Big Story: SEC digs into capital formation proposals
Policymakers are exploring ways to improve access to capital for small businesses, including startups, and it’s critical that they pursue a multi-pronged approach at creating opportunities for people to invest in startups. At a forum held by the Securities and Exchange Commission (SEC) this week, regulators, investors, startup founders, and more discussed proposals to create more capital formation opportunities for entrepreneurs, including at an early-stage and in historically underserved communities across the country.
Expanding participation in the startup ecosystem requires improving investor access and facilitating capital formation. Ahead of the forum, Engine submitted recommendations aimed at increasing capital access for U.S. startups, including reforming 3(c)(1) funds to raise the investor cap and expand participation from a broader pool of accredited investors. Doing so would allow more individuals to invest at lower levels, creating opportunities for innovation in underserved areas and among founders who are often excluded. We also called for reforms to the accredited investor definition, which currently unfairly equates wealth with financial acumen, limiting opportunity, and for clarity around general solicitation to avoid unnecessary hurdles for founders trying to raise early capital, especially for those without deep investor networks.
During the forum, Andrew Prystai, CEO and Co-Founder of Omaha-based Event Vesta, discussed how reforming the accredited investor definition to account for cost of living in an investor’s region “would bring so much latent capital off the sidelines, especially in places like Nebraska.” He also highlighted how the Opportunity Zone program—set to expire in 2026—has helped his startup grow in an undercapitalized community.
Outside of the SEC, lawmakers in Congress are considering legislative ways to expand capital formation opportunities. In response to a recent request for feedback from the House Financial Services Committee, Engine urged Congress to modernize capital formation rules so more founders can access early-stage funding, including by reforming 3(c)(1) funds, expanding the accredited investor definition, and clarifying outdated solicitation rules. Last month, more than 150 startups wrote to lawmakers, calling on them to expand the accredited investor definition. Policymakers at all levels of government should pursue proposals like these to increase opportunities to invest in the startup ecosystem.
Policy Roundup:
Debate intensifies around Trump’s tariff decisions. This week, the Senate Finance and House Ways and Means Committee held trade policy hearings featuring U.S. Trade Representative Jamieson Greer. Policymakers discussed concerns about tariffs and retaliatory measures as well as key digital trade issues impacting the startup ecosystem. While Greer was testifying, President Donald Trump announced a 90-day pause on certain tariffs for many countries to make time for negotiations with trading partners.
Engine submits privacy framework comments. On Monday, Engine submitted feedback to the House Energy & Commerce Committee’s Privacy Working Group—urging a comprehensive federal data privacy and security framework that works for startups—as House Republicans begin work under new committee leadership. Startups need a federal privacy framework that creates uniformity, promotes clarity, limits bad-faith litigation, accounts for the resources of startups, and recognizes the interconnectedness of the startup ecosystem.
Tech and telecom bills advance in House. The House Committee on Energy and Commerce approved the Tools to Address Known Exploitation by Immobilizing Technological Deepfakes On Websites and Networks Act, or TAKE IT DOWN Act, in a 49–1 vote on Wednesday, moving the bipartisan bill—which passed the Senate in February—to the House floor. Policymakers also advanced a number of telecom bills, including the Rural Broadband Protection Act, which ensures the Universal Service Fund is allocated to Internet service providers capable of delivering high-speed Internet to low-income and rural areas.
Nominees advance across several key agencies. The Senate advanced several nominees for agencies impacting key startup issues, including confirming Paul Atkins to chair the Securities and Exchange Commission, confirming Mark Meador to be Federal Trade Commissioner, moving the nomination of Arielle Roth to lead the National Telecommunications and Information Administration to a floor vote, and considering the nomination of Olivia Trusty to fill an open seat on the Federal Communications Commission. These agencies play a critical role in capital formation, competition, AI, and broadband deployment.
Startup Roundup:
#StartupsEverywhere: Raleigh, N.C. With previous experience in the startup world, Chip Kennedy developed a passion for connecting humans and technology. From there, he founded CivicReach.AI, a platform using voice AI technology to improve customer experiences—especially at the local level—with the government. We sat down with Chip and Civic Reach.AI’s chief operating officer Lindsay Avagliano to discuss AI, working with governments, and more.
