March 12, 2025
Issue: Any rollback of QSBS benefits or tightening of Reg. D accreditation standards would shrink the startup and accredited investor ecosystems—decreasing fund formation and overall investment flows.
Context:
Strategic Pillar: Intelligence — KLO; maintaining stable market structures is vital to data-driven insights and the platform's knowledge engine.
Impact: By preserving both QSBS tax incentives and the well-established Reg. D accreditation standards, the industry retains the current level of capital deployment. This means more startups funded and investor capital recycled back into the ecosystem.
Opportunity Size: Combining direct (admin fee) and indirect (banking) exposure, the overall effect on AngelList's business remains favorable—no major contraction. If QSBS or Reg. D were disrupted, we'd expect a 10–15% reduction in platform activity and revenue. By maintaining the status quo, AngelList avoids that dip.
QSBS (Qualified Small Business Stock) offers capital gains tax relief to early-stage investors, incentivizing them to invest in riskier startups. Meanwhile, Reg. D is the key SEC exemption that allows accredited investors to fund private companies without the burden of full registration. Together, they underpin much of the modern venture ecosystem—especially AngelList's syndicates and rolling funds.
Without QSBS, many angels might scale back their startup allocations. Without Reg. D, the pool of accredited investors would shrink drastically. Both changes would hamper fund formation, slow capital flow to startups, and ultimately reduce innovation.
AngelList's revenue relies on fund administration fees, SPV formation, and integrated banking solutions—activities fueled by a broad base of accredited investors seeking tax-advantaged deals. If QSBS and Reg. D remain untouched:
In short, preserving these frameworks supports healthy volumes of new funds, fosters more startup formation, and aligns with AngelList's "Intelligence" pillar by ensuring a large, data-rich ecosystem to power insights and innovation.
Keeping QSBS and Reg. D intact is more than just business as usual—it's a strategic imperative for sustaining America's entrepreneurial ecosystem. We encourage policymakers to maintain these bedrock incentives and accreditation standards. By doing so, we preserve a thriving, data-rich venture ecosystem that fuels innovation, job creation, and opportunity for all.
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