Yesterday, Crowdfund Insider reported on the Securities and Exchange Commission announcing “temporary final rule” streamlining Reg CF (or Regulation Crowdfunding). In announcing the rule change, SEC Chairman Jay Clayton explained that the action responds to feedback the SEC has received from the Small Business Capital Formation Advisory Committee about the difficulties these companies may face.
Today NextSeed, an online capital formation platform that offers companies the ability to raise funding under Reg CF, has commented on the move by the SEC. NextSeed was founded by CEO Youngro Lee who sits on the SEC Small Business Capital Formation Advisory Committee as well as being the Chair of the Association of Online Investment Platforms.
NextSeed said the rule change represents an opportunity for growing small businesses (companies that have been formed and operating for at least 6 months) to expedite a capital raise under the Regulation CF exemption.
NextSeed had this to say:
“Many growing businesses need access to capital in the current market for different reasons. Some are seeking additional working capital to help weather the current economic challenges. Other businesses have seen venture capital and private investors back off of current funding rounds for reasons beyond their control. This set of rule changes will help businesses that need new opportunities to raise capital and build a stronger marketing platform for continued growth. Specifically, startups that are raising their Seed, Series A, or Bridge rounds are best suited to carve out a portion of their capital needs under these rules. It is also now easier and faster to raise a Community Bridge Note, a newly launched debt product on NextSeed that is aimed to help entrepreneurs navigate the current and immediate business challenges presented by COVID-19. These SEC rule changes are temporary, though, and businesses that need to raise capital will need to move quickly.”
While it is difficult to tell how impactful the SEC’s change will be what is clear is that SMEs in need of growth capital are hitting a tough patch due to the COVID-19 crisis. Moves by policymakers that improve access to capital can help mitigate at least some of the economic challenges created by the pandemic. More needs to be done.