Accredited Investor

An individual or entity meeting specific SEC financial criteria required to invest in private securities.

Full Definition

An accredited investor is an individual or entity that meets specific financial criteria set by securities regulators (like the SEC in the US) to qualify for investing in private securities offerings, including startup equity rounds.

SEC Accredited Investor Criteria (US)

Income: Earned $200K+ individually (or $300K+ with spouse) in each of the past two years, with expectation of the same
Net Worth: Individual or joint net worth exceeding $1 million, excluding primary residence
Professional Criteria: Holds Series 7, Series 65, or Series 82 financial licenses
Entity: An entity with $5M+ in assets, or in which all equity owners are accredited

Why It Matters

Securities laws require most startup fundraising (under Regulation D) to be limited to accredited investors. This is designed to protect less wealthy individuals from the high risks of startup investing.

Real-World Example

A software executive earning $250K/year qualifies as an accredited investor and can invest $50K in a friend's pre-seed round.

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