Are you an aspiring entrepreneur looking to navigate the complex world of small business capital formation, aka raising money? In the latest episode of The Angel Next Door Podcast, host Marcia Dawood engages in an insightful conversation with Stacey Bowers, Director of the Office of the Advocate for Small Business Capital Formation at the Securities and Exchange Commission. Stacey shares her extensive experience, ranging from working in securities law to representing founders and small businesses in raising capital, eventually leading her back to the SEC in a significant role. The episode goes into the crucial role of the Office of Advocacy in amplifying the voices of small businesses and investors to advance their interests in the capital markets. In a stimulating discussion, Stacey unveils the vital functions of the Office of Advocacy, shedding light on its mission to support small businesses, investors, and underrepresented entities. The office undertakes substantial outreach, collects data, and publishes an annual report that encapsulates the challenges and experiences of small businesses and investors. The episode emphasizes the array of educational resources available, including a glossary to demystify legal jargon and a funding roadmap to guide potential entrepreneurs in their capital-raising endeavors. With an emphasis on promoting awareness and engagement, this episode is a must-listen for both aspiring entrepreneurs and angel investors seeking comprehensive insights into small business capital formation and the vital support available through the SEC's Office of Advocacy.
Are you an aspiring entrepreneur looking to navigate the complex world of small business capital formation, aka raising money? In the latest episode of The Angel Next Door Podcast, host Marcia Dawood engages in an insightful conversation with Stacey Bowers, Director of the Office of the Advocate for Small Business Capital Formation at the Securities and Exchange Commission. Stacey shares her extensive experience, ranging from working in securities law to representing founders and small businesses in raising capital, eventually leading her back to the SEC in a significant role. The episode goes into the crucial role of the Office of Advocacy in amplifying the voices of small businesses and investors to advance their interests in the capital markets.
In a stimulating discussion, Stacey unveils the vital functions of the Office of Advocacy, shedding light on its mission to support small businesses, investors, and underrepresented entities. The office undertakes substantial outreach, collects data, and publishes an annual report that encapsulates the challenges and experiences of small businesses and investors. The episode emphasizes the array of educational resources available, including a glossary to demystify legal jargon and a funding roadmap to guide potential entrepreneurs in their capital-raising endeavors. With an emphasis on promoting awareness and engagement, this episode is a must-listen for both aspiring entrepreneurs and angel investors seeking comprehensive insights into small business capital formation and the vital support available through the SEC's Office of Advocacy.
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Marcia Dawood
Well, Stacey, welcome to the show.
Stacey Bowers
Thanks, Marcia. Thanks for having me.
Marcia Dawood
Well, it's great to have you here on the show. You have a new role at the securities and Exchange Commission. We originally met because of my role on the advisory committee, which we'll get into a lot of those details. But why don't you just start off by telling us a little bit about your background and how you managed to make it here into the SEC.
Stacey Bowers
Sure. Before we jump into that, I'm going to give my general disclaimer that we all give when we work at the SEC. I'm speaking in my official capacity as the director. Brace yourselves, everyone of the office of the Advocate for small business capital formation. My views do not necessarily reflect the views of the SEC, any of the commissioners or the commission staff. So with that out of the way, I can definitely dive in and talk a little bit about my background, how I got to this role. I'm probably going to say too much, but we'll go with it. So when I think about it, I've really, I've come full circle.
Stacey Bowers
So I started my career out of law school at the securities and Exchange Commission in the division of corporation finance. I won't say how many decades ago, because it was a lot of decades ago. And so it's really interesting that many decades later, here I am back at the SEC in a much different role. But just how life happens and how things work. And I think for me, I think about my backgrounds. We have something in common. I went to undergrad at Pittsburgh, University of Pittsburgh, and I know you lived in Pittsburgh, and I was an accounting major there. And I knew coming out of undergrad that I wanted to go to law school.
Stacey Bowers
But I did. I took a year off before I went to law school, and then I got to law school. And I think I really knew going in, I wanted to work with corporations and businesses. I don't think I necessarily knew what I wanted to do with them, but I guess that's my way of saying I also knew I didn't want to be a litigator. There was no part of me that wanted to litigate. So I knew I wanted to be a transactional lawyer. I had a chance to be research assistant for Professor Jay Brown, who's still at the University of Denver. And really he piqued my interest in securities law.
Stacey Bowers
I'm not sure at the age you go. I went to law school pretty early. I'm not sure I really had a true understanding of what that meant. He definitely got me interested in securities law so I was a research assistant for Jay, and then I had a chance to be research assistant for two adjuncts, Hal Blumenthal and Sam Wolf, who are both securities law gurus in their own rights. And so I think, honestly, just between that and my love of working with businesses and interacting with them, I think that's part of what got me started on this path. So out of law school, like I said, I went to the division of corporation finance and worked there for a couple years. And then I switched gears and I spent the next couple years of my career. I worked for some public companies, or companies getting ready to go public, I should say.
Stacey Bowers
They brought me on board to help them through their public offerings. So I worked in house. I also worked for small firms helping companies do public offerings. And then I am old enough to have survived the Internet bubble, and the Internet bubble happened. And probably a lot of your listeners are going to have to Google and figure out what does she mean when she talks about the Internet bubble. And so, like a lot of securities lawyers or deal lawyers, we had to retool. And so I shifted gears a little bit and found myself working less with public companies or companies that wanted to be public and working more with small companies who were trying to maybe do their first capital raise or just raise small amounts of capital. And honestly, I think it's one of the most rewarding things I've ever had the chance to do.
Stacey Bowers
So I did a lot of that early on, and we could go through a lot of details, but I found myself joining academia, being a professor at the University of Denver. And I can tell you that all of those early years, they really played a role in what I decided to do as a professor. I was lucky enough to be given the freedom. I developed a class on capital raising through exempt offerings. And I think you know this about me. I'm a little bit of a data nerd. I'm a little bit of a numbers nerd, and I got the chance. I was asked if I was willing to teach accounting for lawyers, and I said yes.
Stacey Bowers
I don't know what I was thinking when I said yes. But then I absolutely loved it because there was something also really fun about introducing law students to accounting, most of whom are scared to death of it and don't really understand it. So I got a chance to do that. And then in the mix. And most recently, while I was still I was a professor, I was also working with a small local firm in Colorado outside of Denver. And I was representing founders and small businesses raise capital. And so I think all of that really just led me down this path. And I know this is getting long winded.
Stacey Bowers
I'm almost there. And then I had the chance. Somebody pointed out the small business Capital Formation Advisory committee, see if I can get all those letters put together. And so much like you, I put in, I submitted an application or email or however you want to think about it, to be a part of the committee. I was accepted. I was absolutely thrilled. Came to the first couple meetings of the committee, somebody referenced to me that the director position for the office was open. And I decided to explore it.
Stacey Bowers
And I have to give credit to one other mentor. He's a friend of mine, Brad Olson, and he has a perspective in life that when somebody asks you to do something, your first response should be, why not? And so when I was asked, would I be interested? Or when it came up, am I interested in being the director? I'm like, well, why not? Why wouldn't I explore this, see what it's about, see if it's interesting, put my name in the hat, and then honestly just was lucky enough or privileged enough to be selected. And so here I am, a little over two months later, and I get to work as with an incredible team of people who are so passionate about helping small businesses raise capital. So that was a really long winded answer about how I got to be the director of this office and tell.
Marcia Dawood
Us a little bit more, what does the office of Advocacy actually do?
Stacey Bowers
That is a fantastic question because I am pretty sure that most. I don't want to say it that way. I am sure that a lot of people don't know much about our office or even know that it exists. And so to get the opportunity to talk about it and enlighten people, it's really important. So we're really, our office is here to bring the voices of small businesses and investors to light with the goal of advancing their interests both at the SEC and in the capital markets. So we're really here to support small businesses and their investors. And under the statute that created this office, the legislation that created it, we are mandated to look at the unique challenges that underrepresented businesses and their investors encounter along the way. So because of that, we're really intentional about who we work with, who we talk to.
Stacey Bowers
So we like to focus on women founders, diverse founders. And when I say diverse founders, that runs a huge gamut. We talk to rural businesses, and then also we have a focus on businesses that are in natural disaster disaster areas. So those businesses that are affected by a natural disaster like a hurricane, a fire, a flood, something along those lines. And then we, and we also are here to be a voice for the investors. So thinking about your podcast, people who are listening today, angel investors. So it's not just that we're here to advocate and amplify the voices of small businesses. We're doing the same thing for the investors and the capital allocators who are putting their money into those small businesses.
Stacey Bowers
Then, just to give a little perspective for us, small businesses runs the gamut from a startup to a small public company that has up to 250 million in public market capitalization. So it's a pretty big swath that we're out there trying to advocate for and amplify their voices. And one of the things that we do a lot of in our office is we do a lot of outreach events. So we try and get out there and we try and talk to our stakeholders, find out what's going on in the capital raising marketplace. We also watch for trends. We collect a lot of data. Sometimes we commission studies. We'll commission somebody to actually do a study for us to try and collect additional data.
Stacey Bowers
And we take all of that information and we put it into an annual report that we publish on an annual basis. And while our legislation requires us to put together the annual report and it goes to Congress and the commission, but we really, first of all, we love doing it, and it's a chance for us to tell the stories of small businesses and investors, and we try and do it in a really interactive, engaging manner. So for those of you out there who have not seen our annual report, it's not your traditional annual report where you're going to open it up, and it's 50 pages of like, paragraph after paragraph. I really encourage you go to our website, check it out, and you will see lots of graphics, lots of charts. We like to highlight voices of people that we've talked to through the years. So a lot of times we'll have quotes from people that we've interacted with. And so it really is an engaging report, and it really does tell the story of small businesses. And then just to put a little bit more perspective on it, if you take the time, the audience, if you go out there and you check out the report, you'll see we approach it in two ways.
Stacey Bowers
So we look at businesses based on their lifecycle. So are they in the early startup stage? Are they in more of the middle mature stage, or are they in that later stage? Small public companies. So when you're looking at the information that's in the annual report. We look at it that way, and then we also drill down and look at it from the perspective of those various groups that I talked about. So those businesses that are underrepresented. And this is a way for us to give a voice and to inform the public. So, for instance, for this audience, if you're an angel investor out there and you're like, I want to invest in a woman owned business, or I want to invest in a business that was founded by LGBTQ founders, we have sections in our annual report that are specific to those groups of small businesses. So it's a chance to go out there, learn some more information, and dig deeper into those specific sort of founders.
Stacey Bowers
Versus the other part of our annual report is looking more broadly as we look across the life stage of businesses. And then probably the last thing we do, a lot of educational resources, they're very user friendly, so much like our annual report. You're not going to get in there. It's not the kind of annual report you're going to read to put you to sleep at night. I'm just going to say that. So we try and take that same approach with our educational resources. We try and create user friendly resources that small, small businesses, founders and investors can turn to and rely on.
Marcia Dawood
Yeah, I was going to ask you about the resources. I was surprised when I became a member of the advisory committee, just how many resources the SEC has for free, and mainly for entrepreneurs, if I'm not mistaken. So if somebody is thinking about starting a small business, whether it's a startup or maybe they just. Or that maybe they want to start a business in their community, what would be the first thing that they might go to look at in the resources section?
Stacey Bowers
Sure. It's a really great point. I think a lot of people don't realize the SEC broadly has a ton of resources that are available to small businesses, but businesses of all types. And then in particular, our office has what we call our capital raising hub. So I think for a new business, a startup, or even investors, and along the way, honestly, our resources run the gamut as well. But I think checking out those resources, so when I think about it, we've really tried to design them to help small businesses, to help investors. So we have things like, we have a roadmap. Somebody's just getting ready to start a small business, and they're wondering, what kind of capital should I be looking for? And capital could be a loan from the.
Stacey Bowers
The small business association or your local bank, or it could be your own personal savings, or it could be that you're raising money from angel investors. So capital has a lot of forms. So we definitely have some resources out there that just even explain to new founders what are the different types of capital that might be available to me. And then we do that through what we call, we call them building blocks. They're one page helpful guides that provide information. We also have what's called the roadmap. And let me see if I get that right, the funding roadmap. So we have what's called the funding roadmap, which is just also can walk a small business owner through what are the different ways I can raise capital.
Stacey Bowers
And then I think one of the things that, I think all of our resources are amazing. I wouldn't be heading up this office if I didn't think that. But we have what's called the Navigator tool. So a founder can go in there and answer a series of questions. It's going to walk them through a series of questions, and after they've answered all the questions, it's going to come back and say to that founder, well, based on what you've told us, here are some potential ways that you might think about raising capital, and then here are resources that are going to help you understand. How do you legally raise capital if you're going to go down one of those specific pathways? When I think about your audience, I think there are, for angel investors, I think we have a number of resources that would be of interest. We have our cutting through the legal jargon glossary. So we've tried to take all of that legal terminology or all that specialized terminology that gets bandied about in this capital raising world and put it into a more user friendly, more understandable language so that everybody can get in that glossary and look at something and be like, oh, that makes more sense to me.
Stacey Bowers
Or they might think, God, I was at a meeting and people were throwing around this term gap, for instance, and I have no idea what that means. And so they can go into the glossary, look up gap, learn what that means, understand where that comes from. I think the other resources thinking about angel investors is we actually have a building block on different types of investors that might invest in small businesses. So, for instance, there's a whole section in that building block that talks about angel investors. I think the other building block that angels could find interesting is the one on private funds. Because while I know a lot of angels, they're writing the check out of their own pocket. I think sometimes angels, they come together and create a fund, they pool their money to be able to make investments, or maybe just as an individual, they're investing in another fund. So I feel like that resource on private funds could also be really insightful.
Stacey Bowers
And then one last thing I want to highlight, I think in particular for this audience we have, they're called capital Trend maps, and they're interesting in that you can get into the map and you can take a look at how are people raising capital in a specific state and using pathways such as crowdfunding or regulation D, regulation A or registered offering. Knowing that I was talking to you today, Marcia, I looked at North Carolina. So in 2023, there were 19 crowdfund offerings in the state of North Carolina. And so for the audience, when I say crowdfunding, I mean crowdfunding under the federal securities laws. And those 19 offerings in total hit a range of between five hundred k and one million. But there were 672 reg D offerings in North Carolina in 2023. And they raised in the aggregate in the five to $20 billion range.
Marcia Dawood
Wow.
Stacey Bowers
Yeah. Yeah. And I don't know exactly where in that range, but I'm a nerd. I don't think I would have been a professor or be in this office if I wasn't a little bit, if I didn't like numbers and data. So I think those maps are really interesting. So, for instance, on the flip side, I didn't look at it, but if you were to look at states that are less populated, more rural, such as like North Dakota or South Dakota, those numbers are going to shift dramatically. We might see more crowd funds, less reg ds, but overall, we're probably going to see a lot less offerings and capital raised.
Marcia Dawood
And so interesting. And overall, and I saw this in your annual report, I think the amount of funding that went into equity crowdfunding in all of 2023 was something like, or I guess the report was showing what was happening in 2022 was something like $350 million, which is like nothing compared to what is raised by, through even angel investing, let alone venture capital and private equity. But it is growing faster than those other areas. So I really think it's something to watch. And just like you said, in areas where it's harder and harder to raise capital, that could be an interesting way, especially very early on when founders are trying to get that friends and family round, that could be something that they do.
Stacey Bowers
I think that's true. And the other interesting tidbit, not just one, there are lots in the annual report. But tying into that too, I think the other thing that I think is interesting is the distance, when we're talking more about venture capital or angels, the distance in miles between those people and the investments that they're making is growing. And I think some of that comes from, we now live in a world where we're much more comfortable having these kind of Zoom conversations and interacting with each other. And so in an interesting way, I think that also opened up the doors, particularly for founders in less populated parts of the country, to be able to reach out to angels, to VC's, to other investors, get the word out and maybe they don't have just to look in that local community.
Marcia Dawood
Exactly. I'm very passionate about trying to get more people involved in angel investing. So what are some of the ways that your office interacts with or gets people excited about being angel investors?
Stacey Bowers
So I, so when it comes to angel investors, I think what's interesting is I suspect that a lot of angels wonder, like, why do I even necessarily care, not necessarily care about the SEC, but what role does the SEC play in my world? And so I think I'm going to talk about the SEC broadly and then I'll talk about our office. So I think it's important for angel investors to understand that when they are investing in offerings and in small businesses, those small businesses have to be relying on an exemption from the registration requirements. And so depending on that exemption could impact who can invest, how much money that company can raise. Is there a difference in the amount that an accredited versus a non accredited investor can raise? So I think from that perspective, there is really angel investors should be aware of that kind of information. And then I think as far as thinking about our office and the role that we play with angel investors, again, we're here to be a voice for small businesses and their investors, and that includes angel investors. And so I think we're here to advocate on behalf of angel investors. We want to hear those voices. We have an email, small businesscc dot Gov.
Stacey Bowers
So we're always interested in hearing what you have to say, whether it's your thoughts on a particular rule or regulation. If you've taken a look at our resources and you think, hey, you're missing this, have you thought about filling that gap? The other thing I would highlight, tangentially related, is we just did an event that was called incubate accelerate ignite, where we were talking to entrepreneurial support organizations. So a little bit different role than angel investors, but I think still, still in that arena where you're helping early stage startups and offering them some of the mentorships so again, I think about, when I think about angel investors is some of those building blocks that I highlighted are there for angel investors. But I think just like wanting to hear from small businesses, we want to hear from angel investors. And so I think this is where I get to say to you, Marcia, you're an angel investors. What would you like to see our office doing or see the SEC thinking about as it pertains to angel investors?
Marcia Dawood
Well, I think any type of education is going to be super helpful. I love that the SEC has a legalese kind of glossary because I feel like no matter how long you've been an angel investor, looking at legal documents, if you're not a lawyer, is sometimes very daunting. And all of them tend to be, while they look similar, they do tend to be different, and there can be terms in one deal that aren't in another deal and vice versa, and then how it gets affected based on what was raised in the past and what could be raised in the future. And there's just so many nuances to it. So maybe some case studies or other types of education that can really show, like, real life stories, because I know I've learned a lot just from being involved in deals where I, of course, invested money, and then in some cases, I lost that money. Not always, of course, but occasionally it happens. And I felt that was an expensive lesson to learn. Maybe I could have learned that from a case study.
Marcia Dawood
So think if we had a little bit more of those going on. Unfortunately, in the private markets, though, sometimes the exit or the end result of what happened to the company is sometimes not disclosed or not all the information is disclosed, which makes it a little harder. But I think that might be a way that we could help some angels just see the entire lifecycle of an investment, because it does take, and for most of them, it takes several years to get through.
Stacey Bowers
Does. And that's, that's really good feedback for us to hear. It makes me think about a couple of things. So I think we have a building block on exit strategies. So when you're talking about for angels to understand, what are the different exits? And I think you're right, a lot of times we don't know what happened at an exit because we don't. They're private companies, they're not filing public information. So we don't necessarily know how that exit played out. But we do have a nice resource that at least walks through what are the different potential exit events.
Stacey Bowers
So I think that's useful for founders. But equally as useful for investors who are coming into an investment. We also have a resource that just talks about the diversifying your investments. So I think, particularly for anyone who's new to angel investing or investing in general, taking a read of that resource and understanding how much you think about diversifying your investments to mitigate some of the potential risks that you encounter. And then I also think when I think about angel investors, most angel investors are accredited investors, and that term gets talked about a lot. But I think we've got a whole building block that just explains who are accredited investors. So I think it's always important if you're going to invest to understand, do I actually meet the definition of accredited investor? And not just from the perspective of understanding if you're accredited investor, but if someone's taking your money based on the fact that you're saying you're an accredited investor, I think it's important to understand, do I fall within those categories and what does that mean? But again, I think there's always the ability to build more resources. And I would say to your audience, we have the small business forum coming up April 16 through the 18th.
Stacey Bowers
And I think for this particular audience, day one will be focused on early stage startups, but day two of the forum will be focused on capital allocators. So I think, to your point, hearing stories, takeaways, what works, what doesn't work as you, not everything is a success. Sometimes things fail. So I think for the audience registering and tuning into it, it's an online event. It happens over three days. Registration should be live the first week of April. But I think in particular, tuning into definitely day two for angel investors. But I also think tuning into day one and listening to startups talk about my founders, talk about their path through that would be really helpful as well.
Marcia Dawood
Yeah, that sounds great. And we'll definitely put all that information in the show notes and the social posts. So as we wrap up, Stacey, what are some of the things that you're hoping to focus on in your tenure? I know you've been in the job for a whole eight weeks now or something like that. It's been pretty short, but you have some time in front of you. What would you like to accomplish in the role?
Stacey Bowers
Sure. And I get asked that question quite a lot. And yeah, I've been in the office, I've been in this position a little over two months. So I think most important to me right now is actually getting out there, listening to people's voices, talking to our stakeholders. So trying to talk to small business founders, trying to talk to investors, other third party organizations that operate in this space or support small businesses and their investors. For instance, we talked to the Angel Capital Association a couple weeks ago. So I think it's important to me to get out there and hear what people are saying and hear those voices and try and get a better grasp of what's going on in capital raising outside of what I already brought to my role. So I think that's really important to me.
Stacey Bowers
But I know one of the things we hear a lot in our office is small business. Well, really founders, they're looking for mentorship. They're looking for connections to other founders who have been through the process. They're looking for resources. So that's something that's really on my radar right now. So obviously we've got a lot of great resources. So part of my goal is to get them out there more broadly for people to know about them. But one of the things that I'm really interested in doing is talking to more of these support, these entrepreneurial support organizations that come in early on in the life of, whether it's a founder, I think about even angel investors, they have their own set of support organizations.
Stacey Bowers
So I think trying to have conversations with those groups to understand how they're interacting within the small business community and providing that mentorship that so many people need. And then I think the other thing for me is just I want the world to know about our office. That's wishful thinking. But what I really want is just more people to know about this office, but really to know about what we do, our outreach efforts, talk to us, send us an emails and use our resources. So I think that's something that's really important to me through the tenure. And that's both of those things I think are going to be important the whole time I'm in this position. But as far as just being two months in, those are probably the things that are on my radar right now.
Marcia Dawood
That's awesome. Yes. We need everybody to know about all the resources and the wonderful information in the annual report, especially for the small business advocacy office. Stacey, thank you so much for being here with us today and explaining all of this to us. And we'll make sure that everybody who is listening gets to know where they can go to find out not just about the office, but also about the forum, April 16 through 18th.
Stacey Bowers
Great. Thanks, Marcia. This has been a blast.