Congress Just Passed a Bill That Could Change How Startups Raise Money. Here's What's In It.

In December 2025, the House passed a sweeping capital formation bill called the INVEST Act, by a 302 to 123 bipartisan vote. It has since moved to the Senate. If it becomes law, it will be the most significant update to startup fundraising rules since the JOBS Act of 2012\.

Most founders have not heard of it. They should.

Why This Bill Exists

The number of publicly listed U.S. companies has fallen from roughly 8,800 in 1997 to fewer than 4,000 in 2024\. The House Financial Services Committee's diagnosis: successive rounds of regulation, including Sarbanes-Oxley and Dodd-Frank, raised compliance costs high enough that staying public became too expensive for smaller companies. Meanwhile, private market rules never kept pace with inflation or the realities of how early-stage companies actually raise money.

The INVEST Act is Congress's attempt to fix both problems at once.

What It Would Change for Founders

Pitching at accelerators and universities would no longer be a legal gray area

Under current SEC rules, any communication that broadly promotes a fundraise to investors who have not yet been pre-screened qualifies as "general solicitation." Once you cross that line, you lose access to Rule 506(b) of Regulation D, the most commonly used fundraising exemption, and your deal becomes subject to significantly more compliance overhead.

This has created a real problem for founders who pitch at demo days, university entrepreneurship events, and angel group meetings, all situations where you are speaking to a room that almost certainly includes people who are not yet accredited investors.

The INVEST Act would fix this directly. Under the proposed changes, presentations at universities, nonprofits, angel groups, and accelerators would be explicitly carved out from the general solicitation definition. You could pitch at Y Combinator Demo Day, a university founder event, or an angel network meeting without triggering the restriction. That is a meaningful change for early-stage founders who rely on these networks.

More people could legally invest in your startup

The accredited investor definition, unchanged since 1982 in terms of its underlying logic, sets the threshold for who can invest in private companies. Right now the primary criteria are a $200,000 income threshold ($300,000 joint) or $1 million in net worth excluding a primary residence. Those numbers have never been adjusted for inflation, which means the pool of eligible investors has expanded over time simply because asset prices have risen, not because the rules were intentionally designed to grow.

The INVEST Act would modernize this in two ways. First, it would allow inflation adjustments to the wealth thresholds going forward. Second, and more meaningfully for startups, it would create new pathways to accredited investor status based on professional licensure, demonstrated investment experience, or an SEC-administered exam.

In practice, this means more operators, advisors, and experienced professionals who might invest in your company but do not meet the current income or wealth thresholds would be eligible to do so legally. A larger accredited investor pool means a larger universe of people you can raise from.

Crowdfunding becomes a more viable option

If you have considered Regulation Crowdfunding as a fundraising path, the threshold that triggers a requirement for accountant review currently sits at $100,000. The INVEST Act would raise that to $250,000, with SEC discretion to push it to $400,000. For companies doing smaller crowdfunding rounds, this removes a meaningful compliance cost.

Going public gets slightly less painful

For Emerging Growth Companies, the requirement to include three years of audited financial statements in an IPO registration would drop to two years. This matters for startups that are earlier in their financial history and for which a third audit year represents a real cost and timeline burden.

The bill would also expand access to confidential submission and "testing the waters" to all issuers, not just EGCs. Testing the waters lets you gauge investor interest before formally committing to a public offering, which reduces the all-or-nothing pressure of a traditional IPO process.

What It Does Not Do

The INVEST Act is not law yet. It passed the House with broad bipartisan support but is now sitting in the Senate Committee on Banking, Housing, and Urban Affairs. Senate timelines are uncertain. The provisions described above may be amended, delayed, or passed in modified form.

It also does not eliminate the need for founders to follow securities law carefully during fundraises. The general solicitation carve-out, if enacted, applies to specific venues. It does not mean fundraising has no rules. The accredited investor requirement for Reg D offerings would still apply. What changes is how you find those investors, not the standards investors need to meet.

What Founders Should Do Now

If you are actively raising or planning to raise in the next twelve months, two things are worth doing regardless of whether the INVEST Act passes.

First, understand your current fundraising structure. Whether you are doing a SAFE, a priced round, or a convertible note under Reg D, your attorney should be able to walk you through exactly what your current compliance obligations are and how proposed changes would affect your options.

Second, watch the Senate. If this bill passes, some of the venue-based general solicitation carve-outs could change your strategy for where and how you pitch. Founders who understand the rules tend to use them better.

That is exactly the kind of conversation worth having with a securities attorney before you start the raise, not after something goes wrong. LWYRD matches founders with attorneys who specialize in early-stage fundraising and securities, so the first conversation is with someone who actually knows this space.

Source: American Bar Association, Business Law Today: House Passes Bipartisan Capital Formation Package: The INVEST Act

This post is for informational purposes only and does not constitute legal advice. For advice specific to your fundraise, consult a qualified securities attorney.