Congress Just Changed How Startups Can Raise Money. Are You Paying Attention?
You have been pitching at demo days, accelerator events, and university programs.
You probably assumed that was fine.
For years, the rules around general solicitation, meaning publicly promoting a fundraise to unverified investors, have created legal risk when founders raise capital in open settings under certain exemptions. A bipartisan bill passed by the House in December 2025 is attempting to change that. If it clears the Senate, how founders legally raise their first round could look meaningfully different.
Here is what the INVEST Act of 2025 would change and why it matters for founders who are raising now or preparing to.
What the INVEST Act Would Change for First-Time Founders
Pitching at Accelerators and Demo Days May No Longer Trigger General Solicitation Rules
Under current Regulation D rules, publicly promoting a fundraise to unverified investors can jeopardize a private offering exemption. The INVEST Act would direct the SEC to develop rules that could carve out certain sponsored events, so they are not treated as general solicitation.
That potential carveout would apply to events hosted by organizations such as:
- universities
- nonprofits
- angel groups
- accelerators
For first-time founders who rely on demo days and showcase events to meet early investors, that could reduce a legal risk many do not even realize exists today.
The Accredited Investor Definition Would Expand
Today, accredited investor status is still tied primarily to income and net worth. Under current rules, an individual generally qualifies through:
- net worth of more than $1 million, excluding a primary residence
- annual income of more than $200,000 individually
- annual income of more than $300,000 jointly
The INVEST Act proposes additional pathways to qualify, including:
- professional licensure
- relevant education
- relevant investing or business experience
- passing an SEC-administered exam
The exact criteria would depend on SEC rulemaking if the bill is enacted. If enacted, this would expand the pool of people who can legally participate in seed and pre-seed offerings.
Crowdfunding and Private Fund Limits Would Increase
The bill also proposes adjustments to crowdfunding limits and certain private fund thresholds, including:
- raising the Regulation Crowdfunding threshold from $5 million, with room for future adjustments
- increasing venture capital fund size limits from $10 million to $50 million
- increasing the investor cap per fund from 250 to 500 qualified investors
For founders, the takeaway is not the specific numbers, but the direction: more flexibility in early-stage capital formation may be coming, but it is not defined yet. These changes would create more flexibility in how early-stage companies access capital.
It Has Not Passed Yet
The INVEST Act passed the House on December 11, 2025, by a 302 to 123 vote with bipartisan support. It is now awaiting Senate consideration.
For founders, the key takeaway is simple:
- the bill is not law yet
- the proposed changes are not currently in effect
- fundraising strategy should not change based on proposed legislation alone
- the bill is still worth tracking closely because, if enacted, it could reshape private offerings
3 Mistakes Founders Make Here
Mistake #1: Assuming Current Rules Are Simple and Self-Enforcing
Many first-time founders:
- pitch publicly
- post about a raise on social media
- speak at open events
- share fundraising details too broadly
Those actions can create legal issues under current Regulation D exemptions.
The rules around general solicitation are not intuitive. They are easy to misunderstand and easy to violate unintentionally. The fact that Congress is debating reform is a reminder that founders still need to understand the current rules while any new framework remains pending.
Mistake #2: Treating Legislative Progress as a Green Light
The INVEST Act passed the House with broad support, but Senate passage is not guaranteed.
That means founders should not:
- assume the bill will become law
- structure a raise around proposed rules
- rely on future exemptions that do not yet exist
- market an offering as though the law has already changed
Watching legislation is smart. Acting on it before enactment is risky.
Mistake #3: Not Knowing What Exemption the Raise Is Operating Under
Many founders raising under Regulation D do not know whether their offering is being conducted under Rule 506(b) or Rule 506(c). That distinction matters.
Under current rules:
- Rule 506(b) does not allow general solicitation, but it may allow up to 35 non-accredited investors
- Rule 506(c) does allow general solicitation, but all investors must be verified as accredited
Not knowing which exemption applies is not a minor oversight. It is a compliance gap that can put the entire offering at risk.
Before Your Next Fundraising Conversation, Work Through This
Before you pitch investors or begin a formal raise, test your approach with these questions:
- Do I know which Regulation D exemption (506(b) or 506(c)) my current or planned offering relies on?
- Am I publicly promoting my raise in any way that could constitute general solicitation under current rules?
- Have I verified the accredited investor status of everyone I am targeting for this round?
- Do I understand the difference between what the INVEST Act proposes and what the rules actually are today?
- Has startup-specialized legal counsel reviewed my fundraising approach before I begin outreach?
If you cannot answer yes to all of these, you are not ready to begin formal fundraising yet.
Bottom Line
The INVEST Act reflects growing recognition that existing securities rules create friction for early-stage founders who rely on community driven events and open networks to build investor relationships. Regardless of whether it passes, the underlying rules it is attempting to change are in effect right now. Most first-time founders are not aware of them. That gap creates legal exposure at exactly the moment a founder is most focused on closing, not complying.
Want to Understand How the Rules Affect Your First Raise?
The First Time Founders Master Class covers how to protect your stake, structure your board, and avoid hidden legal traps before you sign. We will answer your fundraising questions. Our next free session is May 19th.
Reserve your seat: https://howtoraisevcround.com/how-to-raise-priced-round-2
Sources Used
- Harvard Law School Forum on Corporate Governance, House Passes Bipartisan Capital Formation Package: The INVEST Act, https://corpgov.law.harvard.edu/2026/01/11/house-passes-bipartisan-capital-formation-package-the-invest-act/
- American Bar Association, House Passes Bipartisan Capital Formation Package: The INVEST Act, https://www.americanbar.org/groups/business_law/resources/business-law-today/2026-january/house-passes-bipartisan-capital-formation-package-invest-act/
- Troutman Pepper Locke, INVEST Act Passage by House of Representatives Could Bring Major Changes to Capital Markets, https://www.troutman.com/insights/invest-act-passage-by-house-of-representatives-could-bring-major-changes-to-capital-markets/
- Congress.gov, H.R.3383 INVEST Act of 2025, https://www.congress.gov/bill/119th-congress/house-bill/3383