Want to invest in a startup but having trouble getting access? At Fund Wisdom, we believe innovative wealth-building investments should be accessed by all. Returns for alternative assets like equity ownership in startups have outperformed the stock market through the greater risk profile. We showcase investment opportunities in early-stage companies with the goal to help you produce higher returns, lower fees, and reduced risk. Review our curated list of leading-edge alternative investment platforms and companies listing across each platform and let us know about your experience.
Getting past the Accredited Hurdle
In the United States, you must be wealthy in order to invest in most startup offerings. This is where the term "private" in private equity comes from. The measure of wealth is defined by the Securities and Exchange Commission (SEC) as a net worth of $1 million excluding a primary residence. Their other measure of wealth is an annual income of $200,000 for the past two years (if single, for married couples it’s $300,000). If you hit one of these thresholds you would qualify as an accredited investor. More detail on accredited investors can be found on our Investor Type section.
Times are changing with the democratization of private equity. Several regulatory and market changes now allow for greater access to these historically private offerings. The Jumpstart Our Business Start-ups (JOBS) Act’s Title III and IV enable non-accredited investors to purchase shares in private companies through equity funding portals.
Find a Startup Right for You
It’s clear that the barriers to entry are decreasing, providing access to less-affluent individual investors. An assortment of online platforms have been developed to attract investors that cannot hit the requisites for accreditation. These platforms provide end-to-end digital solutions, providing an array of alternative investments across the liquidity sphere. They also offer relationships with sophisticated institutions such as sovereign wealth funds, pension funds, insurance companies, and endowments. They also offer investors exposure to private funds that lower minimum investments. These platforms can seamlessly incorporate with client portfolios and help qualified registered investment advisors collate smaller pools of money.
>The laws that govern the startup investing access you can get were drafted with access in mind, but have been implemented with too many restrictive limitations. As an example SEC regulation states that if non-accredited investors have an annual income/net worth less than $100,000, they retain the ability to invest over $2,000 or 5% of lesser their annual income/net worth, Yet if over $100,000, that moves to 10%. These limitations will continue to lessen, but in my opinion major market innovations like blockchain and cryptocurrencies have filled the resulting gaps.
Non-accredited offerings must adhere to SEC legislation like Regulation D and A which restricts private securities deals. Below are a few of the different classifications founders can chose from in structuring their offering and you to be aware of:
- Type Advertising (general solicitation) Cap non-accredited investors
- 506b Forbidden max 35
- 506c Allowed none
- 504 Allowed (if restricting to accredited only.) Caps at $5 mil in 12 months
Share your Experiences
The proliferation of financial technology is contributing to the extinction of inefficient marketing practices, excessive distribution pricing, and archaic information delivery. Non-accredited investors can efficiently and cost-effectively access curated leading-edge alternative investment liquidity. There are a lot of online platforms, and at Fund Wisdom we’ll help you take advantage of this paradigm shift. If you decide to participate in the market let us know in the comments below or reach out as we look to share experiences whether they are good or bad.