Small businesses serve a significant role in promoting the American economy. Because of your importance to the nation as an entrepreneur, ACE-Net was developed by the Office of Advocacy of the U.S. Small Business Administration as a way to encourage more private investments in small companies.

As the research arm of the SBA, the Office of Advocacy has studied various aspects of the lifecycle of small businesses. By talking to entrepreneurs like you, the Office discovered that many entrepreneurs are able to raise up to $250,000 through personal savings, family, friends, credit cards, and small loans. However, it was also clear that you face significant difficulties as you seek the next rounds of financing in amounts between $250,000 and $5 million.

Research further found that while there are various sources of equity capital funding, a vast majority of small businesses have difficulty accessing them:

• Venture Capital (VC): In the past, the VC industry funded a lot of small businesses. However, because it takes just as much time to perform due diligence on a small investment as on a large one, most VC firms nowadays do not finance deals less than $7-$10 million. Additionally, VCs only finance about 3,000 companies annually, which are mostly technology-based businesses concentrated in a few regions of the country, such as Silicon Valley in northern California and Route 128 near Boston, Massachusetts.
• Individual accredited investors: These wealthy individuals usually have substantial business experience, and fund start-up companies in industries they know or businesses owned by a group they are familiar with. However, estimates indicate that while there are over 350,000 small companies seeking equity capital, only about 30,000 are currently receiving financing from about 250,000 active accredited "angel" investors. The bulk of the current investment activity takes place through exclusive and often restrictive angel networks.
• Potential accredited investors: Estimates further indicate that there are 1.5 to 2.5 million accredited individuals who can potentially become "angel" investors of small companies if they are given an opportunity to easily find these business opportunities. However, because there is no national marketplace for these investors to operate in, it is difficult for small companies to find the potential investors.

Conclusion: There is not a shortage of small companies seeking financing or a shortage of potential investors just a shortage of ways for them to meet each other.

ACE-Net is a direct response to the needs of entrepreneurs like you who operate small, growing companies seeking equity capital. By enrolling in ACE-Net, the information about your company that you submit will be viewed by a national audience of investors.

ACE-Net operates under the guidance of a no-action letter issued by the staff of the U.S. Securities and Exchange Commission (SEC). The letter requires that all small companies listed on ACE-Net be "in full compliance with the appropriate filing and registration requirements of federal and state securities laws and regulations."

The SEC letter allows ACE-Net to charge a nominal fee to participating small companies. This fee, covering administrative expenses, is not contingent upon the outcome or completion of any securities transaction resulting from your company's listing on ACE-Net. The maximum annual enrollment fee of $450 provides you the opportunity to submit your company's securities offering information that will be listed, and remain active on the ACE-Net Company Database for one year. Check with your local Network Operator for additional information on the fee as some states may vary.

The day-to-day operations of the program are managed by regional Network Operators that are nonprofit, university- or state-based entrepreneurial development centers. These Network Operators are established leaders in all aspects of economic development in their regions, and collectively, they have helped small businesses raise over $4 billion over the past few years to finance their growth.

If you are a new entrepreneur, the Network Operators can mentor you and provide training and workshops on all aspects of business development that may be relevant to your needs. The Network Operators also sponsor local forums where you can meet investors, legal and financial professionals in your area.

ACE-Net''s Internet system resides on a secure server at California State University, San Bernardino. The database containing information about ACE-Net investors is strictly protected by the University, and is not available to any outside individual or organization, including the SBA or any other government agency. The database is maintained on an off-line computer that is not accessible to computer "hackers."

If you have a small, rapidly growing business and you are seeking equity financing from an outside institutional investor, venture capitalist or individual accredited (angel) investor, there is no reason why you should not enroll in ACE-Net:

• For a nominal fee that covers the program's administrative costs, you can have your company's securities offering information presented to investors nationwide.
• ACE-Net is not a broker-dealer or an investment adviser, so you pay no brokerage fees or commissions.
• You can work with a national network of nonprofit entrepreneurial experts who mentor and assist your business development.
• You can take advantage of model "Terms and Conditions for Securities Offerings" prepared by expert attorneys to help you negotiate with investors.
• As a public-private partnership by federal-, state- and university-based entities, ACE-Net is especially helpful to women and minority entrepreneurs who seek to investment from investors with similar interests.
• ACE-Net operates under the guidance of a "no-action" letter issued by the staff of the Securities and Exchange Commission (SEC).