What the INVEST Act Means for Startups and Venture Funds

(January 05, 2026) — Louis Lehot of Foley & Lardner LLP discusses the INVEST Act, outlining how the bipartisan bill expands flexibility for fund managers, broadens investor access, and modernizes rules for startups and venture funds.

For years, I’ve been saying that the U.S. IPO market needs a fundamental rearchitecture. The onramps to public capital are backed up, and ordinary investors are left waving from the sidelines while unicorns ride off into private pastures. My prior blog posts have argued for a full renovation of the IPO process, not a fresh coat of paint, but a teardown and rebuild.

Now, Congress has turned its attention to the private markets with the bipartisan INVEST Act. Think of it as Washington finally calling a plumber. The House passed the measure 302–123, sending it to the Senate with rare bipartisan optimism. A Christmas miracle?

Renovation, Not Revolution: The INVEST Act (https://bit.ly/453ltQb) doesn’t blow up securities law. It’s more HGTV than demolition with a bundle of 22 bills that replace, rewire, and install fixtures that work for founders and fund managers. For emerging managers and earlystage companies, these changes expand flexibility while preserving investor protections.

The DEAL Act (https://bit.ly/4ji760g) becomes the headliner. Our current rules cap secondaries and fundoffunds allocations at 20 percent; the INVEST Act raises the cap to 49 percent. Nearly half the fund can now be deployed into secondaries or fundoffunds without losing exemptions. For emerging managers, this is oxygen. In a slowexit environment, secondaries are how you build track records. Fundoffunds exposure is how you manage risk.

Lawmakers struck a balance, giving us flexibility without chaos, liquidity without landmines. Diversification without premature adviser registration. It’s pragmatic, but in venture, pragmatism is gold.

Accreditation by Knowledge: For decades, access to private offerings has been gated by wealth thresholds. The INVEST Act finally recognizes that sophistication can be measured by knowledge, not just assets. This democratizes access in a way that makes sense. In Silicon Valley, where intellectual capital often precedes financial capital, this is long overdue.

Demo Days: Founders have long dreaded demo days. Under Regulation D, general solicitation is prohibited, and the line between a demo day and a public offering has been blurry. The result: accelerators lawyering every slide deck, founders pitching with one eye on the SEC.

Enter the HALO Act (https://bit.ly/45qexfR). Demo days at universities and accelerators are not considered general solicitation. Founders can pitch freely, without contorting their presentations into compliance theater. Demo days can go back to being celebrations of innovation, not exercises in regulatory anxiety.

Raising the Caps: The Act updates the venture capital fund exemption under the Investment Company Act. Fund size cap rises from $10 million to $50 million. Investor headcount doubles to 500.

These thresholds were outdated. Today, a $10 million cap is tiny. Doubling headcount shows venture capital is now mainstream. These changes help smaller funds scale painlessly.

Politics and Path to Completion: Of course, legislation is never a straight line. Retirementplan provisions are controversial. Senator Elizabeth Warren has voiced skepticism. The path to completion looks like this:

(1) Senate debate and amendments.

(2) Conference reconciliation with the House version.

(3) Final passage and presidential signature.

Momentum is strong, but the finish line requires careful navigation. In Washington, even bipartisan bills can stumble. But the odds here are better than most.

Juxtaposition: Too much capital? Here’s the irony. While Congress is greasing the wheels of private capital formation, Roelof Botha recently warned that private markets are already drowning in capital, which is bad for tech. He’s not wrong. Too much money chasing too few quality deals inflates valuations and distorts incentives.

But here’s my counter, the INVEST Act is about modernizing the rules of the road. Better plumbing doesn’t mean more water; it means fewer leaks.

If my IPO rearchitecture writings argued for fixing the publicmarket onramps, the INVEST Act is about unclogging the privatemarket side streets. Botha’s critique is valid, but efficiency matters as much as volume.

The Bigger Picture: For founders, fund managers, and investors, the message is clear: Congress sees venture capital as mainstream, not niche. Outdated rules can block innovation as much as they protect against risk.

If enacted, the INVEST Act will expand flexibility for fund managers, broaden participation through smarter accreditation, reduce compliance headaches for founders, and modernize thresholds for small funds. In summary, it’s a practical upgrade for startups and venture funds, not a market revolution, but a step forward in private market modernization.

And in a world where capital is abundant, but exits are scarce, that balance matters.

In short, the INVEST Act signals government recognition of venture capital’s importance. If the Senate enacts it, startups and funds gain greater flexibility and a clearer route from startup to success. The clear takeaway: Washington is opening a smoother path for innovation.

By Louis Lehot, Esq., Foley & Lardner LLP