INVEST Act goes to House Floor next week

Topline

• House to consider capital formation package—INVEST Act—next week

• Atkins outlines vision to make IPOs great again

• NEW: Carta Fund Economics Report

• Private credit facing increasing scrutiny

• Quick hits 

House to vote on INVEST Act, capital formation package for innovation ecosystem

The House will vote next week to advance the bipartisan INVEST Act, a legislative package to help expand access to capital for startups and investment funds, increase private market investment opportunities, and ease the burdens for companies to transition to public markets. Carta, the Innovator Alliance, and our broader ecosystem partners have led engagement to craft, build bipartisan support, and—with ongoing effort—advance these priorities. 

Importantly for private capital, this bill would:

• Expand qualifying venture investments to include fund-of-fund and secondary transactions, helping drive more capital to emerging managers and easing liquidity pressures across the startup ecosystem. (DEAL Act)

• Increase the size and investor limits for qualifying venture capital funds, enabling smaller managers to assemble competitive funds and reach more investors. (ICAN Act)

• Modernize the accredited investor standard by adding new on-ramps based on education, experience, or examinations, not just financial metrics. 

• Enhance retail access to private markets through professionally managed funds, permanently removing barriers on how much closed-end funds can invest in private funds.

• Streamline pathways for companies to go public, lowering barriers and reducing costs for companies to enter and remain in the public markets.

Why it matters: The venture capital ecosystem powers American innovation and economic growth, but unless we modernize our policy infrastructure, the benefits of this engine will be limited. These bipartisan solutions will not only help bolster the VC ecosystem but also broaden its benefits to more investors, more entrepreneurs, and more communities.

Here is the thing: Private capital and the growth-stage companies it backs are this nation’s economic and innovation engine. But over the past decade, efforts to modernize the private capital regulatory system have become increasingly partisan and, as a result, increasingly stalled. Over the past few congresses, House andSenate Republicans have introduced a capital formation “JOBS Act” package, but these efforts have largely been a messaging exercise.

This time it is different—if we make it so. 

We have built the foundation to make this package of our legislative priorities bipartisan and, as a result, real. We worked to achieve strong bipartisan votes in the House Financial Services Committee and are now working to get a strong bipartisan vote in the whole House. A strong House vote will help push the Senate to prioritize this legislation, pass it, and make it law. 

But first things first. Carta Policy and our ecosystem partners have been working with committee leaders, educating dozens of congressional offices, expanding our coalition and broadening support (see coalition letter here), and enlisting the help of more stakeholder <> like you—click here to sign the broad sign-on support letter <>.

It is early, but we are doing the right things. Join us and get involved by reaching out to policy@carta.com, visiting the InnovatorAlliance.org, or reaching out to us on LinkedIn. 

Atkins outlines plans in “Make IPOs Great Again” speech

This week, SEC Chairman Paul Atkins rang the NYSE opening bell and outlined his agenda to revitalize U.S. capital markets and encourage more companies to go—and stay—public. Atkins reiterated his long-standing concern that decades of “regulatory creep” have contributed to the 40% decline in U.S. public companies over the past 30 years, narrowing investment options for everyday Americans and undermining U.S. competitiveness. He argued that today’s “voluminous” disclosure requirements, layered over decades, without modernization no longer reflect what investors actually need and often impose disproportionate burdens on smaller companies. Atkins laid out a series of reforms to revamp the disclosure regime and reduce the friction of being public:

• Disclosure framework: Focusing disclosure on financial materiality; scaling requirements based upon size and maturity of the company; updating outdated issuer thresholds; and extending the JOBS Act IPO on-ramps to ease the size and maturity; updating outdated issuer thresholds; and extending the IPO on-ramp to ease compliance for newly public companies.

• Proxy and governance reform: De-politicizing the shareholder process by narrowing the scope of shareholder proposals and refocusing annual meetings on core governance and fiduciary matters, rather than social or political debates.

• Litigation reform: Reducing frivolous securities litigation while maintaining pathways for legitimate claims. The SEC has already taken steps in this regard, announcing it would no longer block registration statements for companies that adopt mandatory arbitration provisions in their governance documents—a significant policy shift. Instead, the Commission will defer to market demand so long as companies provide full and clear disclosure to investors.

Why it matters: A central pillar of Atkins’s agenda is to remove the frictions that discourage companies from going or staying public. Scaling disclosure, easing reporting frequency, and enabling arbitration could collectively lower compliance costs, reduce legal exposure, and make public-company life more manageable—especially for smaller and mid-sized issuers. While seeking to make public markets more attractive, Atkins is also looking to bolster private capital and expand investment opportunities. The SEC has already made progress on both fronts through guidance and exemptive relief. Still, many of the changes Atkins envisions will require formal rulemaking and, in some cases, congressional action—the biggest constraint: bandwidth and time. But the posture is clear: The Atkins SEC will be more constructive toward companies considering going public. A more hospitable regulatory environment could strengthen the IPO pipeline, increase liquidity options for founders and investors, and better align U.S. markets with long-term innovation and economic growth. 

New: Carta Fund Economics Report

Carta released our first-ever Fund Economics Report, with never-before-seen data on the operational side of how private funds raise, call, and spend capital. Here are a few highlights:

• PE fund managers have more skin in the game: In venture capital, the median fund manager makes a GP entity commitment totaling 1.7% of the fund size. In private equity, the median GP entity commitment is 50% higher, at 2.55%. 

• Most capital calls are fulfilled on time: Across all recent fund VC vintages, at least 75% of capital calls to LPs are fulfilled at or prior to the given deadline. The longer the notice period given for a capital call, the more likely LPs will wire the capital earlier than requested. 

• Venture funds from 2022 are spending more slowly: After nearly four years, the median 2022 vintage VC fund had deployed 67% of its capital. Most other recent vintages had deployed around 80% of their capital at the same threshold in time. 

• Management fees and carry rates have remained steady: Across all recent VC vintages, the 2-and-20 fee structure remains the norm, with a median management fee during the investment period of 2% and the median GP taking 20% of a fund’s profits in carried interest. 

• Venture funds benefit from economies of scale: The median VC fund between $1 million to $10 million spends about 3.4% of its fund size on operating expenses within the first five years. The median fund larger than $100 million only spends 1% of its fund size on expenses in the same time frame.

Private credit facing increasing scrutiny

Policymakers are intensifying their scrutiny of the $1.7T private-credit market amid recent write-downs, bankruptcies, and signs of stress emerging in parts of the AI boom. This week, Sens. Elizabeth Warren and Jack Reed sent a letter to federal banking regulators urging stepped-up supervision of private-credit funds and closer monitoring of the growing interconnectedness between banks and non-bank lenders. The senators are also pushing for stress tests tailored specifically to non-bank lending—a prudential tool generally not applied to activities outside of traditional banking.

But the attention isn’t coming only from progressive lawmakers. Trump-aligned regulators are sharpening their focus as well. In recent remarks, Jay Clayton, U.S. Attorney for SDNY and former SEC Chairman, flagged concerns about how private-fund managers value illiquid assets and move positions between affiliated vehicles, warning that aggressive or opaque marks could give investors a distorted sense of performance as defaults rise and market volatility increases. The SEC’s latest exam priorities echo those concerns, highlighting valuation practices, fees and expenses, and conflict-management in private funds. And SEC Chairman Paul Atkins has expressed the need for guardrails, highlighting valuations, liquidity, and transparency around fees and side letters as areas that need to be addressed to prevent lower-quality assets from being pushed onto retail and retirement accounts.

Why it matters: Private credit is unlikely to be brought under prudential regulation, but these markets will be regulated, and scrutiny is increasing, especially as the industry pushes into retirement and retail distribution. This will necessitate a shift in standards around valuation, reporting, and disclosure, and Carta is building the operational, technological, and policy infrastructure for it.

Quick hits

• House passes bills to expand access to capital. As we previewed last week, the House passed three bills to expand access to capital, particularly for small and emerging managers in underserved markets:

  • Developing and Empowering our Aspiring Leaders (DEAL) Act: Expands the category of qualifying venture investments to include fund-of-fund and secondary investments. 

  • Improving Capital Access for Newcomers (ICAN) Act: Increases the size and investor limits for qualifying venture capital funds.

  • Investing in All of America Act: Expands access to capital for small businesses in rural and underserved areas or those operating in national security or critical tech sectors by excluding those investments from the SBIC leverage cap.

While we’re bullish on our chances of getting a broad legislative package through Congress, passage of the standalone bills provides additional pathways for these important initiatives to become law.

• SEC IM Director outlines strategic areas of focus. SEC Division of Investment Management Director Brian Daly outlined a new strategic listening-first, light-touch regulatory approach intended to foster innovation, modernize outdated rules, and expand access to investment for a broader array of investors. Daly highlighted four key pillars to drive the division’s work over the coming years: deregulation to spur innovation; modernization and tech-neutrality; democratizing retail access to alternative investments; and promoting AI in investor disclosures and fund operations.

Net/net: Expect the SEC to be more open and responsive to the private fund industry, including through guidance, exemptive relief, and embracing technology solutions like AI or blockchain.

• AI preemption scrapped from NDAA. Despite a strong push, language to preempt states from imposing AI regulations will not be included in the annual must-pass National Defense Authorization Act (NDAA). 

• Chopra to lead state consumer protection efforts. Former CFPB Director Rohit Chopra has been tapped to lead the Consumer Protection and Affordability Working Group, a new initiative designed to coordinate Democratic-led state attorneys general as a counterweight to federal deregulatory moves. Chopra will develop nationwide enforcement and policy strategies across healthcare, technology, and financial services, effectively positioning states as the last line of defense against the Trump administration’s agenda in these sectors.

Sign up below to receive Carta's Policy Weekly Brief