What is Accredited Investor?
Nexa Consultancy | Startup & Finance Glossary
An "accredited investor" is a classification used by securities regulators (like the SEC in the US or SEBI in India) to identify individuals or entities who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. They are legally eligible to invest in high-risk, unregistered securities like startup equity.
Base Term for Startups: Most venture capital and angel investments are limited to accredited investors only. This is because startup investments are highly risky and illiquid, and regulators want to ensure that only those who can afford to lose their entire investment are participating.
Criteria: The criteria vary by country but are typically based on high thresholds for net worth (e.g., over $1 million, excluding primary residence) or annual income (e.g., over $200,000 annually).
Base Term Example: A startup raising a seed round can only accept investment from individuals who meet the legal definition of an accredited investor, as they are selling unregistered securities.