Congressional Vote Sends ACA Priority to President’s Desk to Become Law


By: Marianne Hudson, ACA Executive Director

ACA and angel investors celebrated victory this week at our nation’s capital as the bill to solve the “99 Investor Problem” passed the House of Representatives on Tuesday, May 22.  The resolution to the 99 investor problem is part of S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, which focuses on reducing the regulatory burden on community banks by rolling back Dodd-Frank regulations.  Included in the bill is a provision to raise the cap on the number of investors in angel funds and syndicates from 99 investors to 250 in funds of $10 million or less.  This piece of legislation passed with 258 votes, 33 Democrats voting in favor, so somewhat bipartisan.  The bill was signed by the President on Thursday, May 24, making it law (probably pending rule-making).

The SEC limited the number of investors in a fund to 99, as part of the Investment Company Act of 1940.  This limited the number of investors that could be part of an angel fund or syndicate in an online investing platform, consequently reducing the amount of money invested in a startup.  Brad Feld coined the term “99 Investor Problem.”  Brad expressed in his blog a few years ago after setting up a syndicate on AngelList; “as a result of this 99-investor limitation, we have two disappointing problems. First, we have over 100 investors who would like to invest in our syndicate with us who get excluded because of the 99-investor rule. Next, there is $118,000 per investment that we’d like to include in each syndicate that the companies we are investing in won’t get. Bad for the companies and bad for the investor.”

ACA has worked hard for years to increase the number of investors in funds.  This part of the bill will be helpful for startups, because it would allow for more people to invest via angel funds or online platforms like AngelList.  Through the hard work of Rep. Patrick McHenry, Rep. Nydia Velazquez, Sen. Heidi Heitkamp, Sen. Dean Heller, grassroots teams, individual angels, angel groups and ACA, startups will now have the opportunity to receive more funding through angel groups, leading to more job-creating new businesses. 

Public policy is an extremely important part of ACA’s work and how we advocate for our members and the angel community.  The passing of S.2155 is a prime example of how ACA’s public policy work can make a positive and lasting impact for our angel community and the angel ecosystem.  Thanks to ACA members who wrote their Members of Congress as part of our efforts.

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