SEC Releases Staff Report on Capital-Raising Dynamics

On January 8, 2026, the SEC’s Office of the Advocate for Small Business Capital Formation released its annual staff report on capital-raising dynamics and delivered it to Congress. The report is not a policy document. It is a data compilation. But the data tells a clear story about how capital formation is functioning in practice.

First, the SEC’s data confirms that capital formation for small and emerging businesses remains overwhelmingly private. Early-stage companies continue to rely almost exclusively on exempt offerings rather than registered public offerings. The report reinforces that Regulation D offerings, particularly Rule 506(b) and 506(c), remain the dominant mechanism for startup and early-growth financing. Public markets are effectively irrelevant at this stage, not by regulatory design, but by cost, timing, and feasibility.

Second, the report shows that companies are staying private longer and raising more capital while private. For mature and later-stage businesses, the SEC’s data reflects sustained growth in the size and frequency of private capital raises. Companies that historically would have entered the public markets earlier are instead using private markets to fund expansion, acquisitions, and late-stage growth. The SEC does not characterize this as a failure of the public markets, but it clearly documents the shift.

Third, the SEC’s data on IPOs and small public companies underscores the continued contraction of the small-issuer public market. The report reflects relatively low IPO activity compared to historical norms and highlights the ongoing difficulty smaller public companies face in raising follow-on capital after going public. Compliance costs, disclosure obligations, and market liquidity constraints remain persistent headwinds for smaller issuers.

In addition to market data, the report summarizes the Office’s outreach and public engagement during fiscal year 2025. According to the SEC, this outreach focused on gathering feedback from founders, investors, intermediaries, and other market participants about the mechanics and friction points of capital raising. Common themes included regulatory complexity, uncertainty around exemptions, and the practical challenges of navigating overlapping federal and state requirements.

The report also reviews the work of the Small Business Capital Formation Advisory Committee during fiscal year 2025. The Committee addressed issues such as access to capital, secondary liquidity for private company securities, and the cumulative regulatory burden on smaller issuers. While the report does not adopt specific recommendations, it makes clear that these topics remain under active discussion within the SEC ecosystem.

Finally, the SEC emphasizes its continued effort to expand and refine educational resources for small businesses and investors. The Commission expressly acknowledges that a meaningful portion of compliance failures arise from misunderstanding rather than misconduct, particularly in private offerings. The Office positions education as a complement to enforcement, not a substitute for it.

The throughline of the report is straightforward. Capital formation in the United States is increasingly private, segmented by lifecycle stage, and dependent on exemptions that now carry far more economic weight than they were originally designed to bear. The SEC is not announcing changes in this report. It is documenting the status quo.

For issuers and advisors, the report is valuable precisely because it is unambiguous about where capital is actually being raised today. It is the SEC’s own data-backed account of the market it regulates.