U.S. Sens. Pete Ricketts (R-NE) and Ruben Gallego (D-AZ) introduced legislation in the Senate recently that seeks to make it easier for entrepreneurs to connect with investors at pitch events.
Specifically, the Helping Angels Lead Our Startups (HALOS) Act would clarify SEC rules to ensure that showcasing of products and ideas at “demo days,” pitch competitions, and economic development events are not treated as “general solicitation” under federal securities law. The two caveats are that the startup does not advertise investment terms, and the event sponsor does not offer investment advice, negotiate terms, or receive compensation for connecting issuers and investors.
“Startups drive American innovation,” Ricketts said. “Entrepreneurs in the Silicon Prairie and across the country shouldn’t be stifled by red tape when trying to share their ideas with investors. The HALOS Act cuts through unnecessary bureaucracy so that promising companies can attract the capital they need to grow, create good paying jobs, and help maintain America’s technological edge.”
The lawmakers said these events both encourage and showcase innovation. By supporting them, investors will be better equipped to discover promising startups and entrepreneurs will be able to connect with a broader ecosystem.
“Entrepreneurs often attend demo days to share their ideas and attract investors, but confusing and outdated rules make it hard to do that without worrying about violating securities laws,” Gallego said. “By cutting unnecessary red tape and clarifying the rules around demo days, we can make it easier for Arizona entrepreneurs grow their businesses, create jobs, and build a more diverse mix of small businesses and founders across our state.”
The National Venture Capital Association (NVCA) has endorsed the bill.
“By clarifying that startups can discuss their products and business plans at these important events without triggering general solicitation concerns, the HALOS Act will help expedite capital access opportunities and strengthen the broader startup ecosystem in every corner of our country,” Bobby Franklin, National Venture Capital Association president and CEO, said. “We urge lawmakers on both sides of the aisle to advance this measure that will help promote American innovation.”