E111: Legislating for Startup Investing

Venture In The South

E111: The Expanding Access to Capital Act of 2023 (HB2799) is a proposed bill tha recently passed the US House of Representative. It would substantially change how startup investing works in the US.
It would change the basic definition of an accredited investor, change how both small and large startup funds operate, and lower regulatory burdens. The stated goal is to increase available capital for startups while lowering the barriers to entry for small investors so as to democratize startup investing.
Startup investing is mostly the domain of wealthy accredited investors, as non-accredited investors can only participate via crowdfunding (at much higher investor cost). Co-hosts David & Paul discuss this legislation, the many effects that might be expected, and the potential for passage into law.
We think it will be modified in the Senate to address some peripheral Democratic political concerns around gig labor and investor risk. However, the upcoming 2024 election cycle is likely to delay a deal until after the election.
For some context, on December 21, 2011, the SEC adopted amendments to the definition of accredited investors, requiring that the value of a person’s primary residence be excluded when determining whether the person qualifies as an “accredited investor” based on having a net worth in excess of $1 million. The regulation change is estimated to have removed over 20% of previously-eligible households from the market. Check out this study of the impact of investor protection regulation changes from 2011. (recorded 3/12/24)

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