Thanks to the Angel Capital Association the so-called “99 investor problem” is sufficiently solved for small seed funds. Specifically, S.2155 was passed by Congress and signed into law, which amongst a series of changes to financial regulations included:
(Sec. 504) The bill amends the Investment Company Act of 1940 to exempt from the definition of an “investment company,” for purposes of specified limitations applicable to such a company under the Act, a qualifying venture capital fund that has no more than 250 investors. Specifically, the bill applies to a venture capital fund that has less than $10 million in aggregate capital contributions and uncalled committed capital.
It’s still unclear to me exactly which Americans need protection from a fund with 251 or 501 or 5001 investors, but 99 was too far too small and 250 seems plenty of investors to manage (for now).
This bill also fixed some issues with crowdfunding, so hopefully this will be sufficient to make that a much more popular path for funding startups.