As strange as it may seem, only a small percentage of Americans can legally invest in most startups today. Under long-standing rules governing who qualifies as a so-called “accredited investor,” only quite wealthy individuals (those make at least $200,000 in annual income or have $1 million in assets, excluding their home) can buy shares in a fast-growing, privately held company.
This “accredited investor” definition is extremely important for the startup ecosystem, since themost common legal arrangement that startupsuse to raise funds limits participation almost exclusively to accredited investors.
Granted, the landscape of investor participation in funding startups may be changing thanks to the JOBS Act. What’s being referred to as “regulation crowdfunding” is set to go live in May, allowing startups to accept not just monetary donations, but securities-backed investments, from online supporters, regardless of their income.
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