The House passed bipartisan legislation Thursday that increases the investor limitation from 100 to 250 individuals for qualifying venture capital funds, provided that the fund does not have more than $10 million in total investor capital.

The bill, H.R. 1219, the Supporting America’s Innovators Act, sponsored by Patrick McHenry, R-N.C., vice chairman of the House Financial Services Committee, passed by a vote of 417 to 3.

McHenry said in a statement after the House vote that the legislation, which amends an exemption under the Investment Company Act of 1940, is “a common-sense bill that will remove needless and outdated regulations replacing them with a regulatory framework that will encourage the growth of innovative forms of capital formation, which help businesses grow and create jobs.”

The bill, he added, “would eliminate a significant barrier facing small businesses and startups, instead incentivizing venture capital funds to grow.”

H.R. 1219 now moves to the Senate where it awaits further consideration. A Senate version of H.R. 1219, S. 444 authored by Sens. Heidi Heitkamp, D-N.D., and Dean Heller, R-Nev., unanimously passed the Senate Banking Committee in early March. 

Rep. Maxine Waters, D-Calif., applauded House passage of the bill, noting that the bill fixes the problem of capping sophisticated angel investors, who fund promising startup businesses, to pool their money together.

Under current law, “if more than 100 people want to invest, the fund is forced to exclude some of them from the deal to avoid registration and regulation as a quote ‘investment company’ … under the securities laws,” Waters said. “That means investors willing to commit capital are being turned away and startups are losing out on important early stage funding.”

H.R. 1219, Waters said, “reflects a measured, bipartisan approach to promoting our nation’s startups and the investors that take a chance on them.”

— Check out SEC Easing of ‘Accredited Investor’ Restrictions: The Benefits on ThinkAdvisor.