In a rarity, Democrat and Republican Senators have joined in sponsoring the Expanding American Entrepreneurship Act, which aims to improve access to capital for early-stage firms.
US Senators Jerry Moran, Tim Scott, and Mark Warner have joined to introduce the legislation into the Senate, which would increase the number of investors into angel funds.
The act would increase the maximum number of permitted angel investors from 250 to 500 while raising the cap on angel funds from $10 million to $50 million.
Senator Moran said that investing in startups should not be reserved for a select few individuals, and if it becomes law, the Act would mean Main Street would have more access to participate in these funds.
“This will also expand opportunities for entrepreneurs to secure investments for their start-ups. Entrepreneurship is the bedrock of the American economy. Allowing a larger pool of Main Street investors the ability to raise capital for American small businesses is crucial to more companies choosing to go public,” said Senator Moran
Democrat Senator Mark Warner shared he was involved in business long before he entered politics, and enabling access to capital is vital to helping a new business grow.
“This bipartisan legislation will allow entrepreneurs to raise more funds with more contributors, enable start-ups to gain access to a new pool of investors, and give individuals with less access to capital more opportunities to invest at lower rates.”
Senator Scott added that too often, Wall Street has access to aspects of the capital markets, but Main Street does not.
“That has to change. As the top Republican on the Senate Banking Committee, I’m glad to join this effort to allow more investors to participate in funds that help provide small businesses with the resources necessary to grow their operations and create good-paying jobs.”
This legislation is described as expanding on the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed into law in 2018.
Pat Gouhin, CEO of the Angel Capital Association, welcomed the legislation, stating there is a critical need for more early-stage capital to support startups.
“By allowing funds to raise money from a larger pool of accredited investor prospects, the bill will help early-stage startups throughout the country raise the capital they need to create the next generation of innovative high-growth companies.”
One aspect the legislation does not address is the expansion of the Definition of an Accredited Investor to allow more individuals to qualify as Accredited. Several bills have been introduced to expand the definition in recent years, but none have been signed into law. Meanwhile, leadership at the Securities and Exchange Commission wants to make it more difficult to be deemed accredited, something that counters the nature of the Act introduced by the above Senators.