Improving Capital Allocation for Newcomers Act of 2025
The Improving Capital Allocation for Newcomers Act of 2025 would expand the pool of venture capital funds that qualify for exemptions from certain registration requirements under the Investment Company Act of 1940. Specifically, it raises the investor-count and size thresholds used to define a qualifying venture capital fund. The bill also establishes a five-year study by the Advocate for Small Business Capital Formation (in coordination with the Investor Advocate) to assess how the changes affect startups and small businesses, with a public report and a subsequent rulemaking process to adjust the thresholds within a defined range based on findings and public input. The aim is to broaden access to capital for newcomers while preserving oversight and inflation indexing. In short, the bill makes it easier for more venture capital funds to qualify for exemptions, potentially increasing capital flow to early-stage companies, and it sets up a structured, evidence-driven review and potential adjustments to those exemptions over time.
Key Points
- 1Increases the qualifying-venture-capital-fund thresholds: the number of investors allowed rises from 250 to 500; the related dollar threshold rises from $10,000,000 to $50,000,000. This expands which funds can qualify for exemptions from certain SEC registration requirements.
- 2Section 3(c)(1) changes: The amendments modify the definition of what counts as a qualifying venture capital fund under the Investment Company Act of 1940, affecting eligibility for exemption from registration.
- 3Study requirement: Beginning five years after enactment, the Advocate for Small Business Capital Formation (in consultation with the Investor Advocate) must study the effects of the amendments on startups and businesses funded by qualifying venture capital funds, examining geographic distribution, founder demographics (socio-economic characteristics and veteran status), industry sector, size, development stage, and other metrics.
- 4Reporting and public input: The Advocate must publish a report with findings and make it publicly accessible on the Commission’s website. The public will have a 180-day period to provide feedback on the findings.
- 5Potential rulemaking: The Commission, after considering public comments and if the amendments demonstrably increase geographic capital distribution or diversifying founder characteristics, may issue rules to adjust the thresholds. Specifically, the investor threshold could be adjusted between 250 and 750, and the dollar threshold between $10,000,000 and $100,000,000. Adjustments must be within those bounds and cannot override the statutory inflation indexing of the first dollar amount.