A bipartisan group of senators have introduced legislation that seeks to increase the size of angel funds to facilitate more investors in start-up companies.
The Expanding American Entrepreneurship Act (S. 2906) would increase the maximum number of permitted angel investors from 250 to 500. It would also raise the cap on angel funds from $10 million to $50 million.
By allowing more individual investors per angel fund and raising the fund’s cap, the senators say more investors will be able to invest at a lower rate. This, in turn, will allow new investors who have less access to capital to invest in start-ups, expanding the funding base.
“Entrepreneurship is the bedrock of the American economy and the backbone of communities across our nation,” U.S. Sen. Jerry Moran (R-KS), one of the bill’s sponsors. “Expanding access to angel funds gives Main Street more opportunities to invest in startups while supporting the growth of American small businesses. This legislation represents a much-needed change that encourages more companies to go public.”
The bill was also sponsored by Sens. Mark Warner (D-VA), Tim Scott (R-SC) and Ruben Gallego (D-AZ).
“Long before I entered politics, I was in business. I know first-hand how important early investments are for start-ups and small business owners,” Warner said. “This bipartisan legislation will allow entrepreneurs to raise more funds with more contributors, enable small start-ups to expand, and give individuals with less access to capital more opportunities to invest at lower rates.”
This bill expands on the Economic Growth, Regulatory Relief and Consumer Protection Act, which was signed into law in 2018 to expand investment opportunities.
“Entrepreneurship is the driving force of economic growth and job creation in America, and capital is a critical resource entrepreneurs need to turn their innovative ideas into thriving businesses,” John Dearie, president of the Center for American Entrepreneurship, said. “Many new businesses – particularly those that have the potential to grow very quickly – rely on investors who provide early-stage capital in exchange for an equity stake in the company. The bipartisan Expanding American Entrepreneurship Act addresses this problem by expanding parameters of section 3(c)(1) of the Investment Company Act to permit emerging fund managers to raise larger funds with a higher number of permitted investors.”