The obvious but unpopular solution would be to make it easier for companies to go public.
The trade off is that Theranos would be public, but so would, for example, Stripe and Slack.
The trade off is that Theranos would be public, but so would, for example, Stripe and Slack.
I agree with you that there are trade-offs.
On one hand, making it harder for companies to go public creates a more QA-ed public market and prevents some very questionable fundraising. OTOH, the stricter criteria & controls exclude smaller companies from public markets altogether, either because they don't qualify or don't want the extra hassle, transparency or outside scrutiny.
Public markets are more transparent and more open to the "retail investor." So, there are real reasons to worry about trends towards staying private.
However.... I don't think this is all or mostly about securities regulators or policy. First, wealth is increasingly concentrated. "Retail" investors are not as important a source of finance. Where they do need access (pensions, etc.), this can be had 2nd hand via the complex "corporate structuring" of most large piles of aggregated wealth.
Basically, the problem that public markets centralize and solve is proportionally smaller in this generation than the last. If public markets didn't exist today, "private" alternatives could probably fill most of the void comfortably.
I do think it's time for fresh ideas. I would not object to a more active regulator, but in different ways, than we've seen up to now. How about regulators inventing new types of securities, instead of leaving this to the shadow sector.
Edit: This is wrong, see below.