“Obviously, COVID is having a negative impact on all small businesses but underserved segments have been undermined on a disproportionate basis. While government programs have helped, more needs to be done. Access to capital via digital funding portals and participating broker-dealers can supplant these government programs” writes J. D. Alois for Crowdfund Insider.
The Securities and Exchange Commission (SEC) and its Small Business Capital Formation Advisory Committee met recently to discuss the impact of the pandemic on underserved entrepreneurs and small businesses. They discussed pertinent statistics such as the fact that the number of minority-owned businesses has grown by 38 percent since 2007 and that women-founded start-ups accounted for 21.6 percent of all start-ups by 2018.
While these statistics are encouraging, they don’t tell the whole story. That all-important early-stage capital is still a struggle for these under-represented businesses. Neither minority-owned businesses nor female founders are able to attract as much capital as white-owned businesses or male founders. Now the effects of the Covid19 pandemic is amplifying this inequality. During the three months starting in February 2O2O, there was a decline in businesses by 3.3 million. 2.7 million of these, almost 82%, were minority and women-owned.
Rodney Sampson, a Brookings Institute Senior Fellow, founder of OHUB and venture partner at Draper Goren spoke at the meeting. A champion of crowdfunding, he was involved in the passing of the JOBS Act legislation and believes improvements to crowdfunding could help the democratization of access to capital. Amongst his suggestions are increases to funding caps for Regulation Crowdfunding and Regulation A+ and changes to the accredited investor definition, permitting sophisticated investors to invest even if they do not reach the net worth or income bar.
The SEC is already reviewing the exempt offering ecosystem with updates expected by the end of the year. Their proposals, which support some of Sampson’s suggestions look positive for crowdfunding, small businesses, minorities, women and investors alike.
From our point of view, they can’t implement them fast enough. Read the original article here.
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