At Fund Wisdom, we believe innovative wealth-building investments should be accessed by all, and we look to empower the democratization of private equity. Overarching returns for alternative assets like private equity have outperformed the stock market through the greater risk profile. Below 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.
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.
Several regulatory and market changes allow for greater access to these historically private offerings. As alternative assets become increasingly democratized, non-accredited investors can capitalize on access to private equity. The Jumpstart Our Business Start-ups (JOBS) Act’s Title III and IV requirements enable non-accredited investors to purchase shares in private companies through equity funding portals.
These laws were drafted with access in mind, but have been implemented with too many restrictive limitations. Major market innovations like blockchain and cryptocurrencies have filled the resulting gaps.
Venture Investing for All
Non-accredited offerings must adhere to SEC legislation including Regulation D which restricts private securities deals. Below are the different options founders can chose from in structuring their offering:
- 506b private placement
- forbidden from advertising (no general solicitation)
- cap at a maximum of 35 non-accredited investors
- allows for advertising, (general solicitation)
- no non-accredited investors
- advertising (general solicitation) allowed if restricting to accredited investors only
- caps at $5 mil in 12 months
- 5 mil cap 12 month
- 35 non accredited ok but phased out and made part of 504
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 percent of lesser their annual income/net worth. Yet if investors receive over $100,000, they can invest 10 percent of lesser of their annual income/net worth.
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, offer an array of alternative investments across the liquidity sphere, and leverage 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 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.