Velazquez Bill to Aid Startups Clears U.S. House
Measure Would Expand Capital Options for Growing Firms
Washington, DC – The U.S. House of Representatives has passed legislation sponsored by Rep. Nydia M. Velázquez (D-NY) that would help funnel investment capital to fast growing startups. As the Ranking Democrat on the House Small Business Committee and a senior member of the House Financial Services Committee, Velázquez has long made entrepreneurs’ access to capital a priority.
“Fast growing startups and small businesses drive growth and create jobs in our nation,” said Velázquez. “By channeling capital to them, we can create greater economic opportunity for all Americans.”
Velázquez’s bill would allow venture funds that often provide seed capital to small companies to draw in more investors. The Investment Company Act of 1940 currently limits the number of investors in a venture fund to no more than 100 individuals, before the fund must register with the Securities and Exchange Commission. Velázquez’s bill will allow up to 250 accredited investors to invest in a venture fund without having to register, meaning more equity investment is available for small businesses.
“The limit of 100 individual investors restricts the number of individuals that can invest in small businesses and startups – and that means less opportunity for our entrepreneurs,” Velázquez noted. “By easing this restriction, we’ll help more Americans pursue dreams of business ownership and more companies to scale up and hire people.”
Many of these investors pool their money together either in local or national groups. More recently, many have started using on-line crowdfunding platforms in order to funnel more capital to small businesses and startups. Importantly, these types of funds are often a good fit for women and minority-owned firms seeking investment capital.
“This bill will mean that businesses that have traditionally struggled to secure capital will have more options available to them,” noted Velázquez. “Small business ownership among minorities and women is a proven path out of poverty and this bill can help replicate that success.”
A number of organizations including the Angel Capital Association and the Internet Association endorsed the measure. The bill has moved through the legislative process with strong bipartisan support every step of the way. Last month, the bill was approved by the Financial Services Committee with a broad bi-partisan vote of 54-2. The same day, the Senate Banking Committee passed its bi-partisan companion version. The legislation would next need to be considered on the Senate floor.
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