House Passes Bill to Raise Equity Crowdfunding Cap to $5 Million

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A bill passed the House of Representatives last night that would allow entrepreneurs to raise up to $5 million with equity crowdfunding, five times the current $1 million cap.

Called the Fix Crowdfunding Act (H.R. 4855), the bill was one of two pieces of legislation aimed to help small-business owners get access to capital that representatives passed with a strong bipartisan majority.

"Despite the headlines from Silicon Valley, the truth is the vast majority of early-stage companies are not securing venture capital,” Rep. Patrick McHenry said on the House floor while introducing the bills. In a written statement announcing the successful vote in the House, McHenry said, "angel investing and investment crowdfunding are both innovative new forms of capital formation which -- in the proper regulatory climate -- can become vital tools for entrepreneurs and small businesses."

Related: Starting May 16, Entrepreneurs Can Raise Money in a Whole New Way. Here's What You Need to Know.

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In mid-May, rules for equity crowdfunding went into effect -- more than four years after they were passed into law by the Jumpstart Our Business Startup Act in 2012 -- making it possible for entrepreneurs to raise money from unaccredited investors through registered online crowdfunding portals. Before the rule change, entrepreneurs could only raise money through equity crowdfunding from sufficiently wealthy accredited investors.

The goal of the legislation is to make it easier for entrepreneurs to get access to capital. However, the bill also limited the amount that any entrepreneur could raise with equity crowdfunding to $1 million. If the Fix Crowdfunding Act bill is passed into law, startup entrepreneurs would be able to raise $5 million with equity crowdfunding.

The second bill that passed the House last night, also by an overwhelming bipartisan majority, is the Supporting America’s Innovators Act of 2016 (H.R. 4854). It would expand the pool of investors in any qualifying venture fund supporting startups from 100 to 250.

“These bills are the greatest political achievement for startup and growth-company entrepreneurs since passage of the JOBS Act in 2012. Specifically, this legislation truly democratizes the access to capital for entrepreneurs by eliminating the last few major limitations in holding entrepreneurs back from using these important new regulations,” said Ron Miller, CEO of equity crowdfunding platform Start Engine Crowdfunding, in an email to Entrepreneur. “We are so pleased to see that bipartisanship is alive and well when it comes to well thought out legislation that helps America’s entrepreneurs raise capital, build companies and create high paying jobs.”

Related: Which Entrepreneurs Will Benefit Most From the New Era of Crowdfunding?