Executive Summary
The Main Street Growth Act represents critical legislation that authorizes the creation of venture exchanges in the United States. These specialized exchanges will provide small and emerging growth companies with access to public capital markets that have become increasingly inaccessible over the past two decades. Once passed, Dream Exchange plans to become one of the first venture exchanges. Once the venture exchange is formed, we will be able to provide a marketplace specifically designed for early-stage and high-growth companies seeking between $5 million and $100 million in funding.
Dream Exchange champions this legislation as part of our mission to create a marketplace that will allow small to mid-size companies to list their securities with a venture exchange, providing these companies with public access to capital. Allowing these types of listings in the venture exchange will also provide investors with the opportunity to transact in the securities of these small to mid-size companies through the marketplace formed by the Dream Exchange after it creates its venture exchange
Your Role as a Dream Exchange Investor
As an investor in Dream Exchange, you are part of something larger than a financial transaction. You are part of an initiative to transform American capital markets. This movement creates real opportunity for entrepreneurs to access the public markets, while allowing investors and ordinary people from all walks of life who have previously been overlooked to invest with these entrepreneurs who share similar interests.
The Main Street Growth Act needs champions to succeed. When you share information about this legislation, you are advocating for fundamental fairness in our financial system. You are standing up for the small business owner who has a viable concept but cannot access capital. You are advocating for everyday Americans who deserve the chance to invest in the next generation of successful companies.
We have armed you with facts, sources, and talking points because we believe in the power of honest and informed advocacy. This is about presenting a compelling case for change backed by data and driven by a genuine desire to create a better and fairer marketplace.
Legislative Background
The Main Street Growth Act (formerly H.R. 6623)
- Status: We understand that Majority Whip Tom Emmer (R-MN) and Representative Andy Barr (R-KY) plan to introduce the bill to the House of Representative in the near future with substantially similar language as H.R. 6623. We also expect that Senator John Kennedy (R-LA) will re-introduce a companion bill to the Senate, just as he had done in the past with S.2068.
- Support: A similar bill had received widespread bipartisan support in the 115th Congress passing unanimously out of the House Financial Services Committee and both houses of Congress in 2018 but was unfortunately a fatality and omitted from the final omnibus bill after a compromise was reached on the funding of the border wall.
- Goal: The legislation amends the Securities Exchange Act of 1934 to permit the U.S. Securities and Exchange Commission to provide for the registration of national venture securities exchanges.
- Function: The bill will authorize the proposed venture exchanges to list and trade the equity securities of smaller companies that meet certain criteria set forth in the bill. These companies will generally include startups and emerging growth companies.
Source: Congress.gov | H.R. 6623 – Main Street Growth Act: S.2068: Main Street Growth Act
The Problem: Declining Access to Public Markets
The United States capital markets have experienced dramatic changes that have effectively shut out smaller companies from accessing public capital.
1. Steep Decline in Public Companies The number of publicly listed companies in the United States has fallen by approximately 50 percent over the past two decades. In 1996, nearly 6,000 companies were listed on U.S. exchanges. By 2016, that number dropped to approximately 3,600 companies.
Source: National Bureau of Economic Research | The Shrinking Universe of Public Firms
2. Virtual Disappearance of Small IPOs Small company initial public offerings (IPOs) have become virtually nonexistent. According to a working paper published in the Harvard Kennedy School in 2018, “[t]he number of small IPOs averaged 401 annually in the 1990s, but then dropped to only 105 annually in the 18 years since.” This shrinkage is also reflected in the overall IPO Market, as the “average annual number of IPOs fell by over 61% between the 1990s and the 2000s.” The statistics show that “[b]etween 1990 and 1999, the average number of IPOs per year was 529. This number fell to 205 during the 2000s.”
Source: Harvard Kennedy School | Hunting High and Low: The Decline of the Small IPO
3. Shrinking Pool of Small Companies In 1975, firms with assets of less than $100 million in 2015 dollars represented 61.5 percent of listed firms. By 2015, only 22.6 percent of the listed firms had less than $100 million in assets.
Source: National Bureau of Economic Research | The Shrinking Universe of Public Firms
The Economic Impact
Job Creation The decline in IPOs has significant consequences for job creation in America.
- Research from the Kauffman Foundation found that 92 percent of a total job growth for a company occurs after its IPO.
- When companies cannot access public markets, this job creation potential remains unrealized.
- Emerging growth sized issuers grew employment by 135 percent in the five years following their IPO.
Source: Inc.com | Does the JOBS Act Help These IPOs? (Citing Kauffman Foundation)
Wealth Concentration & Limited Liquidity The shift toward private markets means the earliest and largest rewards of company growth now go primarily to industry insiders and accredited investors. Furthermore, while electronic exchanges optimize trading for large companies, small companies lack the volume and liquidity to maintain constant trading transactions.
Source: Dream Exchange | Main Street Growth Act Info
The Solution: Venture Exchanges
The Main Street Growth Act will allow for the creation of a new category of stock exchange specifically tailored to the needs of smaller companies.
Specialized Infrastructure Venture exchanges will provide a trading environment designed for companies that do not fit the traditional model of major exchanges like NYSE and Nasdaq. These new venture exchanges, as proposed, may offer:
- Tailored listing requirements appropriate for emerging companies.
- Trading mechanisms suited to lower volume securities.
- Regulatory frameworks that balance investor protection with the practical realities of early stage companies.
Broadest Market Place Access By creating venture exchanges, the legislation will:
- Restore the ability of small companies to access public capital markets.
- Enable retail investors to invest in early stage and high growth companies.
- Foster innovation by providing liquidity to private companies earlier in their development.
Talking Points for Personal Communications
Supporting Small Business and Job Creation “The Main Street Growth Act helps restore opportunities for small businesses to access public capital markets. With 92 percent of the job growth of a company occurring after going public, this legislation has real potential to create jobs and drive economic growth.”
Opportunity for All People “For too long, the best investment opportunities have been reserved for accredited investors. The Main Street Growth Act gives everyday Americans the chance to invest in promising early stage companies again.”
Addressing Market Evolution “Our capital markets have evolved in ways that work well for large corporations but have left smaller companies behind. We have half the number of public companies we had 20 years ago. Venture exchanges will provide a modern solution to help small businesses access the capital they need to grow.”
Bipartisan Solution “The Main Street Growth Act had bipartisan support because it addressed a real problem in a practical way. Representatives from both parties recognized that we need to create pathways for small businesses to succeed in the markets of today. We expect the same bi-partisan support as the most recent iteration is identical to the last iteration.”
Economic Opportunity “When small companies can access public capital and grow, they create jobs and generate wealth. The Main Street Growth Act is designed to ensure that economic opportunity is not concentrated in the hands of a few. It will make opportunity available to entrepreneurs and investors across America.”