Investment crowdfunding options for non-accredited investors

A lot of investment crowdfunding offerings are restricted to what the SEC calls accredited investors, which in general means you either have a net worth of more than $1M, or you earn more than $200K a year (you can also qualify by combining with your spouse if together you earn more than $300K per year). Unfortunately, that leaves out a lot of people! (more than 90% of US households don’t qualify).

But the good news is that more options are become available all the time for non-accredited investors, including ones with very low minimum investments (often $100 or less). This is a great place to ask questions about your options as a non-accredited investor, or share ideas you’ve come across that are open to all investors.

If you’re looking for ideas, I’ve posted a list of 30+ options available to non-accredited investors. Is there something I missed? Do you have questions about where and how much you can invest? This is the thread to ask in!

This is great info.

I recently got into Virtual Realty and in YieldTalk #40 I was pointed to Virtuix; a Virtual Realty Motion Platform. I was floored by this technology. Unfortunately, the funding period in Seed Invest closed so I didn’t get a chance to actually invest.

If I did invest, do I get a voting share of equity in the company? And what’s the market like if I wanted to sell an investment?

Thank you!

Thanks @david, and welcome!

Sorry you missed the investment window on that one, but the number of offerings coming online is really picking up, so hopefully you’ll be able to find something else soon (just this week Wefunder launched 39 Y-Combinator startups in one day!).

Also, those are great questions:

If I did invest, do I get a voting share of equity in the company?

It depends on the specific details of the offering, but in general, you won’t get any voting rights in the company, especially not right away. If you’re investing directly in the company, in most cases with equity crowdfunding you’ll get some flavor of a “SAFE” (simple agreement for future equity). Under certain conditions, that SAFE will convert into equity, which may give you voting rights (though in many cases, startups structure equity so that founders retain a supermajority of voting rights). Here’s a blog post from a law firm with some of the gory details about SAFEs from an investor perspective.

With the SEC changes that went into effect back in March, you’ll start to see more offerings made using “special purpose entities” (aka SPEs or SPVs), in which a separate LLC is created that owns the actual equity (or convertible notes or SAFEs), and you the investor receive a membership interest in that LLC. Typically the subscription agreement for an offering like that stipulates that you forego any voting interest in the SPE (much less in the startup itself). That scenario was already the norm for platforms like AngelList and others catering to accredited investors and utilizing SEC Regulation D, and is now also possible for companies raising using Regulation Crowdfunding (Reg CF), which is open to all investors.

In short, don’t expect a meaningful voting interest using one of these platforms.

And what’s the market like if I wanted to sell an investment?

Right now, there’s effectively no secondary market for most of these investments. Theoretically, I believe you could re-sell your shares to an accredited investor (after a 12-month hold period), and some platforms (such as Netcapital) are working on building the infrastructure for a secondary market, but in practice it’ll be awhile until there’s enough volume and liquidity for most investors to resell. In general, for a startup investment you should plan to hold the investment for 5-7 years or longer. If you’re looking for options with shorter hold times or more liquidity, there’s a lot of other choices out there as well besides startups.

Again, great questions, and thanks for joining the community!