Startups Get a $3 Billion Revenue Cap Boost for Regulatory Relief

The aptly named Helping Startups Continue To Grow Act is about making life easier for companies that are starting to hit the big leagues but aren’t quite corporate behemoths yet. Essentially, this legislation changes the rules for what qualifies as an “Emerging Growth Company” (EGC) under federal securities laws, which is a status that grants companies a break from some of the heavier regulatory burdens required by the Securities and Exchange Commission (SEC).

The $1 Billion Ceiling Just Got Tripled

Right now, a company loses its EGC status—and the regulatory relief that comes with it—once its annual revenue crosses a $1 billion threshold. This bill dramatically changes that. It raises the maximum revenue limit for EGC status from $1 billion to $3 billion in both the Securities Act of 1933 and the Securities Exchange Act of 1934 (SEC. 2). What does this mean in practice? Imagine a fast-growing tech company that’s just crossed $1.5 billion in revenue. Under current law, they’d be spending millions immediately to ramp up compliance with full SEC reporting rules and expensive auditing requirements. Under this new bill, they get to keep the lighter EGC framework, allowing them to reinvest that compliance money back into R&D, hiring, or expansion for longer.

More Breathing Room, Less Paperwork

The entire point of EGC status is to provide a runway for growing companies by reducing the immediate administrative and financial load associated with being a fully public company. By tripling the revenue limit, this bill extends that runway to a much larger segment of the economy. For the founders and employees of companies in that $1 billion to $3 billion range, this means their employer can focus more on growth and less on bureaucratic overhead. It’s a significant financial relief that could translate into faster job creation and innovation. The bill also makes a modification to the timeframe for status retention, changing a reference from “fifth” to “10-year,” which suggests an intent to extend or modify the period companies can lean on these exemptions after going public (SEC. 2).

The Investor Trade-Off

While this is clearly a win for growing companies, it introduces a wrinkle for investors. EGC status allows companies to delay implementing certain investor protection requirements, such as the full scope of internal control audits required by Sarbanes-Oxley. When a company is small, this is generally accepted as a necessary trade-off for fostering growth. However, when a company has $2.5 billion in revenue, it’s a major player. Critics of this kind of expansion argue that delaying full regulatory compliance for companies of this size—which are handling billions of dollars—could potentially increase risk for investors who rely on comprehensive disclosure and strict auditing standards. The bill is essentially betting that the benefit of reduced regulatory burden outweighs the marginal increase in investor risk for these larger, but still growing, entities.