Pre-IPO Profits

Big Changes for Non-Accredited Investors

Big Changes for Non-Accredited Investors
By Adam Sharp
Date November 10, 2020

Last week the SEC announced that it was increasing the limit on Regulation Crowdfunding (Reg CF) deals from $1.07 million to $5 million. 

In case you weren’t aware, anyone can invest in Reg CF deals. You don’t have to be an accredited investor like you do on AngelList. The new limit is great news for non-accredited investors. 

The new $5 million limit is a giant bump from $1 million. I think Reg CF rounds are going to start attracting a more serious type of startup as a result. And that means everyone will be able to invest in bigger, more established startups raising substantial amounts of money. 

I don’t think this is going to change anything on the accredited side immediately. But I do see it having an impact further down the road. With the ability to raise $5M, Reg CF will legitimately begin to compete with Regulation D (how most startup deals are structured right now). And if the new higher limit performs well, I believe it’s likely that we’ll see the limit raised yet again in another few years — maybe to $10 million or even $20 million.

Regulation D will still have some important advantages — such as privacy, unlimited raises, lower cost, and an appeal to wealthy investors. But Reg CF will have its advantages too. The publicity that comes with a public round and having thousands of investor champions are both major assets for startups.

For now, Reg CF isn’t an immediate threat to accredited investing on sites like AngelList. But over a longer period, I believe it will be. And that’s something to start planning for now.

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