The Securities and Exchange Commission (the “SEC”) has just published the 2025 Staff Report from the Office of the Advocate for Small Business Capital Formation with the aim of providing a robust picture of what is going on in the small business marketplace. You can check out the report for yourself here. Below are a few points that jumped out to us as relevant for our clients.
Small Businesses Continue to Be the Backbone of our Economy. The U.S. is home to 36.2 million small businesses, which represent 46% of U.S. private sector employment. From 2023 to 2024, U.S. small businesses created nearly 9 of 10 net new jobs.
Despite how vital the small business sector is (particularly for creating new jobs), there is still a major capital raising gap for small businesses. 81% of small business owners who applied for a business loan or line of credit found it difficult to access affordable capital. Even when businesses do apply for funding, only 72% received some funding, and just 43% received the total amount requested. This is exacerbated by the fact that small banks are disappearing; over the last decade, the number of small banks decreased by 49%. This matters because small banks have traditionally been the primary lenders to small businesses.
Adequate support and networks can make a major difference. Founders who are plugged into mentorship networks tend have more resilient business plans and higher confidence with approaching lenders.
Snapshot: Crowdfunding Offerings
$235 million was raised through Regulation Crowdfunding offerings during the reporting period. 3% of crowdfunding offerings were for equity, and 58% of issuers were less than 3 years old – showing that crowdfunding serves very early-stage companies.
Typical investors in crowdfunding raises are investing fairly small amounts. The average check size per investment was $1,500 (a 26% increase from 2023), demonstrating that crowdfunding allows everyday investors to participate with modest amounts.
Crowdfunding reflects how dependent small businesses can be on funding sources away from home. 69% of crowdfunding investments are distributed outside of the top 10 crowdfunding cities, showing that crowdfunding provides access to capital beyond traditional venture capital hubs.
Of businesses that completed at least one successful crowdfunding offering from May 2016 through 2024: 0.25% completed an IPO, 2.2% were acquired, and 3.4% received VC funding.
Snapshot: Regulation D Offerings
Regulation D continues to be extremely important for small (and other) businesses. $378 billion was raised through Regulation D private placements during the reporting period – far exceeding any other capital-raising pathway. Over the past 3 years, operating companies raising capital under Regulation D were most often in their first few years of operations – with the majority of companies being less than 3 years old. The top industries using Regulation D were:
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- Technology
- Energy
- Business Services
- Manufacturing
- Health Care
- Real Estate
Regulation D accounted for 99% of total capital raised by both rural small businesses and small businesses in areas affected by natural disasters through exempt offerings – showing it’s the dominant pathway outside traditional financial centers.
Other Resources
This report is one way that the SEC’s Office of the Advocate for Small Business Capital Formation supports small businesses by sharing data, trends, and analysis of what is going on in the market. We also recommend their Capital-Raising Building Blocks.
If you are contemplating raising money for your small business, please reach out to us for legal and strategic support.
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