Today in America, accredited investors still have a major advantage over non-accredited investors (approximately 92% of America).
We can invest in all private startup and company deals, including those on sites like AngelList. These Regulation D deals have no limit on the amount of money the company can raise. And these companies only have to file limited paperwork with the government.
Non-accredited investors can only invest in a tiny subset of deals, which use either “Regulation Crowdfunding” (Reg CF) or Regulation A+. These deals require a lot more work on the company’s side. They usually require a financial audit, which costs money. And these deals also cap the amount that can be raised ($1.07 million for Reg CF and $50 million for Reg A+).
I’ve seen thousands of deals — both accredited and non-accredited. And by far, the best deals I’ve seen are still on the accredited side.
This isn’t a fair or sustainable situation. Eventually non-accredited investors will realize how limited their investment options are. When that happens, they’ll demand equal access (as they should).
I suspect in the near future (the next 5 years?) that anyone will be able to become an accredited investor by passing a test or meeting updated requirements. SEC Chairman Jay Clayton has already hinted at upcoming changes to how an accredited investor is defined. I suspect we’ll see steady pressure to change these laws going forward.
When all startup and company deals become available to everyone, valuations (prices) are almost certain to rise dramatically. The more people bidding on a deal, the higher the price will be.
So my message today is to suggest that you take advantage of the current situation. It won’t last forever.
Invest in some AngelList deals. Or seek out Reg D deals in your own area. Just make sure you’re investing alongside quality co-investors until you get a few years of experience. As always, I recommend starting out on AngelList, as it consistently offers the highest-quality deals I’ve seen online.