Does General Solicitation Improve Access to Equity Capital for Small Businesses? Evidence from the JOBS Act

Anup Agrawal and Yuree Lim

♦ Under Title II of JOBS Act, firms can sell private placement securities to the public via general solicitation (GS) or privately (non-GS). We find that equity offerings under GS tend to be riskier than under non-GS. After accounting for selection, GS issuers are less likely to succeed in (1) raising capital, (2) getting VC funding, and (3) exiting via IPO or M&A; and incur substantial brokerage costs for advertising and verifying investor accreditation. But GS appears to help new entrants and offerings that use registered brokers. The success of Form D financing improves future VC financing and exit outcomes.

Read it here.