A bill that aims to help small businesses amass capital and go public overwhelmingly passed the House of Representatives Wednesday morning.
The bill, introduced by Rep. David Schweikert, R-Arizona, and sponsored by U.S. Rep. Anna Eshoo, D-Palo Alto, seeks to raise the amount of money a small business can raise under SEC Regulation A from $5 million to $50 million. The provision, adopted during the Great Depression, governs offerings for small businesses and simplifies the registration requirements. The $5 million limit was set in 1992. Proponents of the bill, including Eshoo, have argued that this limit no longer suffices.
The bill, known as the Small Company Capital Formation Act, passed 421-1 Wednesday in the House of Representatives. During the hearing, Eshoo, whose district includes the high-tech communities of Palo Alto, Menlo Park and Mountain View, said the legislation is an important step toward supporting innovation in America.
"This is an important way to facilitate capital formation, which is one of the important pillars of the national economy," Eshoo said. "My Congressional district, which is Silicon Valley, is the innovation hub of our nation and it thrives on capital formation."
In December, Eshoo testified in front of the House Committee on Financial Services and argued that the existing $5 million limit is too small to be useful for most companies. At the same time, she said, the threshold for going through an initial public offering remains out of reach for most small businesses. This leaves many businesses with few options for raising capital, she said.
She noted that two local companies, Silicon Valley Bank and the law firm Wilson Sonsini Goodrich and Rosati, have more than 9,000 private companies as their clients between them. These companies, she said, either need or will need an infusion of public capital.
"Regulation A will allow companies to seek small infusions of funds as they go along and investors can demonstrate their confidence with their checkbooks," Eshoo said at the December hearing. "Without this access to public-capital markets, good ideas are withering on the vine."
Comments
Jackson Park
on Nov 8, 2011 at 5:34 pm
on Nov 8, 2011 at 5:34 pm
Main Street, ~500 or fewer employees, is the real source of innovation, enterprise, and net new jobs. The exceptional companies around here don't change that basically. So the bill would seem a good step forwards. So far Congress, especially the right, has been bought by Wall Street and left Main Street twisting in the wind to our detriment.
The SBIC programs governed by the SBA have also been a source of funding for smaller companies and some of the participating VC's are around here.
The multinational corporations with their present hq's in the US are not, or are no longer, American companies. This would be true even if the US economy was doing well and was not structurally distorted. The companies are global and see their future growth and profits elsewhere. Since they can still Pay-To-Play in Washington, that's what they buy there. Effectively they hijack government, enabled by our Pay-To-Play system.
Perhaps now we can define Main Street as companies that don't do Pay-To-Play in Washington instead of ~500 or fewer employees, Organizations like the US Chamber of Commerce have been hijacked by the hard right politically and don't seem to represent its membership. The CEA may be similar.
Note, however, that Eshoo's record is mixed. She is also a strong advocate for large corporate agendas including visa worker programs extreme enough that it makes less and less real sense for American students to get near STEM at all. These days they may get a first job but will not have a career even if they are good. While being able to draw first-rate people as we still do is a privilege, the sheer number of STEM people is diminishing the US supply very seriously, a grave error and a result of the Washington Pay-To-Play system, not markets.