Today’s congressional hearing on capital formation reinforced an important truth: Regulation Crowdfunding (RegCF) and Regulation A (RegA) are working. These mechanisms are fueling economic growth, creating jobs, and unlocking opportunities for everyday investors and entrepreneurs alike.
Yet, despite clear data showing their success, critics like Alexandra Thornton from the Center for American Progress continue to spread misinformation and fear, uncertainty, and doubt (FUD) about private market investing. Let’s address these concerns head-on.
Myth: 90% of Startups Fail—So Expanding Investment Access is Risky
While Andrew Barnell pointed to studies suggesting that 90% of startups fail, the real issue is why they fail—and that’s exactly what RegCF and RegA help solve.
According to CB Insights, lack of access to capital and running out of money are the two biggest reasons startups fail. RegCF and RegA directly address this problem by providing new funding pathways that allow entrepreneurs to raise capital from their communities, customers, and everyday investors.
Moreover, data from the Annual State of the Investment Crowdfunding Industry Report reveals that companies raising funds through RegCF have a failure rate of just 21.7%—far lower than the widely cited 90% figure. Investment crowdfunding is actively reducing startup failure rates, not increasing them.
Myth: Private Markets Are Risky and Opaque
Thornton’s claim that private investments lack transparency and investor protections is broad and flat-out false. RegCF and RegA require businesses to file financials, business plans, risk factors, and ongoing reporting with the SEC—all of which protect investors and create a level playing field.
“Thornton’s testimony is a textbook example of fear-mongering and a complete misrepresentation of the facts,” said Sherwood Neiss, Principal at Crowdfund Capital Advisors and author of Investomers – How Customers Turned Investors is Reshaping Early-Stage Finance. “If she actually understood these regulations, she’d realize that RegCF and RegA don’t reduce investor protection—they enhance it by giving everyday Americans access to vetted investment opportunities under a structured, transparent framework.”
In reality, traditional venture capital and private equity deals may offer far less transparency than crowdfunding, where disclosures are public and accessible to all investors.
Myth: Expanding Access to Private Investments Will Lead to More Fraud
Thornton warns of fraud risks in private markets, but doesn’t substantiate her claim with data. The SEC, FINRA, and funding portals actively monitor RegCF offerings, ensuring strict compliance and investor protections.
“The idea that investment crowdfunding is a Wild West is absurd,” said Neiss. “The regulatory framework is strong, the platforms are diligent, and investors are protected. There is no widespread fraud in investment crowdfunding—it’s a well-regulated and thriving industry.”
Myth: Private Markets Only Benefit Wealthy Investors
Thornton suggests that private market expansion benefits insiders at the expense of retail investors. In reality, RegCF and RegA are democratizing access to capital across the country, not just in major cities like New York and San Francisco.
RegCF has enabled fundraising in over 2,000 towns across the U.S., ensuring that small businesses in underserved communities can raise capital from their supporters. This isn’t just about entrepreneurs—it’s about giving everyday Americans the ability to invest in the businesses they believe in.
McKeever Conwell emphasized this during the hearing: “For too long, underrepresented founders have been shut out of traditional funding. Crowdfunding is changing that, allowing great businesses to raise capital from their communities and thrive.”
Rebecca Kacaba, CEO of DealMaker, highlighted another major advantage: “When customers become investors, they don’t just bring dollars—they bring loyalty, advocacy, and network effects that drive long-term success.
The JOBS Act Was a Bipartisan Success—Let’s Keep It That Way
Let’s not forget: The JOBS Act, which created RegCF and RegA, passed the House in 2012 by a vote of 407-17—one of the most bipartisan bills in recent history. Both sides of the aisle agree that expanding access to capital is good for the economy.
Instead of rolling back these successful programs, Congress should focus on expanding them. The data is clear:
✅ Crowdfunding is working.
✅ It’s driving job creation and economic growth.
✅ It’s supporting women, minority, and underserved founders.
✅ It’s reducing failure rates for small businesses.
✅ It’s creating wealth-building opportunities for everyday investors.
It’s time to build upon this success, not restrict it. Instead of limiting investor access, policymakers should focus on expanding opportunities—so more Americans can participate in our nation’s entrepreneurial growth.
