Starting a Business

They're Certifiable!

Need big bucks? Find accredited investors.
Magazine Contributor
2 min read

This story appears in the October 2000 issue of Entrepreneur. Subscribe »

As you look for individuals who have money to infuse your business with, you've probably seen or heard the term "accredited investor" countless times. Don't dismiss it as unimportant.

"An accredited investor is a legal term that identifies someone [presumed to have a certain level of sophistication]. They have the knowledge to [recognize] the risks inherent in a proposed investment," says Susan Bird, founder of Women.future, a company that uses Web and satellite technology to arrange conversations between businesswomen.

According to the Securities Exchange Commission (SEC), an accredited investor can be a person or business and must have a net worth of at least $1 million or an income exceeding $200,000. (See www.sec.gov/smbus/qasbsec.htm under Regulation D for a full explanation.)

To avoid violating SEC laws when you're gathering a group of investors, you can't get money from more than 35 non-accredited investors. Consequently, finding these high-net-worth people becomes critical because it can help you sidestep crippling lawsuits should your venture prove unsuccessful.

Don't look for investors to hand you accreditation certificates because they don't exist. Instead, depending on where you live, you can accept an investor's written declaration or verify it through written records.

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