Becoming an accredited investor has nothing to do with certification or accreditation in the way most people think of those things. It mostly just means “people that the SEC considers sophisticated enough to invest in unregulated private investments, like startups or commercial real estate”.
Ironically, there is no need to demonstrate any particular knowledge in order to qualify as an accredited investor, you just have to meet one of the following criteria:
- You earned more than $200,000 (or $300,000 together with a spouse) in each of the past two years, and reasonably expect the same for the current year
- You have a net worth of more than $1 million, either alone or together with a spouse (excluding your primary residence)
In the context of online crowdfunding investment platforms, there are very few formal restrictions on what kinds of investments accredited investors may participate in, or how much they can invest. (A notable exception is Reg CF investments – the maximum anyone may invest in Reg CF investments in a given year is $100,000.)
Some online crowdfunding investment platforms only accept accredited investors, while others have that have a mix of offerings also “close off” portions, limiting access to those to accredited investors. Depending on the platform and type of offering, you will either “self-certify” your status as an accredited investor (meaning you just check some boxes), or there will be a more formal verification process that may include providing copies of documents like tax returns or W2 statements.
How many accredited investor are there?
According to some helpful analysis done by the folks at DQYDJ, about 8.25% of US households qualify, mostly through their net worth.
Although a big part of the 2012 JOBS Act was about opening up business financing and other alternative and private investment options to non-accredited investors, you’ll still find that most of the platforms still primarily target their offerings to those 10M+ households of accredited investors. Part of that is because Reg A+ and Reg CF offerings took longer to establish following the JOBS Act, but part of it is because while accredited investors are a small portion of the population, they hold a large portion of the wealth.