The U.S. House of Representatives passed a bill this week that directs the Securities and Exchange Commission (SEC) to revise rules governing venture capital fund qualifications.
The Developing and Empowering our Aspiring Leaders (DEAL) Act (H.R. 4429), cosponsored by Reps. Sean Casten (D-IL) and Ann Wagner (R-MO), modernizes venture capital fund rules and enhances flexibility while focusing on direct investment in startups. Overall, it is designed to support innovation, entrepreneurship, and capital formation.
Specifically, the bill requires the SEC to:
Broaden the definition of a “qualifying investment” to include equity securities from qualifying portfolio companies, whether acquired directly or in secondary acquisitions, and investments in other venture capital funds.
Revise eligibility requirements for venture capital fund status to mandate that at least 51 percent of a fund’s commitments be invested directly in portfolio companies. Also, up to 49 percent of its commitments may consist of shares acquired through secondary acquisitions or investments in other VC funds.
“Congress must do more to support growth in the start-up economy and ensure capital reaches the communities and innovators who need it most,” Casten said. “The DEAL Act does just that. I’m proud to co-lead this bill with Rep. Wagner and am thrilled to see it pass the House.”
Between 2019 and 2023, more than 1,900 Illinois-based startups received over $26 billion in support from the venture capital community. In 2023, venture capital funds invested over $66 million in small businesses in Illinois’ Sixth Congressional District alone.
Wagner is the chair of the Financial Services Subcommittee on Capital Markets.