The Big Story: As JOBS Act turns 10, capital access policies back in the spotlight
This week, policymakers are turning their attention to opening up avenues for capital access. Ahead of the 10th anniversary of the Jumpstart Our Business Startups (JOBS) Act, Senator Pat Toomey (R-Pa.) and Senate Banking Committee Republicans unveiled a draft for the JOBS Act 4.0, focused on accelerating economic growth and spurring new business formation.
The law’s predecessor—the original JOBS Act enacted in 2012—was a monumental step to support startups across the country. The legislation created and strengthened avenues for startups to access and raise capital. It eased the pathway for startups seeking to “go public,” allowed startups to publicly solicit investment from accredited investors through Regulation D, and launched Regulation Crowdfunding, allowing startups to obtain capital from everyday investors using the Internet. The new JOBS Act 4.0 discussion draft would build off of the original effort and further enhance capital formation. The draft, currently open for feedback, compiles roughly 30 pieces of legislation with the goal of boosting American innovation, improving capital access, and includes bipartisan input from entrepreneurs, retail investors, and other innovators. The draft includes language to broaden the definition of accredited investor—one of the primary measures that determines who can participate in private securities offerings—to allow more Americans access to “high-growth investment opportunities.” This effort could be critical as the SEC is also considering changes to the accredited investor framework, which could include raising the financial thresholds to qualify as an accredited investor that would further shrink the pool of would-be startup investors, especially those from historically underrepresented communities.
This resurgence of the JOBS Act 4.0 is the latest sign of support for better access to capital for innovators, and in particular underrepresented entrepreneurs. The Small Business Administration (SBA) announced a handful of reforms this week to their Community Advantage (CA) loan program to open up better and more equitable access to capital for low-income borrowers and innovators in underserved communities. And House Financial Service Committee Republicans came out with a report this week marking 10 years of the JOBS Act, which boosted support for innovators amidst a divided Congress. The report highlights the successes of the JOBS Act, while signaling further need to address regulatory burdens that can stifle innovators.
As we’ve long stated, access to capital is one of the most crucial hurdles founders face when launching and growing their startups. It’s vital that policymakers continue to expand pathways for entrepreneurs, bringing about a more inclusive startup ecosystem.
Policy Roundup:
Senate Approves Kathi Vidal for USPTO Director. On Tuesday, the Senate confirmed Kathi Vidal as U.S. Patent and Trademark Office (USPTO) Director, making her the second woman in history to hold that position. Vidal arrives at an important time as the agency faces policy questions around patent review, standards, and diversity. And as we’ve noted, startups need a USPTO leader who can champion their work, reverse harmful patent practices, and restore balance in the system. Vidal’s history of supporting inclusivity in the legal profession also bodes well for promoting more inclusivity in innovation.
SBA should reconsider rules that keep innovators with prior records from lending programs. In a recent op ed, Relman Colfax counsel, Zachary Best, and partner, Stephen Hayes, detail how the U.S. Small Business Administration (SBA) restricts access to its lending programs for people who have been impacted by the criminal justice system, and how these policies have a “disparate impact on applicants of color” and ultimately inhibit diverse innovations. SBA criteria for lending bars applicants who are on parole for any crime and require those with prior felonies to undergo a “character determination” that lacks clear standards, by the SBA, in order to qualify for 7(a) and 504 small business loans. With formerly incarcerated individuals 50 percent more likely to become entrepreneurs than those who have never been incarcerated, and criminal history having little relation to the ability to repay loans, the SBA risks hindering new business creation with these policies. It’s vital that every government prioritizes opening up avenues of innovation for a more inclusive and diverse startup ecosystem, and not uphold policies that stifle.
Canada proposes new online news media law. This week, Canadian officials unveiled the Online News Act, which would require certain digital platforms to pay news publishers for use of their content. The proposal mirrors similar efforts in Australia and elsewhere around the world that would require Internet platforms to negotiate with news publishers or create new intellectual property rights when users link to publishers’ content. In response to a U.S. Copyright Office study on a similar topic earlier this year, Engine warned of substantial unintended consequences that could emerge from such policies, which do not just alter how information is shared and communicated online, but could cause problems for startups and innovation.
Indo-Pacific Economic Framework talks building momentum. This week, officials from across the U.S. government indicated a coming announcement around the Administration’s proposed Indo-Pacific Economic Framework (IPEF). At an event, officials indicated that digital provisions around privacy and cross-border data flows would be emphasized. Also this week, U.S. Trade Representative Katherine Tai visited Singapore to meet with Prime Minister Lee Hsien Loong to discuss the Framework. Singapore meets many digital standards envisioned by IPEF and will be a key partner in helping to raise standards in the region through the framework. High digital trade standards that lower barriers and open up markets are critical for U.S. startup competitiveness.
Startup Roundup:
#StartupsEverywhere: Chicago, Illinois. Chicago:Blend is a non-profit ecosystem support organization founded by a group of venture capitalists. Its purpose is to bridge equity gaps for underrepresented funders and founders and ensure that diversity, equity, and inclusion remain integral parts of Chicago’s VC industry. We had the chance to talk with Executive Director Joey Mak about why representation is essential to societal and economic progress, and how venture capitalists can help keep equitable access at the top of policymakers’ minds.
