This week the SEC expanded its definition of “accredited investor” (AI). Now investment professionals — as well as certain other individuals and groups — can qualify without satisfying the SEC’s income or wealth requirements — $200,000 annual income for the last two years ($300,000 if married) or a $1 million net worth.
I believe this is just the first round of expansion for the definition. And that within the next five years everyone will be able to qualify as an accredited investor.
But how does this impact existing AIs like you and me? It means more competition in the startup investing world.
Up until very recently, AIs have had this sweet and lucrative market basically to themselves. In 2016 equity crowdfunding came along and began to crack open the market. Now that the definition of AI is being expanded, I believe we’re on a path to eventually eliminating the AI requirements altogether.
Overall, this is a good thing. I don’t believe we should restrict what types of investments people can make in a free country. After all, anyone can legally blow their entire life savings on lottery tickets, stock options or Keno. But more than 90% of Americans still can’t invest in the majority of startup deals.
Our monopoly on non-regulated startup investing is coming to an end. And I intend to invest in as many promising deals as possible before it does. Because after it’s open to everyone, valuations are almost certain to rise. The more competition there is bidding on a deal, the higher the price will drift.
I suspect we still have a few years of exclusive access to Reg D deals. But those days are numbered.
Overall, I look forward to a time when everyone is free to invest in the same deals. It’s only fair.