The INVEST Act: Building for the next generation of American innovation

Congress is considering the most ambitious capital formation package since the JOBS Act of 2012: the Incentivizing New Ventures and Economic Strength Through Capital Formation Act, or INVEST Act. The bill offers meaningful legislative updates to support private capital at every stage of the innovation lifecycle—from the earliest seed rounds to IPO.

In December 2025, the INVEST Act passed the House in a decisive 302-123 vote, with 87 Democrats joining all Republicans in a strong demonstration of bipartisan consensus. The momentum is real, and the focus now shifts to the Senate to ensure the bill is ultimately signed into law.

The INVEST Act aims to  improve capital formation by broadening access to capital, expanding investment and ownership opportunities, and lowering barriers for companies to go and stay public. Here’s what that means for founders, fund managers, investors, and the broader innovation ecosystem.

I. Broadening access to capital

Regulatory burdens concentrate the flow of capital 

The private capital ecosystem is the engine that powers innovation and economic growth. Private capital—angel investors, venture capital, private equity—supports startups and growth-stage companies at every stage of development, providing patient, risk-forward funding to solve ambitious problems. This structure democratizes ingenuity, drives value creation, and promotes economic growth and job creation, all of which are critical to maintaining our nation’s competitive advantage. 

While private capital remains robust at scale, it is increasingly difficult to access for founders and emerging managers, particularly outside traditional hubs and networks. In 2024, 30 VC firms raised 75% of all venture capital in the U.S., with nine firms alone accounting for 50% of the total raised. In 2025, total capital investment on Carta increased, but the total of new rounds fell—notably for Seed and Series A rounds—to a six-year low. Capital is geographically concentrated as well. Most VCs raised and invested their capital in just three states: California, New York, and Massachusetts. Although capital has become more mobile, the data shows proximity still matters, particularly for the earliest stages. Unless we modernize policy infrastructure, the benefits of this economic engine will be constrained—and as private markets continue to grow, the gap will only widen. We need to bolster private capital, but importantly, we need to broaden its reach to more investors, more entrepreneurs, more companies, and more communities.

Broadening access to capital means supporting investors and smaller, emerging funds beyond coastal hubs and networks. Emerging managers are often the catalysts for regional growth because they tend to  invest early, invest locally, and support a broader and more diverse pool of entrepreneurs. But instead of empowering these managers, the current regulatory framework constrains them.

The INVEST Act broadens access by:

• Expanding the category of qualifying VC investments to secondaries by enabling fund managers to invest more capital, increasing market liquidity, recycling capital in the ecosystem, and creating pathways for founders and employees to realize equity value in private companies—without jeopardizing regulatory exemptions.

• Updating qualifying VC fund size and investor limits from $12M and 250 to $50M and 500, respectively, helping emerging managers assemble competitive funds and reach a broader base of investors.

• Raising the private fund exemption threshold from $150M to $175M and indexing it to inflation, helping smaller fund managers who have outsized compliance costs and fewer regulatory exemptions.

Why it matters

These reforms can help unlock private capital for entrepreneurs across the country, driving the development of regional ecosystems and the economic growth and jobs that accompany it.

II. Expanding investment and ownership opportunities

Outdated frameworks hinder wealth creation for most Americans

Over the past 20 years, wealth creation in the U.S. has increasingly been fueled by private market investments. Those investments, however, are largely reserved for institutional investors and high-net-worth individuals, excluding most Americans. Most individuals are effectively excluded from participating in private markets because of the wealth-based accredited investor standard. 

As the number of public companies has declined, the universe of available investment opportunities has narrowed further. These investors are also missing out on the early-stage growth that drives much of today’s value creation, as companies are staying private longer. Since 2014, the number of companies remaining private for more than eight years after the first funding round has quadrupled. 

At the same time, regulatory constraints have limited the ability for retirement plans and publicly available investment vehicles to provide exposure to private markets, further preventing Americans from participating in the diversification and growth potential that private markets offer. As the landscape of American wealth creation shifts deeper into private markets, the regulatory framework must evolve to ensure that everyday investors are not left behind.

The INVEST Act expands investment opportunities by:

• Modernizing the accredited investor definition by expanding qualification on-ramps to reflect financial sophistication, education, and experience instead of relying on financial means alone, 

• Enhancing responsible retail investor exposure to private funds through professionally managed SEC-registered funds, removing barriers on how much closed-end funds can invest in private funds while maintaining fiduciary oversight, disclosure requirements, and institutional-level diligence.

• Permitting 403(b) retirement plans to invest in collective investment trusts (CITs) and insurance products available to other retirement savers, ensuring teachers, healthcare workers, and nonprofit employees equal access to professionally managed investment opportunities.

Why it matters

Expanding investment and ownership opportunities  while preserving important investor protections will allow more individuals to benefit from the growth and diversification benefits of private markets.

III. Lowering barriers to IPO

Liquidity is shifting away from public markets

Going public was once the natural next step for a company that proved its model and was ready to scale, but that reality has shifted. Over the past 30 years, the number of U.S. public companies has declined 40%, and despite a recent uptick, the number of IPOs has trended downward. A confluence of factors—changes in market structure, the growth of private capital, and increased regulation—have contributed to a steady drift away from IPOs and public markets.

Public company life has become expensive. Layered disclosures, reporting requirements, litigation exposure, and complex proxy processes impose costs that disproportionately burden smaller and mid-sized companies compared to their larger counterparts. Companies that have proven their model and are ready to scale but lack the resources to absorb the cost of going public face a narrowing set of choices: remain private indefinitely or sell to a larger company. As a result, the IPO pipeline has become increasingly dominated by large, late-stage companies that can afford to go public. Ultimately, these outcomes shrink the universe of possible investment opportunities, suppress diversification, and compress the size of returns made to founders, early employees, and their investors.

The creation of the emerging growth company on-ramps under the bipartisan JOBS Act was one of the most effective capital formation reforms in decades. Policy should build on that success.

The INVEST Act encourages companies to go and stay public by:

• Permitting companies to test the waters through confidential communications with potential investors or draft registration statements prior to a formal public filing allowing companies to assess and mitigate legal and reputational risk before committing to a public filing.

• Reducing financial statement burdens for emerging growth companies (EGCs) to two years of audited financial statements, lowering costs and barriers, and accelerating IPO readiness for new public market entrants.

• Expanding the well-known seasoned issuer (WKSI) status to more public companies, making it easier for smaller issuers to access follow-on capital efficiently.

• Directing a study on the costs and challenges facing small and mid-sized companies when going public, providing policymakers with the insights needed to identify barriers and craft solutions to reduce friction and improve market access.

Why it matters

The INVEST Act can help encourage more IPOs and restore the public markets as a credible exit path for growing private companies, providing liquidity to founders, their investors, and employees, broadening investment opportunities, and strengthening U.S. market competitiveness.

IV. Policy is infrastructure

Policy is infrastructure. It can bind growth and innovation or unleash it. The current landscape was designed in a different era, which has led to more concentrated capital, limited investment opportunities, and higher barriers to going public—outcomes that have created impediments to growth and innovation over time. But there is an opportunity to update the policy framework now, and the timing has never been more promising.

The INVEST Act strengthens America’s capital formation infrastructure by expanding access to capital, restoring public-market dynamism, democratizing investment opportunities, and modernizing regulation. This important legislation belongs to every founder or emerging manager who has struggled to raise capital; every American who wants to benefit from a diverse investment portfolio; every growth-stage company that looked at the costs of going public and decided it wasn’t worth it. These efforts are critical to creating jobs, driving upward mobility, and ensuring the U.S. continues to lead the world in innovation and economic growth. What happens next depends on how the ecosystem shows up to drive this policy across the finish line.

Carta Policy has helped drive these efforts and will continue advocating for the INVEST Act to be signed into law. To get involved, reach us at policy@carta.com, visit our Policy Desk, or subscribe to the Policy Weekly Newsletter.