What’s the difference between an accredited and non-accredited investor?
Startup Advising & Investing Apr 20, 2019
According to the SEC, an accredited investor has to meet the following criteria:
- Have a net worth of at least $1,000,000, excluding the value of one’s primary residence
Or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.
There are a few ways to look at the net worth component. Here is a good write-up on what counts and what doesn’t count towards net worth: https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/updated-investor-bulletin-accredited-investors
What if I don’t qualify?
All other people who don’t meet the above are not accredited investors. However, when a startup raises money, Regulation D stipulates that 35 non-accredited investors are allowed to invest money into the startup. It’s not uncommon for the “friends and family” round to include non-accredited investors – but that can complicate future fundraising rounds.