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.
Related Terms
A high-net-worth individual who provides early-stage funding to startups in exchange for equity.
A form of private equity financing provided by firms to startups with high growth potential.
Ownership interest in a company, represented by shares of stock.
Raising small amounts of capital from a large number of individuals, typically through online platforms.
The first significant round of funding for a startup, typically used to build an MVP and validate market fit.
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