
With a $5 million max, Regulation Crowdfunding can fill a void that existed in the market before
DENVER, CO, UNITED STATES, February 7, 2023 /EINPresswire.com/ — Last week, Crowdfund Capital Advisors (CCA) released its 2022 Investment Crowdfunding Annual Report. This report is the most comprehensive analysis of Investment Crowdfunding to date. Investment Crowdfunding allows any startup or small business to raise up to $5 million online from their customers, family, friends, or followers. The industry was born out of the 2012 JOBS Act and launched in 2016. The report spans 91 months of activity and covers 6,500 deals from 5,600 Pre-IPO startups and small businesses.
After seven years of experience and the growth in average raises, we can officially announce that the ‘Valley of Death’ is dead. ” Sherwood Neiss In 2022 over 320,000 investors deployed nearly half a billion dollars into 1,100 deals. Deal volume hit record levels within Investment Crowdfunding, with women and minority entrepreneurs receiving up to 50% of all the capital committed. Deals were distributed across the United States and into 687 cities including many at-risk and distressed communities.
Unlike data collected by Pitchbook that tracks Angel/Seed declining deals in 2022, Investment Crowdfunding not only saw a spike in funded deals but saw the trend increase. “This may signal that issuers are going online to raise capital from their customers, friends, family, or followers for capital versus going to Angels or VCs,” says Jason Best, Principal at CCA. “Market dynamics shifted in 2022. Angels and VCs began to pull back and focus on their portfolio investments. This forced more sophisticated issuers online for capital. We expect this trend to continue through 2022 saw the highest number of Regulation Crowdfunding funded deals while Pitchbook saw declines 2023.”

2022 saw the highest number of Regulation Crowdfunding funded deals while Pitchbook saw declines
The data shows that the profile of issuers seeking Investment Crowdfunding capital is shifting as well. The average age of successfully funded issuers expanded past three years, with the vast majority of them being post-revenue. Established companies raised 45% more capital than their startup counterparts and had 20.5% more investors. Average check sizes rose, with the average raise trending higher.
The Valley of Death refers to a crucial early phase of a new venture when work has begun, but a company hasn’t generated sufficient revenue to support its growth. “In this case, outside capital is a necessity that either comes from an entrepreneur’s savings or access to credit,” says Sherwood Neiss, Principal at CCA. “After seven years of experience and the growth in average raises, we can officially announce that the ‘Valley of Death’ is dead. The average raise since the industry launched has grown to $365K, expanding beyond where the Valley existed previously; $25 to $250K. There has always been this talking point about the Valley of Death and doom and gloom. It should be nice to talk about opportunity and capital now that Investment Crowdfunding has proven itself.”
The 105-page report, including 100 charts, tables, graphs, and images, is available here. Scholarships and special discounts are available by emailing sales@theccagroup.com
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Investment Crowdfunding Surges as Industry Exceeds $1.1B in Financing – 2022 to Double 2021 Investment Volume
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DENVER, COLORADO, January 4, 2022 — In its upcoming report “Time to Celebrate Success,” Crowdfund Capital Advisors (CCA) releases findings from its annual industry survey. Since launching in 2016 over $1.1B has been invested into 4,850 startups and small businesses by 1.3M investors. Issuers were present in over 1,300 cities across the USA and in all 50 states. It is particularly important to note that 50% of all crowdfund investments made in the last 5 years occurred in 2021.
“2021 was the tipping point for Investment Crowdfunding,” says Sherwood Neiss Principal at Crowdfund Capital Advisors “Investors poured capital into next-gen startups at a record rate, entrepreneurs launched offerings at a record pace, and Venture Capital which once ignored these issuers, are now actively seeking early deal flow in the space.”
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Investment Crowdfunding allows startups and small businesses to raise up to $5M online from non-traditional (both accredited and unaccredited) investors. It was one of the most fundamental changes to the securities laws as it reversed decades old ban on general solicitation and allowed retail investors for the first time to access early-stage investment opportunities.
Investment Crowdfunding Headlines for 2021:
- Investments into startups and small businesses up 140% over 2020, shattering last year’s record, exceeding the projection of $500M invested, and leading CCA’s Online Investment Index to record highs.
- Total financing in 2021 exceeds all investments from 2016 through 2020.
- More than 540,000 investors participated in over 1,500 offerings. More than 2019 and 2020 combined.
- Average raise across the industry jumps to all time high of $450K from a low of $200K in 2018 as the number of jobs supported/created among these issuers exceeds 180,000.
- In March, SEC updated the maximum issuers can raise from $1M to $5M, the industry then surpasses $1B in funded capital in October.
- Follow-on crowdfunding rounds were raised by over 500 issuers.
- The market value of crowdfunded companies jumped to $33B as median valuations rose in tandem to the broader early-stage market.
- 68.4% offerings were successful and closed within 7 months, which is higher and faster than “traditional” VC round timelines.
- VCs & Y-Combinators jump into the space both co-investing and syndicating offerings providing further validation.
- The number of $1M+ offerings jump to record highs with several $5M+ rounds proving Investment Crowdfunding a viable “Silicon Valley-sized Seed round.”
- Issuers used 43 intermediaries to raise crowdfunding facilitated capital, up 10% over 2020. Wefunder, StartEngine, Republic and SeedInvest, the top leaders, accounted for over 80% of all the funding.
Trends that will shape Investment Crowdfunding in 2022:
- Expect a rally as the Fed reacts to high inflation by raising interest rates, investors taking chips off the public markets and diversifying into Investment Crowdfunding.
- Expect over $1B expected to be invested in 2022 by more than 1M investors into 2,500 new issuers.
- Software companies which saw a 4x increase in online funding in 2021 will leverage Investment Crowdfunding as the de facto area for primary funding.
- The success and ease of remote working coupled with employer dissatisfaction will lead to more entrepreneurs starting local businesses and seeking capital from their communities.
- 76% of investors believe it is important to fund Woman and Minority entrepreneurs. Investment crowdfunding has proven itself as a scalable way to do that.
- As investors seek higher potential returns, we expect further that diversification into Investment Crowdfunding will increase.
- Investment Crowdfunding delivers dollars, customers, and brand advocates to business owners. This will continue to be a powerful combination of benefits for entrepreneurs.
- Investors will expand their activity from local to nationwide into industries they follow as well as into businesses that have raised significant capital online.
- Existing Investment Crowdfunding issuers return online, expect deal activity to increase, fundraising conditions to improve and jobs to follow.
- With most successful issuers expanding their workforce and expecting revenues and earnings to increase, Venture Capital will be combing for potential winners.
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“Regardless of where the market cycle takes you in 2022, private equity and venture capital investors are all looking to earlier stage companies to deliver future alpha. Companies that have raised a round of crowdfunding and are in venture-investable businesses, with demonstrated product-market fit, may benefit from this trend” says Jason Best, Principal at Crowdfund Capital Advisors. “I believe that 2022 will be a great year for entrepreneurs.”
For more information, please visit CrowdfundCapitalAdvisors.com. To pre-order the 2021 Annual Report click here.
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DENVER — The CCA Online Investment Index is a new tool created to gain better insight into the blossoming securities-based crowdfunding market. The index measures the online capital-raising activity of private U.S. companies. This index, which is calculated daily, is based on the capital investments received by the 50 daily highest-raising private issuers that meet certain criteria and are listed on Crowdfund Capital Advisors’ data platform. This data can uniquely inform investment decisions, economic analysis, forecasting and government policy.
Unlike other SME indices that emphasize optimism or policy, this index ranks the top performing issuers by capital commitments. The index is a barometer of investor sentiment across industries and geographies. Since the index launched $3.2B in economic activity has been monitored.

Securities-based crowdfunding was legalized with bi-partisan support as part of the 2012 JOBS Act. It allows startups and SMEs to raise money online from retail and accredited investors. Almost 4,000 securities offerings are included in the dataset (more securities than are tracked by the New York Stock Exchange) which represent over 3,250 issuers and approximately $17.3B in Market Value in over 460 industries across 1,100 cities in the United States. The dataset is growing about 3% per month. On March 15, 2021, new rules by the Securities and Exchange Commission increased the amounts issuers can raise online leading to a spike in the most current week of activity.
CCA collates real-time offerings from over 50 securities-based crowdfunding platforms, including Amplifyx, Buy the Block, Crowdfund Main Street, CrowdsourceFunded, Equifund CFP, FundersUSA, FundMe, Fundopolis, HoneyComb, Infrashares, IPO Wallet, Mainvest, Microventures, Miventure, Mr. Crowd, Net Capital Funding, Nextseed, Nvsted, Raise Green, Republic, SeedInvest, Silicon Prairie Online, Small Change, Stampede, StartEngine, The SMBX, Title 3 Funds, TruCrowd, Fundanna, Cryptolaunch, Musicfy, VidAngel Studios, Vincinity Capital, Wefunder, and Wunderfund. As new platforms are registered with the SEC, data from qualifying companies on these platforms will be added to the index.
Companies represented on the index are operating companies raising money, not equity funds. They represent twenty sectors: Agriculture, Forestry, Fishing and Hunting; Mining Quarrying, and Oil and Gas Extraction; Utilities; Construction; Manufacturing; Wholesale Trade; Retail Trade; Transportation and Warehousing; Information; Finance and Insurance; Real Estate and Rental and Leasing; Professional, Scientific, and Technical Services; Management of Companies and Enterprises; Administrative and Support and Waste Management and Remediation Services; Educational Services; Health Care and Social Assistance; Arts, Entertainment, and Recreation; Accommodation and Food Services; Other Services; Public Administration. These companies are conducting offerings pursuant to Title II [Rule 506(c)], Title III (Regulation Crowdfunding) of the JOBS Act or both.
Figure 2: Percent of Capital Commitments by Industry

“By looking at the index we’re able to gain a better understanding of just how much money is being raised every day through crowdfunding by the top companies in the industry,” says Sophie Dessart, CCA Analyst. “Over time, we can see whether investors are putting more or less money into the market, giving us an idea of investor sentiment and the perceived potential of the companies currently raising funds.”
“The CCA Online Investment Index has grown year after year, but the increases seen from FY 2020 to FY 2021 have been remarkable,” says Alex Nagel, CCA Analyst. “We are almost consistently seeing index values during FY 2021 that are twice as high as the year prior. This is a strong indicator of the growth of the crowdfunding industry including accessibility, availability, and investors bullish on getting involved with some great companies.”
Each day, the leader of the index and the company with the highest capital raise can change and come from a different industry. “It’s fascinating to see the wide range of companies that can lead the index, and it really illustrates the diversity of campaigns that everyday investors are supporting through crowdfunding,” says Dessart. “For example, the leader with the highest raise on March 15, 2021 , was Immersed, a Techstars company that helps remote teams work together in a virtual workspace. They were looking to raise funding build out their platform. Three days later, on March 18, 2021, the top investment was in the media industry with the company Angel Studios, a film studio that helps creators come together with viewers to create high-quality TV and film.”
“The index can also be used to measure real-time economic recovery,” says Sherwood Neiss, Principal at Crowdfund Capital Advisors. “This index is one way to monitor local and regional economic recovery by tracking investor sentiment. We can see peaks and troughs that correlate to unique offerings, seasonality and even the impact of COVID. For instance, in the 12 months leading up to the pandemic the index average was 127.2, since the onset of the pandemic the average rose 215% or 146 points indicating greater investor interest in support SMEs across the country. The low point for the index was 23 on March 15, 2020 when our economy shut down. And the high point was exactly one year later on March 15, 2021 when it hit 3,986 after the new rules went into effect”
“We are excited about the application of this new index,” says Jason Best, Principal at Crowdfund Capital Advisors. “Not only will users be able to gauge economic impact and job creation, but we also believe the next unicorn may be one of companies represented in the index.”
Regulation Crowdfunding from May, 2016 – Feb. 2021
- Over 3,600 securities offerings have been filed with the SEC by over 3,100 issuers (more issuers than are on the New York Stock Exchange)
- These issuers have
- Had over $900M in commitments
- 5% of offerings have been successful. Campaigns that were not only accounted for 4.6% of capital commitments
- Supported over 110,000 jobs
- Represent $17.3B in market value
- Represent over 450 industries, from 1,100 towns in the United States.
Regulation Changes on March 15, 2021
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Before |
As Of March 15, 2021 |
What it Means |
Maximum Raise |
$1.07M |
$5M |
Small issuers can now successfully complete a full Series A offering online broadening access to capital to potentially thousands of enterprises that do not have access to Silicon Valley |
Investment Caps (Retail Investors) |
Individuals may make investments based on the lower of their annual earnings or net worth
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Individuals may make investments based on the higher of their annual earnings or net worth
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More retail investors can diversify into local startups and small businesses they believe in with slightly larger amounts. Moving the current average investment from $750 to $1,500 |
Investment Caps (Accredited Investors) |
Individuals may make investments based on the lower of their annual earnings or net worth |
No caps |
More accredited investors who already invest into startups and SMEs will be able to do so with larger checks. This will promote lead investors within offerings and mitigate risk for retail investors given the higher scrutiny provided by accredited investors |
Testing the waters |
No |
Yes |
Issuers can see if there is an appetite for their offering before a complete filing. This will provide efficiencies and reduce legal, accounting and offering expenses |
Demo Day Pitches |
No |
Yes |
Issuers can pitch their offering without worrying about overstepping prohibitions on general solicitation |
Pooling of Investors into a Special Purpose Vehicle (SPV) – Ability to “crowdfund a fund” |
No |
Yes |
Streamlines the investor communication process such that issuers can communicate with a point-person for the SPV. Investors still maintain their ownership percentages and voting rights. |
Expectations for the Next 12 Months
- Over $1.2B will be invested
- The number of offerings to increase 40% to 1,700
- The number of investors to double to 800,000
Regulation A+ and Reg.CF crowdfunding is allowing millions of average Americans to invest in their favorite companies. How do we know this? From crowdfunding data! In this podcast, listen to Sydney Armani from FinTech World and Woodie Neiss from Crowdfund Capital Advisors explain why we may be at a tipping point in the crowdfunding industry as they explain how crowdfund data is being accumulated, curated, and being used to guide investors and issuers on crowdfund investing – direct from the experts who wrote the framework.
Crowdfund Capital Advisors delivers strategic insights to government agencies, financial institutions, regulators and multilateral organizations seeking to both create and implement innovative strategies to utilize crowdfund investing technologies to drive innovation, job creation and entrepreneurship.
As you’ll learn from listening to this podcast, Mr. Neiss (who Mr. Armani referred to as “The Godfather of Reg.A Crowdfunding”) is at the forefront of the data being accumulated with respect to crowdfunding investing. His company compiles data on a variety of Regulation A+ and Reg.CF deals across many SEC-registered crowdfunding portals across a number of sectors and specific industries. Where is the investment capital going? How much is being invested? What are the trends? Data answers so many of these questions, and it’s all driven by artificial intelligence algorithms.
With their “CCLEAR” Dataset, you get the most comprehensive Regulation Crowdfunding database that collects information on every offering. In addition, learn how Crowdfund Capital Advisors studies and invests in the emerging ecosystem of crowdfunding and the new solutions being created that will impact the broader private capital markets through advising, speaking, and research.
Questions? Comments? Besides his Fintech World website, Sydney Armani has recently launched CrowdfundingUSA.com as a resource for those seeking more information on how issuers can raise capital via crowdfunding. Likewise, you can get more information on what Crowdfund Capital Advisors does at their website at CrowdfundCapitalAdvisors.com.
ABOUT OUR GUEST: Sherwood “Woodie” Neiss
Sherwood Neiss, is a Principal at Crowdfund Capital Advisors and a Partner at Crowd Capital Ventures. He is an expert at building successful businesses. As a 3-time INC500 winner whose former company won E&Y’s Entrepreneur of the Year, Sherwood understands the keys to entrepreneurial success from concept to company to sale.
As a serial entrepreneur and investor during the credit crunch, Sherwood saw a need for a change in outdated securities laws and did something about it—as a co-founding member of Startup Exemption, Sherwood co-authored the Crowdfunding Framework used in the JOBS Act that was signed into law by President Obama on April 5, 2012.
Within Crowdfund Capital Advisors (CCA), Sherwood works with clients ranging from governments and banks that are looking for ways to boost economic development in their countries to investment firms looking for access to increased deal flow that crowdfunding creates. At Crowd Capital Ventures (CCVF), Sherwood researches, analyses and invests in promising FinTech companies focusing on all sectors of the crowdfunding market. Sherwood serves as an advisor to several crowdfunding platforms and crowdfunding technologies giving him a unique understanding and view of the industry and market. As an industry leader, Sherwood contributes to several publications including VentureBeat and TechCrunch. He additionally co-authored Crowdfund Investing for Dummies through Wiley & Son’s as well as the World Bank Report Crowdfunding’s Potential for the Developing World.
Sherwood co-founded Crowdfund Intermediary Regulatory Advocates (CFIRA) and the Crowdfunding Professional Association (CPA), and served as Governing Board Member and co-chair where he led the fight to ensure investors are protected while entrepreneurs have access to the capital they need to start and grow promising companies.
An avid public speaker, Sherwood speaks at universities and seminars around the world discussing crowdfund investing, what it takes to be an entrepreneur and how to build winning companies. He also does a large amount of work presenting to government bodies, speaking in front of the U.S. Congress, leading SEC and FINRA meetings, as well as, addressing foreign governments—testifying about how they can bring economic benefits to their citizenry through implementing their CCA’s Crowdfund Investment Framework.
Sherwood started his post-MBA career on Wall Street and moved to Silicon Valley where he completed personal and financial goals in his late 20’s he hoped to obtain in his 30’s. Wondering what to do next and also left struggling with a debilitating family dilemma, he used his entrepreneurial drive to help turn his family adversity into a multi-million-dollar company that today is helping millions of sick children, animals and adults get better by being more compliant with their medicines.
As the co-founder of FLAVORx (www.flavorx.com), Sherwood structured an approach and built a business model that threw off millions of dollars in cash while growing the business from one pharmacy to over 80% of the pharmacies in the United States. He raised millions of dollars in capital and saw the culmination of his endeavors with the sale of the company in 2007.
When not working, Sherwood is an avid traveler. He lived in Japan for a year and post-sale of FLAVORx took his second backpacking trip around the world. In addition to speaking at universities and businesses around the country he invests in real estate in the U.S. and Brazil, is part of a private equity group in Los Angeles, is working on a clean tech project in Puerto Rico and is involved with several other start-up ventures.
ABOUT OUR GUEST: Sydney Armani
Sydney Armani has more than twenty-five years’ experience in Silicon Valley, active in the community as an entrepreneur as well as an investor.
Sydney’s vision and expertise for starting and managing innovative companies have sparked and nurtured the great success of Hello Net (a mobile telephony appliance service), Minitel, and Videotex (an online first-generation of touchscreen tablets).
He has been an active keynote speaker and moderator at conferences and plenary sessions on Blockchain, Technology, Real Estate crowd finance, Cryptocurrency capital, and digital markets, secondary liquidity, disruption in banking and a host of other topics. He has lectured at major universities such as Georgetown, NYU, Hult International Business School, “Běiwài” University, Beijing, VIA Technologies, PARIS. while authoring articles for or being interviewed by INC Magazine, Housing Wire, Forbes, Fortune, The Economist, CNBC, Bloomberg and others.
Online investment funding in October 2020, the first month of the final quarter of the year, increased 33.2% over September and followed the strongest quarter for online investment, according to Crowdfund Capital Advisors. At the same time, 7 new $1,000,000+ offerings closed last month – this tied for the fourth highest monthly total, so far this fiscal year – indicating that despite a global pandemic and uncertainty around the U.S. presidential election, local investors were continuing to deploy records amounts of cash. This is all happening as the SEC voted to increase the maximum companies can raise online from $1,000,000 to $5,000,000. This change will enable tens of thousands of additional companies to utilize Regulation Crowdfunding to raise capital to start or begin to recover and grow their businesses. |
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Subscribe to Bloomberg Data on SME fundraising in the US
This is the only place you can find complete data on all US Reg CF capital raises. |
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Key Findings
- Online investment funding in October 2020 came in at $32 million, up 71.6 percent from October 2019.
- 7 new “crowd unicorns” (defined as online investment issuers who raised in excess of $1 million online in a single offering from online investors) joined the board in October, this tied for the fourth highest month for the year. The enterprise value of these new crowd unicorns is $143,328,000.
- New offerings were up (116 vs 97 in September) but not as strong as the month of July (130).
Online Investment Funding by Month through October 2020
Includes Regulation Crowdfunding and Parallel 506c Offerings |
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New Crowd Unicorns
There have been 70 crowd unicorns thus far in 2020.
- In October, seven new crowd unicorns joined CCA’s list of startups that raised $1 million or more.
- August had 11 crowd unicorns
- July and September each had 9.
- The most highly valued October crowd unicorns were:
- San Diego-based Pacific Integrated Energy, a company creating new solar energy markets
- This Way Global an Austin-based company that matches people with jobs;
- Boston-based Beanstox, an app that makes investing easy; and
- College Park, Maryland-based Airgility, a manufacturer of AI powered aerial robots for public safety, security and defense.
Interestingly enough, only 4.3% of all crowd unicorns in 2020 have come from Silicon Valley proving that online investing is democratizing access to capital by allowing investors all over the United States to invest in local businesses they believe in. Together these October crowd unicorns have raised $8.2 million and added $143.3 million in valuation to the crowd unicorn board. The crowd unicorn board collectively has almost $1 billion in enterprise value.
7 New Crowd Unicorns in October 2020 |
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Nationwide Online Investment
As of October 31, 2020, nationwide online investment totaled $179.7 million.
- That was up 62.5% over the first 10 months of 2019, when investors spent $110.6 million.
- The number of investors for the first 10 months of 2020 was 295,000 which was up 80% from 164,000 in 2019.
- Average investment decreased 9.6% from $674 in 2019 to $609 in 2020 due to the increase in retail investors.
So, while the pandemic raged, online investment increased dramatically, the number of investors nearly doubled and issuers around the United States were able to find critical capital to help them during this time of crisis.
Rounds of $1 million and more represented 25.6 percent of invested dollars in October 2020 – lower than October 2019 at 32.9 percent – per CCA data. This means that more capital is going to more offerings that are raising less than $1 million in 2020. This would support the theory that more businesses are turning online for capital from local investors where the government stimulus programs have come up short. We’ve noted in other reports that local investors have been particularly active through the pandemic. Overall, $1 million-plus rounds have accounted for a slightly lower percentage of total funding this year, at 32.2 percent, than last year, when such megarounds represented 32.7 percent of funding.
Mega Valuations
During 2020 two companies leveraged online investing that had valuations in excess of $100 million. West Hollywood-based crowdfunding platform StartEngine raised $685k at a $190 million post-money valuation. This is their fourth Regulation Crowdfunding offering. Their first one, which closed on March 2019, had a $120 million post- money valuation. Their success shows their understanding of how to leverage online investors not only for themselves but others on their platform. New York-based Fruit Street Health, a telemedicine service raised $41k at a $104 million post-money valuation.
Election slowdown won’t last
With the U.S. election looming, we saw a slowdown in funding in the first week of November. But, with the markets and liquidity up, we expect capital will still be deployed at a strong clip through the end of the year. From a funding perspective, October was also the strongest month for investments last year as well. With the proposed SEC changes that increase the amounts companies can raise online we only expect the number of firms raising money online and investors backing them to increase. |
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The following is a reprint of an article that appeared on Start Us Up.
The original can be found here.
Start Us Up/America’s New Business Plan was launched by the Ewing Marion Kauffman Foundation.
America’s New Business Plan is a bipartisan policy roadmap to support entrepreneurs, with recommendations for federal, state, and local government. The plan was developed to provide policymakers with research-based solutions to overcoming the problems faced by entrepreneurs that prohibit them from starting and growing their business.
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Crowdfund Capital Advisors and Small Business & Entrepreneurship Council, two members of the Start Us Up coalition, are championing the creation of a co-investment fund for successful Regulation Crowdfunding campaigns. We spoke with CCA’s Sherwood Neiss and SBE Council’s Karen Kerrigan to discuss how the fund, and crowdfunding in general, can transform the funding landscape for entrepreneurs.
Q: Tell us about the idea for a co-investment fund and what it might look like in the United States.
A: During the Great Recession, we developed the idea for securities-based crowdfunding because we needed to find a way to get capital flowing to America’s job creators. The banks weren’t lending, and other options entrepreneurs were using — like lines of credit and credit cards — disappeared. Since Regulation Crowdfunding went into effect, more than 2,750 companies in almost 1,000 cities across the United States have raised close to $700 million to support their growth and operations.
When COVID hit, something interesting happened. Rather than seeing Regulation Crowdfunding offerings diminish and investors shy away, the opposite happened. From February to July, we saw the number of offerings, investors and capital commitments hit historic highs. This got us thinking. If community investors can help support community businesses with their limited capital, what if we were to multiply the amount of capital by creating a co-investment fund whereby the government would invest alongside the crowd?
So, we looked to see where such a model already exists, and we found it in the United Kingdom with the Future Fund. This is what the Main Street Co-Investment Fund is based on. The fund would invest up to $250,000 per business in a dollar-for-dollar match provided a company were to hit a funding target and explain how they would use the capital.
The best part about this program is that it is turnkey. There is no policy that needs to be created. Right now, the Federal Reserve is sitting on about $598 billion that it was supposed to disperse to Main Street businesses. If the Fed were to just carve out $20 billion into this co-investment fund, it could support 80,000 businesses.
Q: What steps have your organizations taken to advocate for the creation of such a fund?
A: The first phase of our work has focused on reaching out and educating the committees of jurisdiction in the House and Senate about the Main Street Recovery Co-Investment Fund. In addition, we continue to deliver information and communications to key staff within the White House, Securities and Exchange Commission and Treasury about the value of this program to small business recovery, resiliency and entrepreneurship in general.
We continue to conduct various interviews with media, and have hosted a virtual Hill briefing about the fund. In mid-September we released the report “Regulation Crowdfunding by Congressional District: A Report Card,” which provides a comprehensive review of the success of investment crowdfunding. As noted in the report, this method of fundraising is widespread, with more than 90% of congressional districts — that is, 393 House districts — having issuers or small business owners that have utilized investment crowdfunding. In addition, there are more than 700,000 retail investors who have participated in these offerings.
Not surprisingly, the areas of the country that are being hardest hit by the pandemic in terms of business closures — urban districts — have tens of thousands of retail investors. Investment crowdfunding can be leveraged to help these hard-hit areas recover and reinvent themselves, but massive capital is needed. This is where the power of the local crowd can step in.
Q: Expanding access to capital is a key pillar of America’s New Business Plan. What potential do you see for Regulation Crowdfunding to help meet entrepreneurs’ capital needs, especially women, people of color, and those living in rural communities?
A: Before Regulation Crowdfunding came into existence, we testified that it would democratize access to capital, and indeed this method of raising capital has done just that. With more than four years of experience under our belts we can see that Regulation Crowdfunding is working. 80% of the capital is coming from investors within local communities.
Further research we have done shows that women and minority-founders are some of the biggest beneficiaries of Regulation Crowdfunding. This is important as much research has been done about how women and minorities are shut out of the traditional capital markets.
With the decimation of untold numbers of small businesses — perhaps in the millions — by the end of COVID, it is more critical than ever that policymakers focus on solutions that will fuel business creation and growth. By leveraging private capital, the government can play a key role in helping the economy recover from the COVID catastrophe.
For more information contact us. |
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Just a few minutes ago, at a Securities and Exchange Commission Hearing, the SEC approved amendments to facilitate capital formation and increase opportunities for investors by expanding access to capital for small and medium-sized businesses and entrepreneurs across the United States. The vote was 3 to 2. SEC Chair Clayton said, “He’s extremely pleased with the work done by the Commission. That the changes will modernize the exempt offering framework and have a lasting impact on our capital markets without detriment to investor protection.”
Some of the key Regulation Crowdfunding (aka Reg CF) changes include:
- Increasing the maximum a company can raise from $1.07 million to $5 million
- Amending the investment limits for investors in Regulation Crowdfunding offerings by:
- not applying any investment limits to accredited investors; and
- revising the calculation method for investment limits for non-accredited investors to allow them to rely on the greater of their annual income or net worth when calculating the limit on how much they can invest.
- Permitting issuers to “test-the-waters” prior to filing an offering document with the Commission.
- Permitting “demo day” communications that would not be deemed general solicitation or general advertising.
- Permitting the use of Special Purpose Vehicles to facilitate investing in Regulation Crowdfunding issuers
“We are thrilled that the Commission has finally increased the maximum issuers can raise under Regulation Crowdfunding,” say Sherwood Neiss, principal at Crowdfund Capital Advisors. “When we began lobbying for Reg CF, we artificially set a low maximum target of $1 million so that we could test the model and make sure there was no fraud. Under those limits, more than 2,800 companies in 430 industries, across 50 states have raised over $500 million dollars in just 4 years, with no fraud. The model is working incredibly well.”
“A $5 million limit and other substantial regulatory changes will expand crowdfunding’s use rapidly. At $5 million, a tech startup can raise a seed round or a traditional small or mid-sized company can raise expansion capital. This will open significant new opportunities for businesses to use this capital to recover from the current economic crisis or launch innovative new products and services.” says Jason Best, Principal at Crowdfund Capital Advisors. “For the first, time we have easily accessible, real time data on the economic health and sentiment of startups and small and medium enterprises (SMEs) and of the communities where they are based. This enables policymakers to understand immediately, how the SEC’s action today is positively impacting Americans’ lives. We are grateful to the Small Business and Entrepreneurship Council for its tireless efforts on behalf of these changes and for their ongoing education of their members about how to use crowdfunding to enhance their businesses. Every community across the country should immediately educate themselves about this new opportunity to support their local businesses.”
The vote comes at a time when local businesses and local economies across the USA are facing the most challenging economic crisis since the Great Recession. The third wave appears to be worse than the first two with many Americans bracing for another shut down like in other parts of the world. If this happens, millions of small businesses that were just scrapping by might permanently shut their doors leading to a housing crisis as unemployed people cannot pay their rent or mortgages.
There is a way to supercharge Regulation Crowdfunding and provide immediate, impactful stimulus to Main Street businesses that may not survive the pandemic. That is for the Federal Reserve to take $20 billion of the $596.3 billion they have remaining from the Main Street lending, PPP and EIDL programs and put it into the Main Street Recovery Co-Investment Fund. This fund would match dollar for dollar, up to $250,000, into businesses that are struggling to survive the pandemic but have customers that wish to see these businesses survive. By turning these customers into investors (what we are calling investomers), the businesses access capital from customers who are now stakeholders in the business and the government can successfully deploy capital at the most micro level into communities all across the USA.
The good news is, many small business have already begun to see the potential in turning to their customers for capital to bridge the divide. The data shows that more companies are turning online to raise funds from investors, more investors are pouring in capital and more money is being raised. Take a look at the following charts:
Broad Appeal Among Industries Across the USA
It is important to show the wide range of industries that are represented. There are over 430 industries represented by issuers using Regulation Crowdfunding. The chart to the right looks at the top 15. It shows is that there is broad appeal by both issuers in a variety of industries and investors interested in backing these enterprises. The two things we expect to change over the next year, given the SEC changes, is more real estate offerings and more medium sized issuers entering the market. The $1 million cap limited many developers/issuers from leveraging money from Reg CF investors, increasing the cap to $5 million means more small/medium sized developers/issuers and more investors will be leveraging Reg CF for funds and diversified investment opportunities. It also means that firms with Revenues between $10M and $50M will find Reg CF more appealing as a mechanism for raising funds. It will be a cheaper alternative than hiring an investment bank and a faster method as the time to raise funds averages around 90 days.
Continuous, Fraud Free Growth Coupled with Pandemic/Amendments Equals Tipping Point
The next chart demonstrates how investments and investors have been increasing since the launch of Regulation Crowdfunding began in May 2016.

As one can see, the industry began to see record numbers starting in July 2020 (Note Since Regulation Crowdfunding began in May 2016 we use May as the beginning of the fiscal year and hence Q1 begins in May each year).
One can also see that when COVID hit and the economy shut down so did investments. Investments went from $12.3 million in January down 35% to $8 million in February. From there, the numbers increased month to month with October seeing a record amount committed at $32 million. This represents at 300% increase in commitments in just 6 months. So, while the pandemic raged, investors did not appear to be discouraged about investing in their community businesses.
What is also interesting in the chart above is that you can see the dollars increasing even though the number of investments has fluctuated. This means that the average check size investors are writing is increasing. In February, when the markets shut down, the average check size was $436. In October that amount doubled to $879. Because they are writing larger checks, this bodes well for Main Street businesses that will need to turn to their customers for capital over the next year. But it should also be a point of relief for concerned regulators that might fear investors are putting too much into risky enterprises. The fact is, investors are being rationale with their check sizes, only writing as much as they can afford to risk and an amount that appears to represent just a fraction of their overall savings.
Steady Growth in Offerings Over Time
This next chart shows the growth in monthly offerings over time.
As you can see the number of offerings also increased after a brief downturn in February and March. July saw the highest number of offerings at 128 since Regulation Crowdfunding began and October saw the second highest number of offerings at 115. With the changes made by the SEC, this means that issuers that need to raise in excess of $1 million but less than $5 million will be turning online for funding.
Seasonal Growth Also Points to Tipping Point
If we compare same period growth (chart right), we see the following year over year results. While the number of offerings between 2018 and 2019 was down year over year for the majority of the year, despite COVID, the number of offerings is up from 2019 to 2020, with June and July seeing the highest percent increase. We expect that the number of issuers leveraging Regulation Crowdfunding will easily double in this next year alone.
“The data has been positive for Regulation Crowdfunding. The industry has proved the naysayers wrong and the opportunity for issuers and investors affirming,” says Neiss. “This truly represents the democratization of access to capital we promised and a way to engage investors at the most local level. If we can just get the government to focusing on investing alongside community investors, I believe we can get through this pandemic with minimal scars.” |
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WHAT IS NOT WORKING FOR SMALL BUSINESSES TODAY:
- The Federal Reserve has allocated $600B to help small and medium businesses to survive the pandemic.
- So far, they have only spent $2B of that money because they are trying to lend via banks…this is not working.
WHAT THE FED CAN DO TODAY TO IMMEDIATELY HELP SMALL BUSINESS:
- Allocate just $20B of the remaining $598B to lend to the businesses that local investors are lending to, via securities-based crowdfunding platforms. The Fed co-invests with communities to help support businesses.
- This could enable at least 80,000 businesses across the country to receive up to $500,000 in funding ($250,000 raised from local investors + up to $250,000 in matching funds from The Fed).
OUR PLAN USES TECHNOLOGY THAT IS ALREADY WORKING TODAY:
- SEC regulated crowdfunding platforms have already raised $712M from over 710,000 Americans in all 50 states.
- The process is SIMPLE:
- The Federal Reserve allocates $20B to this program.
- Securities-based crowdfunding platforms register with the Fed (they are already regulated by the SEC).
- When a company raises their target amount, the crowdfunding platform notifies the Fed and matching funds are transferred.
- All the data is reported daily to The Fed for real time transparency on the program.
WHAT CAN YOU DO TO HELP?
- Contact your representative in Congress and demand they support the Main Street Recovery Co-Investment Fund
- Watch the video below to learn the details of the program and post it on all of your social channels.
- Share this email with people you think can help and post it on your social media channels.
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Click the image below to watch a replay of the
Main Street Co-Investment Recovery Fund Webinar!
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Click the image above to watch the replay |
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How Would it Work?
- Government tells the Federal Reserve to move $20 billion of the $598 billion remaining into the Main Street Recovery Co-Investment Fund. The Federal Reserve would oversee the Fund.
- Online Investment Platforms apply to have access to the Fund for small businesses that raise money on their websites.
- Small businesses will create campaigns, disclose information about the business, how much money they need and how it will be used.
- Investors (mainly customers of these businesses) decide whether or not to fund the business and help the business hit a minimum funding target.
- If a campaign hits the target, the platform would let the Fed know and the Fed would disperse, dollar for dollar, what the investors deployed up to $250,000 per company.
- Investors would be paid back principal and interest on the money that they loaned. We suggest that small businesses either borrow the money or offer revenue share notes.
- The Government would be paid back after the investors were made whole.
- Data about the investments, how the money was used and the impact of the funds would be made available to the Government on a real-time basis.
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Where did the Main Street Recovery Co-Investment Fund Come From?
During the last recession, in 2010, we went to Washington with the idea for Regulation Crowdfunding. It was meant to help struggling small businesses access capital. Since then, an entire industry has emerged. More than 2,700 companies across the USA have raised over $712 million from 710,000 local investors in communities all across the USA. This is happening on online investment platforms that are overseen and regulated by the Securities and Exchange Commission. And there has been no fraud.
Now we find our local economies back on the brink due to COVID. Our government carved out $600 billion to help but because of deficiencies with the Main Street Lending Program, PPP and EDIL only $2 billion has been deployed.
Rather than sit on that money, the government should take $20 billion (only 3% of what they have in reserve) and put it into the Main Street Recovery Co-Investment Fund. It has the ability to help over 80,000 struggling Main Street businesses in the next 90 days and it is a turnkey solution! |
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If you think our government and the Federal Reserve should take $20 billion of the $598 billion that is sitting on the sidelines but meant to support Main Street USA businesses and put it into a co-invest fund that will invest alongside millions of local investors in supporting local businesses, contact us or contact your representatives and let them know! |
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Forbes REPRINT:
Crowdfunding Success Indicates Small Businesses And Startups Worthy Of Government Matching Program
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The following is a reprint of a story that ran in Forbes this morning. You can find the original here.
By: Geri Stengel
Community-focused investing has funded local small businesses and startups across the US. Since 2016, half a billion dollars has been raised from investment crowdfunding, generating $2 billion in economic activity and supporting 100,000 jobs.
According to Regulation Crowdfunding by Congressional District: A Report Card by Crowdfund Capital Advisors, Congress can encourage this more by creating the Main Street Recovery Co-Investment Fund. The United Kingdom has already done this to great success. It worked so well that Fund was re-upped twice, including to support small businesses impacted by the coronavirus pandemic.
A critical lesson from the 2007-2009 financial crisis was that access to capital for small businesses matters. Small businesses were hit harder than large companies by the Great Recession. During and for a period after the financial crisis (2009-2013), big banks reduced lending to small businesses by 20%. Still, they increased loans to larger companies by 4%. During the Covid-19 crisis, access to financing for small businesses is more critical than ever before.
A new category of financing—crowdfunding—was created to meet some of this need. This article is focused on investment crowdfunding and its three forms enacted by the JOBS Act, which allow businesses to raise money via online platforms:
- Regulation Crowdfunding (Reg CF) enables companies to raise about $1 million per year from both average and wealthy (accredited) investors.
- Rule 506 of Regulation D enables issuers to raise money from wealthy investors.
- Regulation A+ (Reg A+) enables issuers to raise up to $50 million from both average and wealthy investors provided that the offering is qualified by the SEC.
Due to the Covid-19 Crisis, the SEC has announced an update of some Reg CF rules, including lifting the cap on how much a company can raise from $1 million to $5 million. Separately, it has recommended making this permanent along with other rules.
Even in 2012, Congress agreed on little, but getting capital to small businesses and startups was something they did. A bipartisan, overwhelming majority passed the JOBS Act. It was intended to encourage funding of small businesses by easing many of the country’s securities regulations. It took four years to phase-in the laws for all three forms of investment.
Sherwood Neiss and his partner, Jason Best, of Crowdfund Capital Advisors, are leading the charge for Reg CF. Neiss is a co-founder of FlavorRX, which offers flavored medicine that kids are more likely to take. “Our phone rang off the hook from mothers and fathers asking to invest in the company,” said Neiss. If you weren’t rich, there was no way, as an average Jane or Joe, to invest in a private company. He sold the company in 2007.
When small businesses struggled to get financing during and after the Great Recession, Neiss asked himself, “What if there was a way to turn customers into investors?” This would require changes to SEC investor laws. Naive to the way laws are made in DC, Neiss and Best sought the help of Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council. It advances policies and initiatives that encourage entrepreneurship and small business growth. Together, they walked the halls of Congress, pushing the idea that you could raise money from the masses to invest in local businesses, particularly those owned by minorities and women entrepreneurs.
Some were concerned about fraud and dissed this new form of financing. Even so, on May 16, 2016, Reg CF was the last of the three forms of investment crowdfunding to be enacted. To date, there has been NO FRAUD, proving naysayers wrong. You can fool investors one by one, but it’s hard to pull the wool over thousands of investors’ eyes, commented Neiss. It also turns out that the crowd picks winners as well as, if not better than, the professionals—venture capitalists.
Using these new forms of investment crowdfunding, 3,100 stock offerings from 2,600 plus companies from over 850 jurisdictions across the country have been made. Anecdotal evidence finds minority- and women-led ventures have success raising money through Reg CF. I’ve written about a few female founders who have raised Reg CF funding, including Liza Velarde of Delee, Max Tuchman of Caribu, Amber McDonald of Indemnis, and Desiree Vargas Wrigley of Pearachute. “There is a disconnect between what’s happening in our local communities and what is getting DC’s attention,” said Neiss.
During the pandemic, Reg CF has grown. “[In July and August,] there were over 40,000 investors investing each month in local businesses,” said Neiss. The vast majority of the dollars—80%—comes from wealthy investors. “There’s massive interest from investors in supporting these businesses.” For example, this past August, $25 million was raised—nearly three times the amount raised six months ago, before the crisis. Top industries include a couple of the hardest hit by the coronavirus—restaurants and personal services.
Interestingly, 95% of women-led congressional districts had investment crowdfunding offerings and 93% of minority-led districts. Having role models in leadership positions, not just as entrepreneurs, is particularly important for women and minorities, commented Kerrigan. “It’s very empowering.”
“The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods,” said Jerome Powell, chairman of the Federal Reserve in The Wall Street Journal. With the Main Street Recovery Co-Investment Fund, the federal government would match 100% of debt and equity investments raised from communities by small and high-growth businesses via SEC-regulated crowdfunding platforms. Matching funds are capped at $250,000 per business. A $20 billion fund would impact over 100,000 small businesses and startups.
Community investors have a vested interest in the business’s success and are the users and marketers for these businesses. Loans or equity investments are paid back first to community investors, followed by the government. Data on these companies’ 100 performance metrics are captured and updated daily and reported to the SEC, Bloomberg, and other entities. The database can be provided to Congress, the Treasury, and the SEC to provide transparency and oversight.
Investment crowdfunding is showing the way to a broader, more inclusive recovery. It could do more. The Main Street Recovery Co-Investment Fund not only provides additional capital to worthy companies based on the investment dollars of customers, but it would spur further interest and investments from others who don’t know about investment crowdfunding.
How will you show your support for the creation of the Main Street Fund?
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Video Replay – Policy Briefing from Oct. 1st
The Main Street Recovery Co-Investment Fund
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Sherwood Neiss speaking as part of a panel talking about the Main Street Co-Investment Fund |
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Yesterday Crowdfund Capital Advisors’ principals Sherwood Neiss and Jason Best joined Karen Kerrigan, President and CEO of the Small Business and Entrepreneurship Council and Jeff Lynn, Executive Chairman and Co-founder of Seedrs in the UK to talk about the Main Street Co-Investment Fund.
You can watch the replay by clicking the image above.
Investment crowdfunding is gaining momentum and offers a practical solution that Congress or the Federal Reserve can immediately utilize to efficiently and effectively deploy capital to local businesses in diverse communities across America. In this video we discuss the proposed Main Street Recovery Co-Investment Fund and the United Kingdom’s successful experience using the co-investment model both pre and during the Covid era.
The democratization of capital is truly taking hold through investment crowdfunding, which allows small business owners to more efficiently identify and access investors and capital using SEC regulated platforms. “Supercharging” this proven, fraud-free method of raising capital through a federal co-investment fund will help local small businesses recover, rebuild and reinvent themselves in the aftermath of COVID-19. The co-investment fund is a successful model that is currently being deployed in the U.K. (through the Future Fund). The Main Street Recovery Co-Investment Fund would match the capital raised by small businesses on SEC-regulated platforms.
On September 16, SBE Council and Crowdfund Capital Advisors released the report, Regulation Crowdfunding by Congressional District: A Report Card, which reviews the progress of investment crowdfunding since 2016 and its capability for meeting the significant capital needs of Main Street business and entrepreneurs during and following this challenging period.
As noted in the report, more than 90% of U.S. House congressional districts (393 districts) have had investment crowdfunding offerings, with 700,000 retail investors participating in these diverse offerings across the United States. The average raise per offering is $342,000. Community-focused investing is delivering significant capital to local businesses, and the amount of capital being raised via debt and equity crowdfunding has increased considerably during COVID-19. There has been no fraud reported by the SEC with investment crowdfunding. |
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A Tale of Two Streets in the COVID-19 Economy
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The following is a reprint of a story that came out in Morning Consult. The original can be found here.
BY MICHAEL ROMAN & KAREN KERRIGAN
September 21, 2020 at 5:00 am ET
“It was the best of times, it was the worst of times…”
The famous opening line to Charles Dickens’ epic novel “The Tale of Two Cities” seems to capture aspects of the dual, divergent and exceedingly difficult COVID-19 realities we are facing in the United States today: Because of the virus, we are bearing witness to both the best and worst of times. Congress and the administration need to take note — especially during National Small Business Week 2020, where this week we officially celebrate the risk-taking and hard work of Main Street business owners.
The coronavirus has certainly taken its toll. The facts are clear – over 6.5 million cases and the heartbreaking loss of nearly 200,000 lives. The economic pain is also well-known by all, with $2 trillion in gross domestic product wiped out during the first two quarters of 2020, 22 million jobs lost (42 percent of which have been regained) and hundreds of thousands of small businesses shuttered. One report estimates 3.5 million closures over the next two months, and possibly 7.5 million closures over the next five months.
The uncertainty of what lies ahead adds to a level of anxiety that is only mitigated by the knowledge that our medical and first responders continue their relentless dedication to caring for the sick, while our best scientific minds are working to quickly deliver an effective vaccine. It is with all this in mind that we have hope that we will eventually return to a world that looks and feels just a little less anxious and a little more like the normal we knew not that long ago.
But times are clearly not normal. Wall Street for example, due to quick action by the Federal Reserve and Congress, has achieved a rather remarkable recovery from the depths of the stock market sell-off in March. Investor portfolios, even with a current breather, have largely recovered their losses, bolstered by a combination of fiscal and monetary stimulus. Here, it looks to be among the best of times.
But Wall Street is not Main Street, and it is Main Street that will ultimately determine the strength of the U.S. economy and a successful recovery.
Despite a commitment of more than $6 trillion of monetary and fiscal stimulus, all is not well, and in fact, far from it. Wall Street’s apparent success masks a harsh truth — businesses of all sizes, both public and private, and especially small and medium-sized businesses, are straining to survive. Although August’s jobs report shows continued improvement in employment, Main Street businesses, as noted above, are in jeopardy, as they operate in a world a void of typical customer interaction and where consumers are hanging tighter to their dollars. Sadly, the inability of Congress to find a way to compromise is seriously undermining business recovery, and along with that, sapping the entrepreneurial energy of many business owners.
For those on Main Street, it is among the worst of times.
The Fed attempted to address the dire need for capital among small-business owners with its “Main Street” lending program, but the result has been very poor given terms and rules that were not realistic for most small businesses. This speaks to the need for Fed officials, and others “designing” capital access and recovery programs, to engage with Main Street businesses and lenders to ensure their programs align with practical needs and conditions on the ground.
More importantly, members of Congress must find a way to put partisanship aside for the sake of local businesses and the communities dependent on them, like they did at the beginning of pandemic — as eloquently mentioned by Kevin Hassett, former chairman of the White House Council of Economic Advisers, in an ACCF webinar. There appears to be clear consensus, for example, on retooling the Paycheck Protection Program by allowing for a second draw, easing some restrictions that have kept many small businesses from applying for a loan and expanding forgiveness to include personal protective equipment and cloud services expenses. Congress created this program on a bipartisan basis, and must now make it work more effectively for small businesses. There is no excuse for inaction!
The U.S. economy remains in a deep hole, and therefore, Congress and federal officials must look at a broad range of solutions to fuel recovery. A strong and resilient recovery needs an innovative approach and government leaders must consider a range of ideas. The proposed “Main Street Recovery Co-Investment Fund,” for example, being advanced by the SBE Council, would leverage the early success of investment crowdfunding by matching federal dollars with local investors’ capital to enable broad and inclusive small business support across diverse communities – urban and rural alike.
Every effort must be made to convene the smartest business and policy minds to identify and implement sound economic, tax, fair trade and social policies, along with programs that boost local growth and entrepreneurship.
True commitment, followed with timely action by government leaders to aggressively confront the challenges with which we are faced, will give us the best chance to write a tale of two streets, Main and Wall, that converge into the very best of times.
Michael J. Roman is a nonresident senior fellow at the American Council for Capital Formation and president of CertainPoint Strategies LLC. Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.
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