNUAL REPORT: FISCAL YEAR 2021 | 45

Women in Leadership Roles

While women remain underrepresented in board roles among 

venture-backed private companies, the numbers improved in 2020

123 

The leadership of private companies ripples into the public markets

Women’s share of board seats of Russell 3000 companies has 

seen some improvement in recent years

126

Historically, thousands of CEOs have founded and led 

companies through an IPO to be exchange-listed; however, 

only about 20 of those were founded and led by women

124

Of the 442 companies to go public by mid-December 2020, 

only four were founded and led 

by women.125 

51%

of companies have a 

woman on their board 

(up from 40% in 2019)

11%

of board seats are 

held by women (up 

from 7% in 2019)

75%

of board seats are 

held by executives and 

investors, of which only 

8% are women

20%

of the board seats 

held by women are 

independent seats

15.1% of board seats in 2016 25.2% of board seats in 2021

However, only 2.9% of the Russell 3000 

(84 companies) boards of directors have 

achieved gender parity as of 2021

127
46 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Although women remain underrepresented in executive leadership 

roles, women’s share of the C-suite among Russell 3000 companies has 

seen some improvement in the past decade

128

Women angels are backing companies roughly in proportion to their 

representation in the angel industry

130

Companies backed by women angels are going on to raise increasing amounts of venture capital.131

Trends in Women Investors in Small Businesses

Women’s representation among angel investors in 2020 remains largely 

unchanged since 2019

129

29.5% of angel investors in 2020 were 

women (unchanged from 2019’s level of 29.0%

2012 2021*

17.4

26.3

Chief Legal Officer 

or General Counsel

Chief Human 

Resources Officer

Chief Financial 

Officer

Chief Executive 

Officer

61.5

38.3

13.7

2.7% 10.3% 5

*As of June 30, 2021

Follow-on VC Deal Value Follow-on VC Deal Count as a Percentage Follow-on VC deal count

of All Angel-Backed Companies

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021*

*As of Sept. 30, 202

$0.B $0.1B $0.2B $0.2B $0.5B $0.6B $0.8B $0.7B $0.8B $1.4B

287

186

171

211

258

217

196

119

85

48

15

286
ANNUAL REPORT: FISCAL YEAR 2021 | 47

Women remain underrepresented among decision-makers within the 

VC industry, though gender diversity has improved in the past 5 years

132

When you don’t have enough diversity on the investing side of the table, you’re 

very unlikely to see that diversity take place on the founder side

SARAH KUNST, CLEO CAPITAL134

“

Diversity among investment professionals directly impacts how the 

funds operate, and importantly the founders in whom the funds invest

133

Deal flow 

origination

Investment 

committee 

decisions

Portfolio 

company 

board seats

Management 

of the 

company

Conversely, women 

remain underrepresented among 

check-writers 

who have the power 

to allocate capital

Women tend to be 

over-represented in 

administrative (94% 

women), operations 

(54% women), and 

investor relations /

communication 

(67% women) roles

All Employees Junior-Level 

Investment 

Professionals

Investment 

Professionals

Investment 

Partners

2016 2018 2020

16%

14%

11%

23%

21%

15%

33%

28%

25%

45% 45% 45%
48 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Minority Business Owners 

and Investors

Precursors to Accessing Capital

Personal wealth dictates the financial starting line for many 

entrepreneurs’ businesses, with funding often more accessible for those 

with homeownership and family assets

135

The wide and persistent wealth gap across demographic groups136 creates additional barriers to entry 

for many underrepresented entrepreneurs.137

The wealth gap creates ripple effects across entrepreneurs’ personal 

networks, which further exacerbates challenges accessing capital

Minority entrepreneurs face greater challenges in accessing debt 

financing, including loans, lines of credit, and cash advances

142

White: $188,200 

Other: $74,500 

Hispanic/Latino: $36,100 

African American/Black: $24,100

Median family net worth

In addition, Hispanic/Latino and African American/Black 

small business owners start with 

1.5 to 2.75 times less liquid wealth

than their white counterparts

138

Hispanic/Latino entrepreneurs 

are 22% more likely than white 

entrepreneurs to rely on personal or 

family savings as a funding source

139

African American/Black entrepreneurs 

have fewer connections to banks, VC 

funds, and informal capital networks

140

Hispanic/Latino entrepreneurs are 

more than twice as likely to find funding 

success when proactively networking 

with business organizations

141

White

Asian American/Pacific Islander

Hispanic/Latino

Black/African American

55% 23% 22%

45% 26% 30%

32% 29% 39%

24% 27% 49%

Fully Approved Partially Approved Denied
ANNUAL REPORT: FISCAL YEAR 2021 | 49

White 

77.1

Hispanic/

Latino

10.0

1996 Asian American/Pacific Islander 3.4

Other 1.1

African 

American/

Black

8.4

White 

55.6

Hispanic/Latino

21.7

2020 Asian American/Pacific Islander 6.7

Other 2.9

African 

American/

Black

13.1

Business Formation and Ownership Trends

Entrepreneurial activity has meaningfully increased across minority 

groups in the past 15 years

143

Hispanic/Latino entrepreneurship has seen the greatest growth of all groups, looking at both number 

of businesses as well as rate of revenue growth.144

Contrary to the archetype of the 20-something entrepreneur that 

dominates the press, rates of entrepreneurship are evenly spread 

across age groups

147

White 

60.1

Hispanic/Latino

18.5

Working age population Asian American/Pacific Islander 5.9

Other 4.3

African 

American/

Black

13.4

New entrepreneurs in 2020145 also largely reflect population by race 

and ethnicity

146

20-34 years

25.7%

35-44 years

23.0%

55-64 years

24.5%

45-54 years

26.7%
50 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

The COVID-19 pandemic has disproportionally impacted minority-owned 

businesses, many of which are overrepresented in service industries

Among entrepreneurs over age 45, the decline in business ownership 

from January 2020 to January 2021 was more pronounced among 

minority populations

150

Capital Raising Trends for Minority-Owned Businesses

Although underrepresentation of minority-founders persists, the investment 

yield rate among those who do seek angel funding has trended up

The five business sectors 

most affected by the 

pandemic generate almost 

50% of the 

revenues

of Hispanic/Latino-owned 

businesses

148

4 out of 5 small 

businesses 

owned by Asian American/

Pacific Islanders report they 

are struggling financially 

from the pandemic

149

Minorities constituted only

5.3% 

of entrepreneurs seeking angel capital in 2020 

(down from 9.3% in 2019)

and had an investment yield rate of 

33.0% 

(up from 22% in 2019), compared to a 

baseline rate of 30.8

151

Asian American/

Pacific Islander

-19

African 

American/ Black

-16

Hispanic/Latino

-11

White

-8
ANNUAL REPORT: FISCAL YEAR 2021 | 51

Despite some progress in recent years, VC-backed companies are still 

predominantly led by white men

152

of VC-backed founders are Hispanic/Latino (1.3%), African 

American/Black (1.7%), or Asian American/Pacific Islander 28% (25.2%), an aggregated increase from 23% in 2017

The outlier model of investing in VC also typically results in a bias toward 

investing in homogeneous teams ... The people who can afford to take the 

biggest risks are also the people with the most privilege; they’re not as 

concerned about providing for food, shelter and healthcare as economically 

stressed people are

DAVID TETEN AND KATHERINE BOE HEUCK153

“

LBGTQ+ founders also face challenges when raising capital, with 

many choosing not to “out” themselves to better pattern match 

investors’ expectations

154

Though challenging to 

estimate, by one count, 

less than 1% 

of VC deals back 

LGBTQ+ founders

155

40% of LGBTQ+ small 

business owners surveyed 

said raising capital is their 

greatest business 

challenge

156

By one calculation, there is a 

48% gap

 in angel and VC funding actually 

going to LBGTQ+ founders and 

what should be achievable

157
52 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Minority Investors and Allies

Minorities remain vastly underrepresented among angel investors

Although minorities are still underrepresented among decision-makers 

within the venture capital industry, firms have shown some progress 

from 2018 (gray bars) to 2020 (colored bars) in increasing diversity

159

of angel investors in 2020 were minorities 

(down from 2019’s level of 7%).5.5% 15

70%

61%

Asian White

American/

Pacific Islander

Hispanic/

Latino

Junior-Level Investment 

Professionals

African 

American/Black

20%

25%

5% 4% 4%

7%

76%

72%

Asian White

American/

Pacific Islander

Hispanic/

Latino

All Positions

African 

American/Black

17% 18%

5% 7%

4% 4%

78% 80%

Asian White

American/

Pacific Islander

Hispanic/

Latino

Investment Partners

African 

American/Black

15% 15%

3% 3% 3% 4%

76%

72%

Asian White

American/

Pacific Islander

Hispanic/

Latino

Investment Professionals

African 

American/Black

17% 19%

3% 4% 5% 4%
ANNUAL REPORT: FISCAL YEAR 2021 | 53

Investor sentiments about diversity are changing

The year 2020 saw a sharp increase in the number of investors who 

agreed that it is possible to have an investment strategy that intentionally 

invests in women and minorities while still maximizing returns

160

Shifting attitudes among VCs are beginning to impact hiring, funding, 

and strategic decisions, which should create ripple effects in diversity 

of funded ventures

of VCs say the Black 

59%

Lives Matter movement 

has affected their 

investment strategy

163

of VCs expressed 

17%

satisfaction with the number 

of minority entrepreneurs in 

their portfolio

164

of VC firms have recently 

55%

brought on more women or 

minority LPs, fund managers, 

partners, or board members

165

Minority VCs

84%

2019

2020

55% 28% 10% 7%

75% 12% 9% 4%

Strongly Agree Somewhat Agree Neither Agree nor Disagree Disagree

However, the breakdown of investors who strongly agree with the 

above statement skews towards women and minority VCs, who are 

underrepresented within the industry

161

Women VCs

83%

White Men VCs

59%

Notably, almost all of the VCs who tracked their returns by demographic profile of founder 

reported that minority-founded company returns were performing on, or above, average, relative to 

the entire portfolio.162
54 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Natural Disaster 

Areas

How do natural disasters impact business survival?

Natural disasters wreak havoc on communities both in their immediate aftermath and in the years to 

come, with 1 in 4 businesses not reopening after natural disasters strike.166

Natural disasters affect communities across the country

Between October 1, 2020 and September 30, 2021, there were 23 natural disaster events with losses 

exceeding $1 billion.167

OPEN OPEN OPEN CLOSED
ANNUAL REPORT: FISCAL YEAR 2021 | 55

After a natural disaster, small businesses often experience direct 

expenses to renovate damaged property and equipment, as well as 

indirect expenses from the loss of revenue

168

Small businesses are less likely to have cash reserves on hand, and more likely to face extreme 

challenges in response to even a month-long closure.

How does the percentage of the population affected by natural 

disasters compare to the amount of capital being raised?

However, businesses in areas affected by natural disasters are generally 

raising less capital relative to the affected population, except with 

respect to offerings pursuant to Regulation Crowdfunding

174

of the U.S. population172 lives in an area that was affected b

a natural disaster over the three years ending June 30, 2021.31% 17

1 in 3 

small business owners 

do not know if their 

business would survive if 

they were forced to close 

for more than a month

169

The average small 

business has 

27 days 

of cash flow buffer,170 and 

for some, that number is 

closer to two weeks

171

27

Percentage of Capital Raised Over 3 Years in 

Areas Affected by Natural Disasters

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Regulation D Regulation A Regulation 

Crowdfunding

Registered Offerings

by Small Public 

Companies

$654B

total

$987M

total

$119M

total

$23B

total

Compared 

to 31% of 

affected 

population
56 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Rural Communities

Job creation in rural communities relies more heavily on 

regional ecosystems 

Economic activity in rural counties helps drive regional clusters that return economic opportunities 

back to local residents. This cycle is more pronounced in rural counties than in urban counties.175

Small banks remain the primary source of capital for 

rural entrepreneurs

While rural entrepreneurs rely on a diverse array of traditional and nontraditional capital resources to 

meet their financing needs, small banks still lead as the primary source of capital in rural communities.176

Jobs connected 

to the regional 

ecosystem

Rural County Jobs 59% 

Urban County Jobs 36% 

Business financial services 

company 3%

Other 3%

Nonbank finance company 2%

Alternative financial source 1%

CDFI 1%

Nonbank 

online/fintech 

company 4%

Large bank

25%

Credit

 union

9%

Small bank

52%
ANNUAL REPORT: FISCAL YEAR 2021 | 57

Rural business owners often view the involvement of investors 

through a different lens

Many rural business owners weigh additional variables in determining whether to seek capital 

from investors beyond mere capital needs, reflective of the close relationships between employers, 

employees, and their broader community, including:177

Importance of 

establishing shared 

values with investors

Prioritizing of continued 

support of the employees 

and community over profits

Unwillingness to sacrifice 

the personal lives of the 

owners or employees in 

exchange for growth

Rural businesses who seek investor capital are raising 

increasing amounts

Rural businesses are increasingly raising larger amounts of investment capital on average, including 

through Regulation Crowdfunding and Regulation D.178

*As of June 30, 2021

$108K $176K $177K $358K $429K

2017 2018 2019 2020 2021*

Regulation D Regulation Crowdfunding

*As of June 30, 2021

$5.3M $5.7M $14.7M $8.5M $

2017 2018 2019 2020 2021*
58 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

How does the rural population compare to the amount of capital 

being raised?

However, businesses in rural areas181 are raising less capital relative to the affected population over 

three years ending June 30, 2021:

18%

of the U.S. populatio

lives in rural areas

179

16% 

of small employer firms are 

located in rural areas

180

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

Percentage of Capital Raised Over 3 Years in 

Rural Communities

Regulation D Regulation A Regulation CF Registered Offerings

by Small Public 

Companies

$14B

total

$55M

total

$16M

total

$1.0B

total

Compared 

to 18% of 

affected 

population

This year the Office partnered with Alicia Robb, Ph.D. to measure 

capital raising activity in rural communities.Download your copy of

the report: “Rural Entrepreneurship and the Challenges Accessing 

Financial Capital: An Overview of Funding in Rural America.”18


ANNUAL REPORT: FISCAL YEAR 2021 | 61

T

he Office developed the following policy recommendations for Congress and the Commission 

based upon feedback received from small businesses and investors affected by our capital 

raising rules. We have distilled their feedback into four key areas for action addressing the 

most significant issues raised.

We recognize that for any complex issue, such as challenges surrounding capital formation, there 

are a multitude of potential solutions, and indeed multiple solutions may be needed to arrive at the 

impact sought. For each of the recommendations, we include background context, particular impact 

to demographic groups, notes on recent Commission action, and our proposed solution.

We welcome further engagement by Congress and the Commission in implementation of these 

solutions so that entrepreneurs and their investors together can bring innovations to market.

Policy Recommendations

Background Context

All businesses need capital to create jobs, grow, and scale, no matter how small, from 

the corner coffee shop to the enterprise tech startup. Some businesses are funded by 

personal savings, debt financing, or retained business earnings, but those resources 

are inaccessible to many entrepreneurs, whether because of limited wealth, lack of 

operating history, or innovations that are pre-revenue.183 Many of those entrepreneurs will look to investors to finance early-stage operations and development.

Even for the most technically sophisticated entrepreneur—whether a biomedical 

researcher commercializing a pharmaceutical patent, an app developer pioneering 

novel code, or an industrial innovator scaling a cleantech solution—the language 

of capital raising and the nuances of our complex rules are often inaccessible. 

Great entrepreneurial insight does not translate into fluency in almost a century 

of layered securities laws.

Most entrepreneurs find themselves in the dark when it comes to the rules of raising 

capital, reliant upon legal counsel to not only select an offering pathway that works 

for them, but to explain the nuanced rules to facilitate compliance. In other words: 

entrepreneurs who already find themselves cash-strapped must spend valuable—and 

often unavailable—resources just to understand their menu of options.

Entrepreneurs need support navigating complex securities laws
62 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Demographic Impacts

Minority and women entrepreneurs are not on a level playing field when 

obtaining funding from investors, as we highlighted in our earlier State of Small 

Business Capital Formation section of this report. The proportion of capital 

raised by women-owned businesses pales in comparison to the capital raised 

by men-owned businesses.184 Despite increasing rates of entrepreneurship in 

minority communities,185 minority entrepreneurs continue to face challenges 

accessing investor capital from the earliest stages through later-stage VC,186 

leaving them financially constrained and unable to reach their full potential. 

For our capital markets to become inclusive, the art of capital raising must first 

become more accessible.

Recent Commission Action

In our 2020 Annual Report, we highlighted the need for targeted educational 

resources to support entrepreneurs and investors navigating the exempt 

offering framework.187 We noted that educational resources should help 

users identify which options best fit their capital needs, risk tolerance, and 

long-term objectives.

Since then, the Commission has supported our Office’s efforts to expand accessibility of capital raising resources by launching the following:

 Capital Raising Hub on sec.gov that targets a gap in accessibility of content

on how to comply with securities laws when raising capital.

 Cutting Through the Jargon glossary of key terms that makes the

language of capital raising more accessible to small business owners and 

their investors. 

 Navigate Your Options interactive tool that explores regulatory pathways

available to raise capital, through which users answer a series of questions 

to identify the most relevant pathways to raise capital based on their 

specific needs.

 Capital Trends Maps that provide data on where capital is being raised

across the country under various offering pathways.

 Emerging Fund Managers series of virtual events to empower a new

generation of investment decision makers and increasing diversity among 

capital allocators.

The resources were developed based upon feedback received directly from 

prospective users during outreach. We have engaged with small businesses, 

investors, and thought leaders in the market to highlight these new educational 

resources, and we continue to seek engagements with diverse audiences across 

the country. Notably, we encourage entrepreneurs and investors to reach out to 

our Office with suggestions on how we can build upon these resources.
ANNUAL REPORT: FISCAL YEAR 2021 | 63

Proposed Solution

Looking forward, additional resources are needed to equip entrepreneurs and 

their investors with capital raising tools to support a healthy investing ecosystem 

for both small businesses and their investors. Development of these resources 

should include:

 Engaging, digital tools to reach diverse audiences with accessible and plain

language information, including short videos, infographics, and Q&A guides.

 Promotion in partnership with federal and state agencies to bolster the reach

of the resources and others’ efforts to promote capital raising and compliance.

 Partnerships with diverse groups of entrepreneurs and investors, including

women, minorities, rural communities, communities impacted by natural 

disasters, and other underrepresented founders. 

Additionally, it is critical that we maintain pathways for emerging companies to 

grow and scale via exempt offerings. As the Commission considers changes to 

the regulatory framework,188 it is critical to consider barriers to entry for underrepresented founders and to avoid creating regulatory foot faults that impact the 

ability of founders to secure future rounds of financing as their businesses grow.

Many entrepreneurs may have goals of one day becoming a public company; 

others may have goals of creating a medium-sized business that supports their 

family and community, but not of the size and scale of a public company. For 

both sets of entrepreneurs, the capital they raise in the private markets is often 

the difference between reaching that next milestone and hiring additional 

employees, or having to close their doors.189 They need well-functioning exempt 

offering pathways.

Background Context

To build successful companies, startups need savvy investors who bring industry 

experience, customer connections, and strategic guidance. However, professional 

angels and venture capitalists are outside of many entrepreneurs’ social and 

geographic networks, which can dramatically impact survival versus failure 

prospects for an early-stage company.190 Developing solutions to bridge social 

and professional networks is critical for building more companies that succeed.

Founders need bridges from their personal networks to 

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

The securities laws are not clear, however, when it comes to that bridge-building 

capacity. In particular, there is a lack of clarity on the role of finders in facilitating 

introductions between founders and investors.191 Given the relatively low-dollar 

transaction sizes of early-stage capital, our Office regularly hears that registered 

broker-dealers are not helping bridge this gap.

Demographic Impacts

As we noted in our 2020 Annual Report, network challenges are magnified 

among women, minority, and rural founders, where social capital plays a critical 

role in startup success.192 The lack of access to networks of potential investors 

has an impact that extends well beyond capital raising to company survival 

and growth prospects, diversity among board leadership, recycled capital from 

entrepreneurs-turned-investors, and long-term wealth-building.

Recent Commission Action

In October 2020, the Commission proposed an order193 that would permit 

natural persons to engage in certain limited activities involving accredited 

investors without registering with the Commission as a broker-dealer. The 

Commission received numerous comments in response, including a recommendation from the Commission’s Small Business Capital Formation Advisory 

Committee.

194 Most commenters agreed with the need to provide regulatory 

clarity that delineates the legal obligations of persons who bridge the 

networks between founders and investors. However, many commenting on the 

proposal identified concerns with the approach proposed by the Commission 

and suggested alternatives for the Commission to consider. Since then, the 

Commission has not taken further action on the proposal, and providing 

regulatory clarity for finders is not in the Commission’s current regulatory 

agenda.195

Proposed Solution

For decades the market has asked for clarity about the legal obligations of 

finders. A clear framework will support compliance with securities laws, 

increase investor protections, and level the playing field for founders who lack 

access to networks of sophisticated investors. We encourage Congress and the 

Commission to consider the comments the Commission received in response to 

the proposed order and to finalize a regulatory framework that helps bridge the 

networks between social and financial capital so that access to investment capital 

can be less about who you know, and more about what you know and the 

innovations you bring to bear.
ANNUAL REPORT: FISCAL YEAR 2021 | 65

Background Context

When businesses look for funding beyond friends and family or their local 

angel network, they very often are turning to private funds of sophisticated 

pooled capital, such as VC funds. Founders looking for seed and early-stage 

capital often struggle to raise financing for their smaller, earlier rounds. Many 

founders refer to the period between the early rounds of financing and the 

Series B round as the “valley of death,” as there are fewer investors who are 

able to participate in the typically more regional, smaller rounds of $10 million 

before the large VCs come to the table for a Series B round.

While the past year has been a banner year for capital raising by funds in 

general, the vast majority of that capital is concentrated into large, established 

private funds.196 Generally speaking, the larger the fund size, the larger their 

target investment check size, so that they can actively manage a small portfolio 

of companies. This has the result of either pushing valuations higher, which has 

happened across the technology industry, or pushing aside earlier-stage, smaller 

deals in favor of later-stage, more mature companies.

Emerging fund managers and their smaller funds are more likely to invest in a 

more diverse pool of entrepreneurs, as well as entrepreneurs located in areas 

not traditionally served by more established fund managers. However, funds 

raised by emerging fund managers are on the decline,197 as the market faces 

concentration of investment-decision making in the hands of a few.

Demographic Impacts

The VC industry—and the investment decision-makers at the firms—are notoriously homogenous across racial, ethnic, and gender lines.198 While we have seen 

modest gains in diversity of representation among “check writers” at funds, the 

population of decision-makers does not reflect the population of entrepreneurs 

seeking capital.199

Diversity among funders directly impacts diversity among the funded. While 

many sophisticated investors recognize the bias inherent in pattern-matching to 

the archetype of a successful, young, white, male entrepreneur, it is critical that 

we empower diverse investment decision-makers who can support and invest in 

solutions to the problems that they too face.

Diversifying capital allocators requires supporting emerging 

fund managers
Recent Commission Action

Over the last year our Office’s Emerging Fund Manager series explored solutions 

to help address some of the challenges emerging fund managers face breaking 

into the industry, including the financial toll that launching a new fund can 

place on the fund manager personally, the difficulties that come with having 

a limited track record, and the impact of personal network on capital raising 

prospects. These challenges are magnified for women and minority emerging 

fund managers.

The Commission has broadly supported diversity-related initiatives, including 

through its different advisory committees, and has encouraged continued 

engagement and ideas to improve the resources available to underrepresented 

and emerging fund managers and their limited partners.200 

Proposed Solution

In our 2020 Annual Report, we encouraged Congress and the Commission to 

explore regulatory solutions to support smaller, regional funds that support their 

ecosystems through locavesting. We support a number of policy solutions raised 

during our Emerging Fund Manager series and recommended by the SEC Small 

Business Capital Formation Advisory Committee, including:

 Improving the utility of the “qualifying venture capital fund” exemption in

Section 3(c)(1) of the Investment Company Act of 1940 by increasing the 

current $10 million limit on the aggregate amount of capital contributions and 

uncalled committed capital.201

Assuming a generous “2 and 20” fee structure by a fund,202 a $10 million 

qualifying venture capital fund would be hamstrung to operate on $200,000 

per year, inclusive of salaries, compliance, diligence, and portfolio management 

costs, an amount so low it functionally sets these small funds up to fail. 

Increasing the qualifying venture capital fund limits would equip emerging 

fund managers and smaller, regional funds with a pathway to raise meaningful 

capital, while also covering their operational costs without charging an 

outsized fee to investors.

 Amending the “venture capital fund” definition under Rule 203(l)-1 of the

Investment Advisers Act of 1940 to permit VC funds to invest in other VC 

funds in satisfaction of the “qualifying investment” requirements of the rule.

Amending the venture capital fund definition under the Advisers Act would 

allow larger—and often more geographically concentrated—funds to invest 

in emerging fund managers who write smaller checks, both increasing the 

diversity of investment decision-makers and accessibility of smaller check sizes.
ANNUAL REPORT: FISCAL YEAR 2021 | 67

Background Context

This has been a banner year for IPOs, with record amounts raised in public 

offerings and record numbers of companies going public compared to recent 

years.203 VC-backed companies continue to be the majority of exchange-listed 

IPOs,204 reflecting the critical nature of pre-IPO capital raised in the private 

markets that prepares companies for the public markets. While the headlines 

are often focused on the offerings of large public companies, smaller public 

companies have also seen growth in equity offering activity in the last year.205

Our Office is acutely aware of the importance of not only the process of going 

public, but also what it takes to remain a public company. Smaller public 

companies continue to experience declining research coverage, challenges raising 

capital from institutional investors, and a less liquid market for their investors 

compared to the market for larger companies, in addition to compliance costs.206

Many aspects of our regulatory structure were originally targeted at the largest of 

public companies, and when applied to smaller public companies often demand 

disproportionate financial and human capital resources.

The past year has seen rising interest from many investors in additional disclosures on environmental, social, and governance (ESG) matters,207 with many 

public companies scrambling to keep pace with demands. Much of the data and 

interest in this space, particularly with respect to environmental and climate 

issues, has focused on larger public companies.

Demographic Impacts

Stakeholders—including investors, exchanges, employees, and customers—are 

increasingly driving public companies to focus on diversity and inclusion both 

internally within their leadership and workforce, as well as externally in their 

business operations. However, the leadership taking companies public remains 

largely homogeneous, a reflection of the social and financial capital available to 

entrepreneurs pre-IPO that ripples into the public markets.208 The challenges our 

Office highlighted above with respect to diversity among entrepreneurs accessing 

capital209 and decision-makers writing checks210 directly impacts who carries the 

title of CEO on opening day and who sits around the boardroom guiding that 

company’s decisions.

Smaller public companies are integral to a vibrant public market
68 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Recent Commission Action

In our 2020 Annual Report, we encouraged Congress and the Commission to 

consider market innovations that could have the effect of encouraging more 

companies to go public, and the past year certainly was a banner year for IPOs.211 

In response to calls for more ESG disclosures, the Commission indicated in 

its regulatory flexibility agenda that it may propose additional disclosure 

requirements relating to climate risk, human capital (including workforce 

diversity and corporate board diversity), and cybersecurity risk.212 The 

Commission has also indicated interest in further refining the disclosures made 

by SPACs bringing companies public.

Proposed Solution

The vibrancy of our capital markets depends on having companies of varying 

sizes, from micro-cap to mega-cap, to provide investors with meaningful options 

for investment, the trademark of our public markets.

In developing rules to improve disclosures to investors by public companies, 

it is critical to be mindful of how and whether our rules are promoting an 

environment that fosters smaller public companies going and remaining public. 

We support efforts to continue tailoring the disclosure and reporting framework 

to the complexity and size of operations of companies, either by scaling 

obligations or delaying compliance for the smallest of the public companies, 

particularly as it pertains to potential new or expanded disclosure requirements.

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

T

he Small Business Advocate Act also established the SEC’s Small Business Capital Formation 

Advisory Committee. The Committee is designed to provide a formal mechanism for the 

Commission to receive advice and recommendations on Commission rules, regulations, and policy 

matters affecting small businesses, from emerging, privately-held companies 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 Committee, which otherwise functions independently.

The Committee’s membership includes companies and investors from across a diverse set of experiences, 

industries, geographies, and company life cycle stages. In FY2021, Andrea Seidt succeeded Michael 

Pieciak and Melanie Senter Lubin’s service as the North American Securities Administrators Association’s representative. Bailey DeVries succeeded William Manger as the Small Business Administration’s 

representative shortly after the end of FY2021. The Commission is grateful for their service and 

commitment to small businesses and their investors.

The members of the Committee as of the end of FY2021 were as follows:

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

KESHA CASH

Founder and General Partner, 

Impact America Fund

Oakland, CA

GREG DEAN*

Senior Vice President of the Office 

of Government Affairs, FINRA

Washington, DC

Small Business Capital 

Formation Advisory 

Committee FY2021 Summary
ANNUAL REPORT: FISCAL YEAR 2021 | 71

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

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 & Exchang

Commission

Washington, DC

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

JASON SEATS

Chief Investment Officer, 

Techstars

Austin, TX

ANDREA SEIDT*

Ohio Securities Commissioner of 

the Ohio Department of Commerce

Columbus, OH

MARC OORLOFF SHARMA*

Chief Counsel of the Office of the 

Investor Advocate, U.S. Securitie

& Exchange Commission

Washington, DC

HANK TORBERT

President, 

AltaMax, LLC

New Orleans, LA

SUE WASHER

President and CEO, Applied Genetic 

Technologies Corporation

Gainesville, FL

*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).
72 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Summary of Activities

The Committee met virtually four times during FY2021. Materials from the meetings, including 

agendas, transcripts, webcasts, and presentations, are available on the Committee’s webpage.

Meeting Date Agenda Topics

November 9, 2020 Proposed Conditional Exemption for Finders; COVID-19 

Updates and Discussion

January 29, 2021 Pulse of the Public Markets; Compensatory Offerings for Gig 

Economy Workers

April 30, 2021 Increasing Capital Access for Underrepresented Founders 

and Investors

September 27, 2021 The Changing Dynamics Pre-IPO and Going Public
ANNUAL REPORT: FISCAL YEAR 2021 | 73

Committee Recommendations

During FY2021, the Committee put forward the following two recommendations to 

the Commission:

Encouraging Small, Regional Funds

April 30, 2021

The Committee explored ways to build upon its August 2020 findings by encouraging the 

Commission to improve access to capital for underrepresented founders and investors, 

including women, minorities, and founders outside of prominent tech hubs. In homing in 

on solutions, the Committee noted the following:

1. Recent trends show that many companies in established technology ecosystems are 

successful in raising capital. However, those figures leave out many entrepreneurs 

in other areas of the country and industries who struggle to raise the capital needed 

to grow and scale. The challenges are particularly acute for companies who are 

pre-revenue, making bank capital largely inaccessible. In particular, founding teams 

outside of tech hubs struggle to raise Series A capital, typically in the $3 million to $10 

million range, after which point companies can more readily attract Series B capital 

from growth-oriented investors.

2. Pattern matching—or the process of making investment decisions that replicate patterns 

of who a successful entrepreneur has looked like in the past—perpetuates a cycle that 

has concentrated capital in limited geographies, ethnicities, genders, and educational 

backgrounds. Women and minority founders continue to struggle to raise capital and 

spend more time raising rounds of funding, relative to their White, male counterparts.

3. Many larger institutional investors express interest in supporting diversity, equity, 

and inclusion through investments in emerging fund managers and underrepresented 

founders. However, the combination of their minimum investment requirements (e.g., 

$15 million to $20 million) coupled with their maximum exposure within a single fund 

(e.g., 10% of the fund’s AUM) functionally rules out direct investments by institutional 

investors in smaller, emerging funds, including regional Seed and Series A funds, which 

have the potential to meaningfully impact diversity of entrepreneurs raising capital.

4. Early-stage investors play an active role with their portfolio companies by providing 

hands-on support to founders, participating in board meetings, and supporting 

customer attraction strategies. Proximity to portfolio companies changes how 

early-stage investors evaluate investment opportunities. Additionally, the number of 

companies that the investor can actively mentor limits the number of investments that 

they can make. As a result, larger venture funds tend to invest larger amounts in a 

handful of later-stage companies, while smaller funds tend to invest smaller amounts in 
74 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Relevant Commission Action

The Commission supports efforts to improve diversity among fund managers and entrepreneurs who 

raise capital. In the spring of 2021, the SEC’s Small Business Advocacy office, in partnership with 

other SEC offices and divisions, launched a “Cutting Through the Jargon” glossary to reduce barriers 

to entry for underrepresented and emerging investors and entrepreneurs and to improve accessibility 

of compliance content. The Office also contemporaneously launched an Emerging Fund Manager 

virtual event series, exploring the role of emerging fund managers and their investors in funding 

underrepresented founders across the country and empowering a new generation of investment 

decision-makers.

a proportionate handful of earlier-stage companies. A fund of funds model—where a 

larger fund invests in smaller, regional funds—could unlock capital otherwise competing 

for late-stage allocations and benefit smaller companies in emerging entrepreneurial 

ecosystems. However, the limitations on exempt reporting advisers’ qualifying 

investments currently make this structure impracticable given the other competing 

demands on the 20% non-qualifying basket, including public offering commitments 

and secondary liquidity for founding teams.

5. First-time fund managers and smaller funds are declining in number and size, 

threatening access to the earliest stage capital that is catalytic to new companies’ 

success. For emerging fund managers, the ability to pool more investors in a fund 

presents a promising pathway to raise a more impactful fund, while also offering 

diversification that decreases portfolio risk for angel investors who would otherwise be 

investing independently. However, the current qualified venture capital fund size limit 

of $10 million under Section 3(c)(1) of the Investment Company Act of 1940 is too low 

for a viable fund to cover its operational costs without charging an outsized fee to its 

investors.

In light of the foregoing observations, the Committee recommends the following changes:

1) With respect to the “qualifying venture capital fund” exemption in Section 3(c)(1) of 

the Investment Company Act of 1940: 

a. increase the current $10 million limit on the aggregate amount of capital contributions and uncalled committed capital to $150 million; and

b. increase the number of permitted beneficial owners from 250 to 600.

2) Amend the “venture capital fund” definition under Rule 203(l)-1 of the Investment 

Advisers Act of 1940 to permit venture capital “fund of funds” investments by treating 

an investment in another venture capital fund, which itself meets the requirements of 

Rule 203(l)-1, as a “qualifying investment.”
ANNUAL REPORT: FISCAL YEAR 2021 | 75

“Qualifying venture capital fund” exemption in Section 3(c)(1)

The Commission has noted that any amendments to Section 3(c)(1) to change the $10 million cap or 

to change the number of investors allowed would require Congressional action.213

By way of background, a 3(c)(1) fund is a type of pooled investment vehicle that is excluded from the 

definition of “investment company” under the Investment Company Act of 1940 (1940 Act) because 

it has no more than 100 beneficial owners and otherwise meets criteria outlined in Section 3(c)(1) 

of the 1940 Act. 3(c)(1) funds are often used by venture capital firms and other early-stage investors 

who pool capital for investment in startups. 

“Qualifying investments” and the “venture capital fund” definition under Rule 203(l)-1

In the adopting release defining “qualifying investment,” the Commission discussed the possibility 

of expanding the definition to include secondary purchases and investments in other venture capital 

funds, but ultimately decided that such investments should be made pursuant to the 20 percent limit 

for assets that are not “qualifying investments.”214 Since then, the Commission has noted that the 

Division of Investment Management issued guidance relating to the definition of “venture capital 

fund” to clarify whether certain fund structures or actions could jeopardize a venture capital fund 

adviser’s ability to qualify as an exempt reporting adviser.215

By way of background, an investment adviser to venture capital funds may qualify as an exempt 

reporting adviser that is not required to register with the SEC if the fund invests at least 80% of its 

assets in “qualifying investments” under Rule 203(I)-1 under the Investment Advisers Act of 1940.216

A “qualifying investment” generally consists of any equity security issued by a qualifying portfolio 

company that is directly acquired by a qualifying fund and certain equity securities exchanged for the 

directly-acquired securities.
76 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

Finders 

November 9, 2020

On October 7, 2020, the Commission proposed a new limited, conditional exemption 

from broker registration requirements for “Finders” who assist companies with raising 

capital in private markets from accredited investors. In order to promote small business 

capital formation, especially underrepresented businesses (such as minority owned and 

women owned businesses) and businesses that are not in regions with robust capital 

raising networks, the Committee supports a framework to permit certain Finders to 

engage in limited capital raising activities involving accredited investors with the following 

principles in mind:

1) The framework should be kept simple.

2) The framework should keep out bad actors.

3) The Commission should consider requiring a notice filing for all Finders, which includes 

information on fees charged for Finders’ services. 

4) The Commission should work with state securities regulators to provide additional

certainty for market participants with coordination among the states and the 

Commission.

5) It is important that Finders and Issuers know the rules on how Finders can assist with

capital formation for small businesses. 

6) The Commission should consider a blanket exemption for Finders for offerings under

a certain size.

7) The Commission should consider the issue of fees to Finders, including the reasonableness around Finders’ fees and/or limits on the amount of Finders’ fees.

8) The Commission should add clarity on prohibited and permissible activities. For 

example, the contact restrictions, the one time per year, and the natural person 

requirements in the proposal may be too limiting. 

9) The Commission should clarify whether broker-dealers are allowed to pay Tier 2 

finders that are non-associated persons.

Relevant Commission Action

The Advisory Committee’s recommendation was made following the Commission’s October 7, 

2020 proposed exemptive order that would permit natural persons to engage in certain limited 

activities involving accredited investors without registering with the Commission as a broker dealer.217 

In connection with that proposal, the Commission requested public comment on all aspects of 

the proposed exemption. Finalizing the proposal is not included in the Commission’s current 

regulatory agenda.218
ANNUAL REPORT: FISCAL YEAR 2021 | 77

ANNUAL REPORT: FISCAL YEAR 2021 | 79

1 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))].

2 See Office of the Advocate for Small Business 

Capital Formation Annual Report for Fiscal Year 

2020, at 66, available at https://www.sec.gov/

files/2020-oasb-annual-report.pdf.

3 This graphic is based on DERA data. This 

graphic depicts amounts reported or estimated as 

raised from July 1, 2020 through June 30, 2021. 

Data on offerings under Regulations D and 

Crowdfunding is based on information reported 

by companies and was collected from EDGAR 

filings (new filings and amendments) on Forms D 

and C, respectively. Data on registered offerings 

was collected from Thomson Financial’s SDC 

Platinum database. For offerings under Regulation Crowdfunding, except where specified 

otherwise, estimates of the number of offerings 

are based on offerings completed during this 

period as shown on progress updates on Form 

C-U; estimates of amounts raised are based on 

proceeds reported in progress updates filed on 

Form C-U during the report period. For offerings 

under Regulation A, except where specified otherwise, estimates of the number of offerings are 

based on offerings qualified during this period, 

excluding post-qualification amendments; estimates of amounts raised 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 supplements 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.

4 “Other exempt offerings” includes estimated

amounts raised under Section 4(a)(2), Regulation 

S, and Rule 144A for calendar year 2020. The 

data used to estimate the amounts raised in 2020 

for other exempt offerings includes: (1) offerings 

under Regulation S that were collected from 

Thomson Financial’s SDC Platinum service; and 

(2) resale offerings under Rule 144A that were 

collected from Thomson Financial SDC New 

Issues database, Dealogic, the Mergent database, 

and the Asset-Backed Alert and Commercial 

Mortgage Alert publications, to further estimate 

the exempt offerings under Section 4(a)(2) and 

Regulation S. We include amounts sold in Rule 

144A resale offerings because those securities are 

typically issued initially in a transaction under 

Section 4(a)(2) or Regulation S but generally are 

not included in the Regulation S data identified 

above. These numbers are accurate only to the 

extent that these databases are able to collect 

such information and may understate the actual 

amount of capital raised under these offerings if 

issuers and underwriters do not make this data 

available. The data on Rule 144A debt offerings 

from Mergent is available only through October 

26, 2021. We have extrapolated the data to obtain a full calendar year. We do not yet have data 

to provide an estimated amount raised under 

Section 4(a)(2), Regulation S and Rule 144A for 

the 12 month period through June 30, 2021.

5 17 C.F.R. § 230.506(b); see https://www.sec.gov/

smallbusiness/exemptofferings/rule506b.

6 17 C.F.R. § 230.506(c); see https://www.sec.gov/

smallbusiness/exemptofferings/rule506c. 

7 17 C.F.R. § 230.504; see https://www.sec.gov/

smallbusiness/exemptofferings/rule504.

8 17 C.F.R. § 227.100 et seq.; see https://www.sec.

gov/smallbusiness/exemptofferings/regcrowdfunding. 

9 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.

10 17 C.F.R. § 230.251 et seq.; see https://www.sec.

gov/smallbusiness/exemptofferings/rega.

11 15 U.S.C. § 77a, et seq.; see https://www.sec.gov/

smallbusiness/goingpublic.

12 See https://www.sec.gov/investor/alerts/ipo-investorbulletin.pdf for more information. 

13 See https://twitter.com/adammgrant/status/1418217471488806912.

14 This graphic is based on DERA data. 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, 2020 through June 30, 2021. See

supra note 3 for a description of how these 

amounts were reported or estimated.

15 This graphic is based on DERA data. This graphic presents capital raised in registered, Regulation 

D and Regulation A offerings across the top six 

industries from July 1, 2020 through June 30, 

2021. Offerings by non-pooled investment funds 

in other industries accounted for approximately 

$67 billion, $29 billion and $40 million in registered, Regulation D and Regulation A offerings, respectively. Regulation A and registered 

offerings were classified into industry groups 

based on the primary SIC code reported by the 

End Notes
80 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

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 $183 

billion and $1.7 trillion in registered offerings 

and Regulation D, respectively, are excluded from 

this graphic. See supra note 3 for a description of 

how these amounts were reported or estimated.

16 This report looks at data from exempt offerings

that take place under Regulation Crowdfunding and parallel offerings under Rule 506(c) of 

Regulation D. See Crowdfund Capital Advisors, 

“How U.S. SME’s Successfully Raised Capital in 

2020, Via Online Platforms,” (Feb. 1, 2021) at 

21, available at https://crowdfundcapitaladvisors.

com/downloads/2020-year-in-review/.

17 Id. at 49.

18 Id. at 48.

19 See Sherwood Neiss, “Day 1 of #10days10trends,” (July 13, 2021) available 

at https://twitter.com/woodien/status/1414925426405769221; see also Crowdfund 

Capital Advisors, supra note 16, at 12 (noting 

that according to a survey of businesses that 

raised $1 million using Regulation Crowdfunding, 45.5% had female founders and 40.9% had 

minority founders). 

20 This graphic is based on DERA data. Because 

of lags in offering qualifications, withdrawals, 

and abandonments, for greater comparability, 

this analysis considers all initiated Regulation 

Crowdfunding offerings and does not exclude 

offerings that are subsequently withdrawn or 

abandoned. 

21 This graphic is based on DERA data. See supra

note 3 for a description of the methodology used 

to calculate this data.

22 This graphic is based on DERA data. This 

graphic includes all industries that accounted 

for over five percent of the reported amounts 

raised by non-pooled fund issuers during one of 

the respective periods. Offerings by non-pooled 

fund issuers in other industries accounted for 

approximately $45 billion and $62 billion in the 

twelve months ended June 30, 2020 and 2021, 

respectively. See supra note 3 for a description of 

the methodology used to calculate this data.

23 This graphic is based on DERA data. Because 

of lags in offering qualifications, withdrawals, 

and abandonments, for greater comparability, 

this analysis considers all initiated Regulation 

A offerings (whether qualified or not) and does 

not exclude offerings that are subsequently 

withdrawn or abandoned. Due to lags and 

bunching in proceeds data and temporary relief 

provided to Regulation A in March 2020, the 

dollar amounts in this graphic are based on the 

amounts sought (in $ million) in qualified Regulation A offerings and not on reported proceeds.

24 This graphic is based on DERA data. This 

graphic includes all industries that accounted 

for approximately five percent of the aggregate 

amounts sought in qualified Regulation A offerings during one of the respective periods. Additional offerings accounted for approximately $37 

million and $81 million in the twelve months 

ended June 30, 2020 and 2021, respectively.

25 This graphic is based on DERA data, including 

pooled funds.

26 This graphic is based on DERA data, excluding 

pooled funds. 

27 This graphic is based on DERA data, excluding 

IPOs filed by pooled funds. This graphic includes 

the top six industries by IPO proceeds. Additional offerings by non-pooled fund issuers accounted for approximately $3.4 billion and $10 billion 

in the twelve months ended June 30, 2020 and 

2021, respectively. Pooled investment funds, including SPACs, accounted for approximately $22 

billion and $176 billion in the twelve months 

ended June 30, 2020 and 2021, respectively. 

28 See Kyle Stanford, “Alternative Sources of Financing for Startups,” PitchBook, (Feb. 11, 2020) 

at 12, available at https://pitchbook.com/news/

reports/q1-2020-pitchbook-analyst-note-alternative-sources-of-financing-for-startups (noting 

that VC is not a fit for all businesses or founder 

personalities). See also Thomas Huckabee, “Not 

All Startups Are a Fit for the VC Funding Model: 

Why They Need Projected Revenues of over 

$25 Million,” Thomas Huckabee, Inc., (June 11, 

2021) available at https://tehcpa.net/uncategorized/not-all-startups-are-a-fit-for-the-vc-funding-model-why-they-need-projected-revenues-ofover-25-million/.

29 See Babson College, “Global Entrepreneurship 

Monitor 2020/2021 United States Report,” (Sept. 

3, 2021) at 24, available at https://issuu.com/

babsoncollege/docs/gem-2020-2021-us-report.

30 See U.S. Census Bureau, “Business Formation 

Statistics,” (Oct. 14, 2021) available at https://

www.census.gov/econ/bfs/pdf/bfs_current.pdf; 

see also McKinsey & Company, “Trends That 

Will Define 2021 and Beyond: Six Months 

On,” (July 21, 2021) available at https://www.

mckinsey.com/industries/public-and-social-sector/

our-insights/trends-that-will-define-2021-and-beyond-six-months-on.

31 See U.S. Small Business Administration Office of 

Advocacy, “Frequently Asked Questions,” (Nov. 

2021) available at https://cdn.advocacy.sba.gov/

wp-content/uploads/2021/11/03093005/SmallBusiness-FAQ-2021.pdf (calculated using The 

Census Bureau’s Business Employment Dynamics 

(BED) data, defining small businesses as independent businesses with fewer than 500 employees).

32 See Jessica Looze and Sameeksha Desai, “How 

Does COVID-19 Affect Challenges Facing 

Entrepreneurs? Trends by Business Age,” Ewing 

Marion Kauffman Foundation, (Dec. 16, 2020) 

available at https://www.kauffman.org/entrepre-
ANNUAL REPORT: FISCAL YEAR 2021 | 81

neurship/reports/how-covid-19-affects-challenges-facing-entrepreneurs-by-business-age/ (“Close 

to half of entrepreneurs with a new business under 1 year old reported information, education, 

or knowledge necessary for running a business as 

a challenge (48%). This is more than twice what 

was reported by those with a mature business 

(21%).”). See also Jessica Looze and Sameeksha 

Desai, “Challenges Along the Entrepreneurial 

Journey: Considerations for Entrepreneurship 

Supporters,” Ewing Marion Kauffman Foundation, (May 2020) at 6, available at https://www.

kauffman.org/wp-content/uploads/2020/05/Challenges-Along-The-Entrepreneurial-Journey.pdf.

33 See Jessica Looze and Sameeksha Desai, “How 

Does COVID-19 Affect Challenges Facing Entrepreneurs? Trends by Business Age,” supra note 

32.

34 See Start Us Up, “America’s New Business Plan,” 

(2021) at 16, available at https://www.startusupnow.org/wp-content/uploads/sites/12/2021/03/

AmericasNewBusinessPlan.pdf.

35 See CB Insights, “The Top 12 Reasons Startups 

Fail,” (2021) at 4, available at https://www.

cbinsights.com/reports/CB-Insights_Top-Reasons-Startups-Fail.pdf. (CB insights analyzed 111 

startup failures since 2018).

36 See Federal Reserve Banks, “2021 Report on Employer Firms. Small Business Credit Survey,” at 

7, available at https://www.fedsmallbusiness.org/

medialibrary/FedSmallBusiness/files/2021/2021-

sbcs-employer-firms-report.

37 Id. at 8.

38 Id. at 24. Percentages add to more than 100 because respondents could select multiple options. 

Unlike prior years, the Federal Reserve’s Small 

Business Credit survey did not include data about 

the use of retained earnings for ongoing business 

operations.

39 Id. at 18 (37% represents a 6% decline from the 

prior year’s 43% of firms).

40 See U.S. Small Business Administration, Office of Advocacy, “Small Business Lending in 

the United States, 2019,” at 1, available at

https://cdn.advocacy.sba.gov/wp-content/uploads/2020/09/10092858/Report-2019-SmallBusiness-Lending-Report.pdf.

41 See Office of the Advocate for Small Business 

Capital Formation, supra note 2, at 30. 

42 See Federal Reserve Banks, supra note 36, at 20.

43 See Gregory Brown et al., “Filling the U.S. Small 

Business Funding Gap,” Frank Hawkins Kenan 

Institute of Private Enterprise, (Feb. 2020) at 

7, available at http://uncipc.org/wp-content/uploads/2020/02/FundingGap_02042020.pdf; see 

also https://proxy.www.sba.gov/loans-grants/getready-apply/check-your-credit/collateral#. 

44 See Federal Reserve Banks, supra note 36, at 17 

(large banks included those with at least $10 

billion in total deposits).

45 See Jeffrey Sohl, “The Angel Market in 2020: 

Return of the Seed and Start-Up Stage Market 

for Angels,” Center for Venture Research, (May 

5, 2021) at 1, available at https://paulcollege.unh.

edu/sites/default/files/resource/files/2020-analysis-report_.pdf.

46 Id.

47 Id.

48 Id. at 2.

49 See Angel Capital Association, “Angel Funders 

Report 2021,” at 8, available at https://www.

angelcapitalassociation.org/angel-funders-report-2021/.

50 Id. at 11.

51 Id. at 5. 

52 Id. at 8.

53 Id. at 56. 

54 Id. at 12.

55 See https://www.sec.gov/jargon-z#S. 

56 See Andy Stinnes, “Seed is Not the New Series 

A,” TechCrunch, (June 21, 2021) available at

https://techcrunch.com/2021/06/21/seed-is-notthe-new-series-a/.

57 See PitchBook-NVCA, “Venture Monitor Q2 

2021,” (July 13, 2021) at 7, available at https://

nvca.org/wp-content/uploads/2021/07/Q2_2021_

PitchBook-NVCA_Venture_Monitor-1.pdf.

58 Id.

59 Id. at 8.

60 See Alicia Robb, Ph.D., “Rural Entrepreneurship 

and the Challenges Accessing Financial Capital: 

An Overview of Funding in Rural America,” 

(Sept. 10, 2021) at 18, available at https://www.

sec.gov/files/2021_Rural_Report_508_Compliance_FINAL.pdf. 

61 See PitchBook-NVCA, supra note 57, at 7.

62 See Kyle Stanford, “Angels: Foundational Investors to VC,” PitchBook, (Sept. 1, 2020) at 10, 

available at https://files.pitchbook.com/website/

files/pdf/Q3_2020_PitchBook_Analyst_Note_Angels_Foundational_Investors_to_VC.pdf.

63 See PitchBook-NVCA, supra note 57, at 9. Data 

from https://sharepoint/sites/oasb/Documents/

Annual%20Report/FY2021/External%20

Source%20PDFs/Q2_2021_PitchBook_NVCA_

Venture_Monitor_Summary_XLS.xlsx?Web=1.

64 Id. (Excel data).

65 See Paul Gompers, et al., “How Venture Capitalists Make Decisions,” Harvard Business 

Review, (Mar.-Apr. 2021) available at https://hbr.

org/2021/03/how-venture-capitalists-make-decisions. 

66 Id.

67 Diversifying Opportunity in Venture Capital: 

Investing with Emerging Managers (Mar. 31, 

2021) available at https://www.youtube.com/

watch?v=318UXLOox3I. 

68 See PitchBook-NVCA, supra note 57. (Excel 

data).
82 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

69 See Paul Gompers et al., supra note 65.

70 See Peter Walker, “Private Market Report: Q1 

2021,” Carta, (May 6, 2021) at 8, available 

at https://carta.com/blog/private-market-report-q1-2021/. 

71 See NVCA, “2021 Yearbook,” (Mar. 2021) at 

29, available at https://nvca.org/wp-content/uploads/2021/03/NVCA-2021-Yearbook.pdf.

72 See Peter Walker, “The State of Private Markets: Q2 2021,” Carta, (Aug. 4, 2021) at 9, 

available at https://carta.com/blog/private-markets-q2-2021.

73 See PitchBook-NVCA, supra note 57. (Excel 

data).

74 Id. (Excel data; new and emerging fund managers is defined as those who has sponsored four or 

fewer funds).

75 Id.

76 See Yuliya Chernova, “A Comeback of First-Time 

Venture Fund? Stay Tuned,” Wall Street Journal, 

(Sept. 7, 2021) available at https://www.wsj.com/

articles/a-comeback-of-the-first-time-venturefund-stay-tuned-11631012400. 

77 See Marina Temkin, “VC is Performing Better 

than Ever. Then Why are so Few First-time 

Funds Being Raised?” PitchBook, (May 4, 

2021) available at https://pitchbook.com/news/

articles/vc-is-better-than-ever-why-so-few-firsttime-funds; see also PitchBook-NVCA, supra 

note 57, at 26. 

78 See First Republic, “Fundraising Best Practices 

for Emerging Managers,” (Apr. 2021) at 5, available at https://www.firstrepublic.com/-/media/frb/

documents/pdfs/innovators/how-to-successfullyraise-a-fund-ii-report.pdf.

79 See PitchBook-NVCA, supra note 57, at 19; 

see also James Thorne, “Corporate VC Firms 

Buck ‘Tourist’ Reputation with Pandemic 

Dealmaking,” PitchBook, (Sept. 28, 2020) 

available at https://pitchbook.com/news/

articles/corporate-vc-firms-pandemic-dealmaking-rate-bucks-tourist-reputation; see also 

James Thorne, “What’s Driving Private Equity’s 

March on VC?,” PitchBook, (Sept. 8, 2021) 

available at https://pitchbook.com/news/articles/

private-equity-nontraditional-investors-vc-deals;

see also Cameron Stanfill et al., “Crossing Over 

Into Venture,” PitchBook, (Apr. 20, 2021) at 2, 

available at https://pitchbook.com/news/reports/

q2-2021-pitchbook-analyst-note-crossing-overinto-venture. 

80 See Cameron Stanfill et al., supra note 79, 

at 3-5.

81 See Cameron Stanfill et al., “Q2 2021 US VC 

Valuations Report,” (May 2021) at 3-5, available 

at https://files.pitchbook.com/website/files/pdf/

PitchBook_Q2_2021_US_VC_Valuations_Report.pdf (report and Excel packet).

82 See Cameron Stanfill et al., supra note 79, at 3-5.

83 Id. at 7.

84 See PitchBook-NVCA, supra note 57, at 6.

85 Data on U.S. listed domestic firms was estimated 

by DERA based on the Center for Research in 

Security Prices (CRSP) database. The analysis 

includes U.S. common stocks (share codes 10 and 

11) listed on NYSE, NYSE MKT and Nasdaq. 

The analysis excludes investment funds and 

trusts (Standard Industrial Classification codes 

6722, 6726, 6798, and 6799). A company with 

several classes of shares is counted once. Data for 

2021 represents the number of listed firms and 

market capitalization as of September 30, 2021. 

86 See Joan Farre-Mensa, “Public vs Private Firms,” 

WEFI Lecture Series, (Nov. 2020) at slides 39-

40, available at https://drive.google.com/file/d/1cGyZ3mMo2IcS7tG8PF16QpnWYSd74WZA/

view.

87 See Professor Michael Klausner, United States 

Securities and Exchange Commission Small 

Business Capital Formation Advisory Committee, (Sept. 27, 2021) at 136, available at https://

www.sec.gov/info/smallbus/acsec/sbcfac-transcript-092721.pdf. “And then post-merger, of 

course, you’re – all of this dilution is drawing a 

big company and post-merger dilution becomes a 

smaller fraction”.

88 This graphic is based on DERA data for nonSPAC IPOs and SPAC offerings. Data on direct 

listings are from Jay R. Ritter, Initial Public Offerings: Updated Statistics, October 1, 2021 (the 

data were pulled from Table 13a) available at

https://site.warrington.ufl.edu/ritter/files/IPO-Statistics.pdf.

89 See Jay R. Ritter, supra note 88, at Table 4c, 

available at https://site.warrington.ufl.edu/ritter/

files/IPO-Statistics.pdf. This table excludes IPOs 

with an offer price below $5.00 per share, unit 

offers, ADRs, closed-end funds, natural resource 

limited partnerships, SPACs, REITs, bank and 

S&L IPOs, small best efforts offerings, offerings 

by companies that were already traded in other 

countries, and firms not listed on CRSP within 

six months of the IPO. CRSP covers stocks listed 

on Nasdaq, NYSE, and NYSE MKT. 

90 See Morgan Stanley Institute for Sustainable 

Investing, “Sustainable Value: How Emerging 

Public Companies Can Deliver on ESG Expectations,” (2020) at 2, available at https://www.

morganstanley.com/content/dam/msdotcom/en/

assets/pdfs/3327223_Sustainable-Value-Delivering-ESG-Expectations_FINAL_REVISED.pdf.

91 See James Thorne, “Institutional Demand Buoys 

Socially Conscious SPACs,” PitchBook, (Feb. 16, 

2021) available at https://pitchbook.com/news/

articles/investor-demand-esg-spacs.

92 See Morgan Stanley Institute for Sustainable 

Investing, supra note 90, at 5.

93 Id. at 3. 

94 See Renaissance Capital, “Equity in Equities: 

MWVBE Investment Banks are on the Rise in 
ANNUAL REPORT: FISCAL YEAR 2021 | 83

IPOs,” (Feb. 18, 2021) available at https://www.

renaissancecapital.com/IPO-Center/News/77940/

Equity-in-equities-MWVBE-investment-banksare-on-the-rise-in-IPOs; see also Jay R. Ritter, supra note 88, at Table 4c. This table excludes IPOs 

with an offer price below $5.00 per share, unit 

offers, ADRs, closed-end funds, natural resource 

limited partnerships, SPACs, REITs, bank and 

S&L IPOs, small best efforts offerings, offerings 

by companies that were already traded in other 

countries, and firms not listed on CRSP within 

six months of the IPO. CRSP covers stocks listed 

on Nasdaq, the NYSE, and the NYSE MKT.

95 This graphic is based on DERA data. Registered 

offering data includes IPOs and registered secondary equity offerings, and was collected from 

Thomson Financial’s SDC Platinum database. 

Registered debt offerings have been excluded. 

Small public companies include public companies 

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), 

Dealogic, Compustat, and Bloomberg were used 

to fill in missing information from SDC Platinum. 

Those companies with missing a stock price on 

the offering day or number of outstanding shares 

are not included in the statistics.

96 See supra note 95 for a description of the 

methodology used to estimate registered equity 

offerings by small public companies. This graphic 

includes all industries that accounted for approximately five percent or more of the total proceeds 

raised in registered equity offerings by small 

public companies during one of the respective periods, excluding offerings filed by pooled funds. 

Additional offerings for industries under five 

percent accounted for approximately $0.6 billion 

and $1.7 billion in the twelve months ended June 

2020 and 2021, respectively. Offerings by pooled 

funds, including SPACs, accounted for approximately 6 billion and 41 billion in the twelve 

months ended 2020 and 2021, respectively.

97 See IR Magazine, “Sample: Retail Investors 

Research Report Sponsored by Broadridge,” 

(Aug. 2021) at 3, 5, available at https://www.

thecorporatecounsel.net/member/memos/Broadridge/08_21_report.pdf. (45% of the 315 total 

respondents were from North America).

98 Id. at 9. (Small cap is defined as less than 

$1 billion in market capitalization, while large 

public companies or “Large Cap” in the report 

was defined as companies with market capitalization between $5 billion and $30 billion; 4

5% of the 315 total respondents were from 

North America).

99 See Phil Mackintosh, “NASDAQ Market 

Makers,” (emailed on July 29, 2021) available at https://nd.nasdaq.com/index.php/

email/emailWebview?mkt_tok=MzAzLVFLTS00NjMAAAF-kmVldKkZaNNmMWVIpyCmiudQFmJR3mp740iEwoHYwO-YDJAEN8UDUXY-uWxtEuXeNo-p-mef86xkft6f47rtG3hb6NBjLuIgPf0hz26hujZ9&md_

id=8462. 

100 See Kauffman Foundation, “Who is the Entrepreneur? The Changing Diversity of New 

Entrepreneurs in the United States, 1996–2020,” 

(Apr. 2021) available at https://www.kauffman.

org/wp-content/uploads/2021/04/Kauffman_

Trends-in-Entrepreneurship-Who-Is-The-Entrepreneur-2020-Update_April2021.pdf.

101 See Victoria Williams, “Small Business Facts: 

Women-Owned Employer Businesses,” U.S. 

Small Business Administration Office of Advocacy, (Aug. 2021) available at https://cdn.advocacy.

sba.gov/wp-content/uploads/2021/08/03103255/

Small-Business-Facts-Women-Owned-Businesses.

pdf. 

102 Id.

103 Id.

104 See Jessica Looze and Sameeksha Desai, 

“Economic Engagement of Mothers: Entrepreneurship, Employment, and the Motherhood 

Wage Penalty,” Ewing Marion Kauffman 

Foundation, (Dec. 2020) at 4, available at

https://www.kauffman.org/wp-content/uploads/2021/01/Economic-Engagement-of-Mothers-How-and-When-Entrepreneurship-Matters.

pdf.

105 See U.S. Chamber of Commerce, “Special 

Report on Women-Owned Small Businesses 

During COVID-19,” (Aug. 26, 2020) available at

https://www.uschamber.com/workforce/specialreport-women-owned-small-businesses-duringcovid-19.

106 See Sarah House et al., “She Means Business: 

A Larger Role for Women in the Post-COVID 

Recovery,” Wells Fargo, (Mar. 2, 2021) available 

at https://wellsfargo.bluematrix.com/links2/html/

89fa294c-14f9-4b9a-bcce-8bd2e36ceff5.

107 Id.

108 See All Raise, “Against the Odds: Underrepresented Founders Report Positive Outlook on 

Business Despite Extra COVID-19 Pressures,” 

available at https://www.allraise.org/assets/

gms069_infographic_desktop_1400px.jpg.

109 Id.

110 See Jeffrey Sohl, supra note 45, at 2. 

111 See Angel Capital Association, supra note 49, 

at 33.

112 See Natasha Mascarenhas and Alex Wilhelm, 

“Female Founders are Making a Buzzing, 

Venture-Backed Comeback,” TechCrunch, 

(Nov. 3, 2021), available at https://techcrunch.

com/2021/11/03/female-founders-are-making-abuzzing-venture-backed-comeback/.

113 See Joanna Glasner, “Something Ventured: 

Despite Blockbuster Venture Investment, Female 

Founders’ Share of VC Funding Falls,” (Sept. 
84 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

21, 2021) (data as of Aug. 27, 2021), available at https://news.crunchbase.com/news/

something-ventured-blockbuster-venture-investment-female-founders-funding-falls/.

114 Id.

115 See Jordan Rubio et al., “Female Founders 

are Having a Standout Year – That’s not the 

Whole Story,” PitchBook, (Aug. 26, 2021) 

available at https://pitchbook.com/news/articles/

female-founders-standout-year-venture-capital-fundraising.

116 Id.

117 See PitchBook, “All In: Female Founders in the 

US VC Ecosystem,” (Nov. 1, 2021) at 16, available at https://pitchbook.com/news/reports/2021-

all-in-female-founders-in-the-us-vc-ecosystem

(see Excel file accompanying report for underlying data).

118 See Gené Teare, “Sole Female Founders Raised 

$1B Less In 2020 Despite Record Venture Funding Surge in the US,” Crunchbase News, (Mar. 

24, 2021) available at https://news.crunchbase.

com/news/sole-female-founders-raised-1b-less-in2020-despite-record-venture-funding-surge-inthe-us/. 

119 Lakshmi Balachandra is an associate professor

of entrepreneurship at Babson College, whose 

research focuses on the impact of trust and 

gender in receiving business funding. See Sophia 

Kunthara, “The Market Minute: A Historic 

Year (So Far) For Woman-Led IPOs, But There’s 

A Ways To Go,” Crunchbase News, (Aug. 11, 

2021) available at https://news.crunchbase.com/

news/the-market-minute-a-historic-year-so-farfor-women-led-ipos-but-theres-a-ways-to-go/. 

120 See Dana Kanze et al., “Evidence that Investors 

Penalize Female Founders for Lack of Industry 

Fit,” Science Advances, Vol. 6, No. 48 (Nov. 25, 

2020) available at https://www.ncbi.nlm.nih.gov/

pmc/articles/PMC7688320/.

121 See Christopher Cassion, et al., “Investors Embrace Gender Diversity, Not Female CEOs: The 

Role of Gender in Startup Fundraising,” arXiv.

org, (Jan. 12, 2021) at 18, available at https://

arxiv.org/pdf/2101.12008.pdf.

122 See PitchBook, supra note 117, at 16. 

123 See Ann Shepherd and Gené Teare, “2020 

Study of Gender Diversity on Private Company 

Boards,” Crunchbase, (Mar. 1, 2021) available at

https://news.crunchbase.com/news/2020-diversity-study-on-private-company-boards/.

124 See Alyson Shontell, “Hundreds of Startups Go 

Public Every Year. Only 20 are Founded and 

Led by Women,” Business Insider, (Jan. 5, 2021) 

available at https://www.businessinsider.com/

female-entrepreneurs-face-obstacles-taking-companies-public-2020-12. 

125 See Sophia Kunthara, supra note 119; see also 

May Teng and Alyson Shontell, “Meet 22 Women Who Launched and Led Startups to an IPO, 

an Accomplishment Few Female Founders have 

Ever Reached,” Business Insider, (Feb. 9, 2021) 

available at https://www.businessinsider.com/

female-founders-startup-fundraising-ipo-data. 

126 See Dan Marcec, “Q2 2021 Equilar Gender 

Diversity Index: Boards Reach Important Milestone, Surpassing Halfway to Gender Parity,” 

Equilar, (Aug. 19, 2021) available at https://

www.equilar.com/reports/84-q2-2021-equilar-gender-diversity-index. Data for 2021 is as of 

June 30, 2021. 

127 Id.

128 Id.

129 See Jeffrey Sohl, supra note 45, at 2. 

130 See PitchBook, supra note 117, at 16. 

131 Id.

132 See NVCA and Deloitte, “VC Human Capital 

Survey,” (Mar. 2021) at 6, available at https://

nvca.org/research/nvca-deloitte-human-capital-survey/. 

133 Id. at 25.

134 See McKinsey Intersection, “Looking to the 

American South in the Quest for Racial Equity,” 

(Mar. 3, 2021) quoting Sarah Kunst, Founder 

and Managing Director, Cleo Capital, available 

at https://www.mckinsey.com/~/media/mckinsey/

email/leadingoff/2021/03/15/2021-03-15b.htm.

135 See Emily Fetsch, “Does Racial Wealth Disparity Hinder Entrepreneurship?,” Ewing Marion 

Kauffman Foundation, (Jan. 21, 2016) available 

at https://www.kauffman.org/currents/does-racial-wealth-disparity-hinder-entrepreneurship/. 

136 See Aria Florant et al., “The Case for Accelerating Financial Inclusion in Black Communities,” 

McKinsey & Company, (Feb. 25, 2020) available 

at https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-case-for-accelerating-financial-inclusion-in-black-communities. 

137 See Neil Bhutta et al., Board of Governors of the 

Federal Reserve System, “Disparities in Wealth 

by Race and Ethnicity in the 2019 Survey of 

Consumer Finances,” (Sept. 28, 2020) available 

at https://www.federalreserve.gov/econres/notes/

feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-2019-survey-of-consumer-finances-20200928.htm.

138 See J.P. Morgan Chase & Co., “Small Business 

Ownership and Liquid Wealth,” (Mar. 2021) 

available at https://www.jpmorganchase.com/

institute/research/small-business/small-businessownership-and-liquid-wealth-report. 

139 See Stanford Graduate School of Business, “2020 

Research Report: State of Latino Entrepreneurship,” (Jan. 2021) at 15, available at https://

www.gsb.stanford.edu/sites/default/files/publication-pdf/report-2020-state-of-latino-entrepreneurship.pdf.

140 See David Baboolall et al., “Building Supportive Ecosystems for Black-Owned US 

Businesses,” McKinsey & Company, (Oct. 
ANNUAL REPORT: FISCAL YEAR 2021 | 85

29, 2020) at 11, available at https://www.

mckinsey.com/industries/public-and-social-sector/our-insights/building-supportive-ecosystems-for-black-owned-us-businesses.

141 See Stanford Graduate School of Business, supra 

note 139, at 5.

142 See Federal Reserve Banks, “Small Business 

Credit Survey: 2021 Report on Firms Owned 

by People of Color,” (2021) at 32, available at

https://www.fedsmallbusiness.org/medialibrary/

FedSmallBusiness/files/2021/sbcs-report-on-firmsowned-by-people-of-color.

143 See Kauffman Foundation, supra note 

100, at 3.

144 See Stanford Business Graduate School, supra 

note 139, at 10-11 (finding that the number of 

Latino/Hispanic-owned businesses has grown 

34% over the last 10 years compared to just 

1% for all other small businesses, and that 

Latino-owned firms grew revenues an average of 

25% per year the past two years, while Whiteowned businesses’ revenue grew at 19%).

145 See Kauffman Foundation, supra note 100, at 3.

146 See https://www.census.gov/quickfacts/fact/table/

US/PST045219. The U.S. Census Bureau adheres 

to the U.S. Office of Management and Budget’s 

(OMB) definition of ethnicity. For purposes of 

classification, “White” reflects the population of 

individuals who responded “No, not Spanish/

Hispanic/Latino” and who reported “White” as 

their only entry in the race question. There are 

two minimum categories for ethnicity: Hispanic 

or Latino and Not Hispanic or Latino. OMB 

considers race and Hispanic origin to be two 

separate and distinct concepts. Hispanics and 

Latinos may be of any race, and thus some 

Hispanics may also be included in other race 

categories. See information description accompanying “Hispanic or Latino, percent” category 

available at https://www.census.gov/quickfacts/

fact/table/US/RHI825219#RHI825219. “Other” 

includes: American Indian/Native American and 

Alaska Native, Two or More Races, and Native 

Hawaiian and other Pacific Islander.

147 See Kauffman Foundation, supra note 100, at 4.

148 See McKinsey & Company, “US Hispanic and 

Latino Lives and Livelihoods in the Recovery 

from COVID-19,” (Sep. 2, 2020) at 16, available 

at https://www.mckinsey.com/~/media/mckinsey/

industries/public%20and%20social%20sector/

our%20insights/us%20hispanic%20and%20

latino%20lives%20and%20livelihoods%20

in%20the%20recovery%20from%20covid%20

19/us-hispanic-and-latino-lives-and-livelihoodsin-the-recovery-from-covid-19-v5.pdf.

149 See McKinsey Intersection, “Asian Americans 

Speak Out,” (May 12, 2021) available at https://

www.mckinsey.com/~/media/mckinsey/email/

intersection/2021/05/12/2021-05-12d.html.

150 Id.; see also Federal Reserve Bank of New 

York, “State of the Older Entrepreneur During 

COVID-19,” (Mar. 30, 2021) at 8, available 

at https://www.fedsmallbusiness.org/survey/2021/45-entrepreneuers-aarp-report.

151 See Jeffrey Sohl, supra note 45, at 2.

152 See Diversity VC and Rate My Investor, “Diversity in U.S. Startups,” (2020) at 12, available at

https://www.sieo.io/ratemyinvestor-report-2020; 

see also e.g., “Women Business Owners and 

Investors” section of the Report above, at 41-42.

153 See David Teten and Katherine Boe Heuck, 

“Broaden Your View of ‘Best’ to Make Smarter, More Inclusive Investments,” TechCrunch, 

(Feb. 26, 2021) available at https://techcrunch.

com/2021/02/26/broaden-your-view-of-best-tomake-smarter-more-inclusive-investments/. 

154 See Jack Graham, “Out in Tech: LGBT+ Entrepreneurs Struggle for Funding,” Reuters, (Mar. 

25, 2020) available at https://www.reuters.com/

article/us-tech-rights-funding/out-in-tech-lgbtentrepreneurs-struggle-for-funding-idUSKBN21C330. 

155 Id.

156 See Hello Alice, “Impact Report: The State of the 

LGBTQ+ Economy,” (June 2021) at 17, available 

at https://alice-data-production.s3.us-east-2.

amazonaws.com/data_reports/the_state_of_the_

lgbtq__economy_2021__2_.pdf.

157 See StartOut, “Socos Labs and StartOut Roll Out 

Inclusion Impact Indexes Survey to All US Entrepreneurs,” (Mar. 15, 2021) available at https://

startout.org/speii/; see also https://startout.org/

news/socos-labs-and-startout-roll-out-inclusionimpact-indexes-survey-to-all-us-entrepreneurs/. 

158 See Jeffrey Sohl, supra note 45, at 2. 

159 See NVCA and Deloitte, supra note 132, at 9-10. 

160 See Morgan Stanley, “Venture Capital and Racial 

Equality: How Attitudes and Actions Are Evolving and What Continues to Hold the Industry 

Back,” (2020) at 6, available at https://www.

morganstanley.com/content/dam/msdotcom/en/

assets/pdfs/9924258_MS_VC_Funding_Gap_Report_2020.pdf.

161 Id. at 9.

162 Id. at 6. 

163 Id. at 8.

164 Id.

165 Id. at 12.

166 See U.S. Department of Homeland Security, 

FEMA, “Stay in Business after a Disaster by Planning Ahead,” (Oct. 30, 2018) available at https://

www.fema.gov/press-release/20210318/stay-business-after-disaster-planning-ahead.

167 See National Centers for Environmental Protection, “Billion-Dollar Weather and Climate 

Disasters,” (Oct. 8, 2021) available at https://
86 | SEC OFFICE OF THE ADVOCATE FOR SMALL BUSINESS CAPITAL FORMATION

www.ncdc.noaa.gov/billions/.

168 See Daniel Kurt, “The Financial Effects of a 

Natural Disaster,” Investopedia, (Oct. 28, 2021) 

available at https://www.investopedia.com/

financial-edge/0311/the-financial-effects-of-a-natural-disaster.aspx.

169 See Insureon Small Business Blog, “61% of Small 

Business Owners Don’t Have a Formal Disaster 

Recovery Plan,” (2021) available at https://www.

insureon.com/blog/small-business-owner-poll-disaster-recovery-plan.

170 See Bruce Katz, “Rethinking Disaster Relief for 

Small Business,” Drexel University Nowak Metro 

Finance Lab Lindy Institute for Urban Innovation, available at https://drexel.edu/nowak-lab/

publications/newsletters/Rethinking%20Disaster%20Relief%20for%20Small%20Businesses/.

171 Id. See also JP Morgan Chase & Co., “A Cash 

Flow Perspective on the Small Business Sector,” 

(May 2020) available at https://www.jpmorganchase.com/institute/research/small-business/acash-flow-perspective-on-the-small-business-sector. 

172 Data from the U.S. Census Bureau, American 

Community Survey (ACS) was used by DERA 

to estimate the population in zip codes affected 

by the natural disasters as described in infra note 

179. However, certain zip codes were identified 

as missing population values, so the percentage is 

likely underestimated.

173 This graphic is based on DERA data. Evaluated 

from July 1, 2018 to June 30, 2021 using zip 

codes affected by natural disasters, excluding 

COVID-19 Pandemic. Zip codes designated 

as affected are defined as having one or more 

residents approved for housing assistance under 

FEMA’s IHP program for natural disasters with 

classifications of Major Disaster Declaration and 

incident start dates between July 1, 2018 and 

June 30, 2021. Given the trailing impact caused 

by natural disasters, each zip code affected in that 

three year period was included. Classification 

of disaster areas are based on FEMA Disaster 

Declaration Summaries data and FEMA Housing 

Assistance Program Data available at https://

www.fema.gov/about/openfema/data-sets, updated on August 19, 2021. The classification method 

for disaster areas is based on the methodology in 

the “2017 Small Business Credit Survey – Report 

on Disaster-Affected Firms,” Federal Reserve 

Banks of Dallas, New York, Richmond, and San 

Francisco, available at https://www.newyorkfed.

org/medialibrary/media/smallbusiness/2017/

SBCS-Report-on-Disaster-Affected-Firms.pdf.

174 Evaluated from July 1, 2018 to June 30, 2021 

using zip codes affected by natural disasters as 

described in supra note 173.

175 See Christiana K. McFarland, PhD et al., “Developing Regional Economic Connectivity: Key 

Factors and Strategies for Urban and Rural Communities,” National League of Cities and Rural 

Community Assistance Partnership at 3, available 

at https://eda.gov/files/tools/research-reports/NLCRCAPRegionalEconConnectivityBRIEF.pdf. 

176 See Federal Reserve Banks, supra note 36. Data 

Appendix from the 2021 Report on Employer 

Firms.

177 See Samuel Crouse, “Linking Private Equity to 

Small Businesses in Rural Appalachian Communities,” Appalachian State University, (Apr. 

2021) available at https://libres.uncg.edu/ir/asu/f/

Crouse_Samuel_Spring%202021_Thesis.pdf. 

178 See Alicia Robb, Ph.D., supra note 60, at 12, 29.

179 Data from the U.S. Census Bureau, American 

Community Survey (ACS), and the U.S. population growth rate from World Bank was used by 

DERA to estimate the population in zip codes in 

rural areas. Classification of rural areas are based 

on the list of 2020 End of Year rural area zip 

codes from the Center for Medicare & Medicaid 

Services available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/FeeScheduleGenInfo.

180 See Federal Reserve Banks, supra note 36, at 29.

181 This graphic is based on DERA data. Classification of rural areas are based on the list of 2020 

End of Year rural area zip codes from the Center 

for Medicare & Medicaid Services, as described 

in supra note 179. 

182 See Alicia Robb, Ph.D., supra note 60, at 12, 29.

183 See, e.g., “Small and Emerging Businesses” section of the Report above, at 22.

184 See, e.g., “Women Business Owners and Investors” section of the Report above, at 42-43. 

185 See, e.g., “Minority Business Owners and Investors” section of the Report above, at 49.

186 Id. at 48, 51.

187 See also North American Securities Administrators Association (NASAA), “Legislative Agenda 

for the 117th Congress Principle One,” (2019) 

available at https://www.nasaa.org/policy/

legislative-policy/legislative-priorities/legislative-agenda-for-the-117th-congress-principle-one/

(encouraging proactive education and outreach 

to underserved and minority entrepreneurs).

188 See “Exempt Offerings,” RIN: 3235-AM85 

(Spring 2021) available at https://www.

reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=3235-AM85.

189 See, e.g., “Small and Emerging Businesses” section of the Report above, at 21. 

190 Id. at 21, 25.

191 Market participants look at staff guidance when

trying to determine whether broker registration 

is required. See “Notice of Proposed Exemptive 

Order Granting Conditional Exemption from 

the Broker Registration Requirements of Section 

15(a) of the Securities Exchange Act of 1934 

for Certain Activities of Finders,” Release No. 

34-90112; File No. S7-13-20 (Oct. 13, 2020) at 

15, available at https://www.sec.gov/rules/exorders/2020/34-90112.pdf.
ANNUAL REPORT: FISCAL YEAR 2021 | 87

192 See, e.g., “Minority Business Owners and Investors” section of the Report above, at 48.

193 See “Notice of Proposed Exemptive Order 

Granting Conditional Exemption from the 

Broker Registration Requirements of Section 

15(a) of the Securities Exchange Act of 1934 for 

Certain Activities of Finders,” supra note 191.

194 See Letter from the SEC Small Business Capital 

Formation Advisory Committee to Chairman 

Jay Clayton (Nov. 13, 2020) available at https://

www.sec.gov/spotlight/sbcfac/finders-recommendation.pdf.

195 See SEC Press Release 2021-99, SEC Announces Annual Regulatory Agenda (June 11, 2021) 

available at https://www.sec.gov/news/press-release/2021-99.

196 See, e.g., “Mature and Later-Stage Companies” 

section of the Report above, at 29-30. 

197 Id.

198 See, e.g., Women Business Owners and Investors” 

section of the Report above, at 42, 27 and “Minority Business Owners and Investors” section of 

the Report above, at 51. 

199 See, e.g., “Women Business Owners and Investors” section of the Report above, at 46-47 

and “Minority Business Owners and Investors” 

section of the Report above, at 52.

200 See Report on the 40th Annual Small Business 

Forum (Sept. 27, 2021) at 21, available at https://

www.sec.gov/files/2021_OASB_Annual_Forum_

Report_FINAL_508.pdf.

201 See Letter from the SEC Small Business Capital 

Formation Advisory Committee to Chair Gary 

Gensler (May 21, 2021) available at https://www.

sec.gov/spotlight/sbcfac/encouraging-small-regional-funds-043021.pdf. See also Letter from 

the SEC Small Business Capital Formation 

Advisory Committee to Chairman Jay Clayton 

(Aug. 26, 2020) available at https://www.sec.gov/

spotlight/sbcfac/underrepresented-founders-recommendation.pdf.

202 See, e.g., “Management Fees,” available at https://

www.sec.gov/fundamentals.

203 See, e.g., “State of Small Business Capital Formation” section of the Report above, at 19. 

204 See, e.g., “Small Public Companies” section of the 

Report above, at 35.

205 Id. at 37. 

206 Id. at 38; see also Office of the Advocate for 

Small Business Capital Formation, supra note 2, 

at 43; see also Office of the Advocate for Small 

Business Capital Formation, Annual Report for 

Fiscal Year 2019,” at 25, available at https://

www.sec.gov/files/2019_OASB_Annual%20Report.pdf.

207 See, e.g., “Small Public Companies” section of the 

Report above, at 36. 

208 See, e.g., “Women Business Owners and Investors” section of the Report above, at 45. 

209 See, e.g., “Women Business Owners and Investors” section of the Report above, at 39 and “Minority Business Owners and Investors” section of 

the Report above, at 49. 

210 See, e.g., “Women Business Owners and Investors” section of the Report above, at 46-47 

and “Minority Business Owners and Investors” 

section of the Report above, at 52.

211 See, e.g., “State of Small Business Capital Formation” section of the Report above, at 19. 

212 See, e.g., SEC Press Release 2021-99, supra note 

195.

213 See Report on the 40th Annual Small Business 

Forum, supra note 200, at 20. 

214 See “Exemptions for Advisers to Venture Capital 

Funds, Private Fund Advisers With Less Than 

$150 Million in Assets Under Management, and 

Foreign Private Advisers,” Release No. IA-3222; 

File No. S7-37-10 (June 22, 2011), at 23-27, 

available at https://www.sec.gov/rules/final/2011/

ia-3222.pdf.

215 See U.S. Securities and Exchange Commission, 

Division of Investment Management, “Guidance 

on the Exemption for Advisers to Venture Capital Funds,” No. 2013-13 (Dec. 2013), available 

at https://www.sec.gov/divisions/investment/guidance/im-guidance-2013-13.pdf.

216 See “Exemptions from Investment Adviser Registration for Advisers to Small Business Investment 

Companies,” Release No. IA-4839; File No. S7-

05-17 (Mar. 12, 2018) available at https://www.

sec.gov/rules/final/2018/ia-4839.pdf. 

217 See “Notice of Proposed Exemptive Order 

Granting Conditional Exemption from the Broker Registration Requirements of Section 15(a) of 

the Securities Exchange Act of 1934 for Certain 

Activities of Finders,” Release No. 34-90112; File 

No. S7-13-20 (Oct. 7, 2020) available at https://

www.sec.gov/rules/exorders/2020/34-90112.pdf. 

218 See SEC Press Release 2021-99, supra note 195.


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FORMATION

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