Online Capital Fundraising for Non-Accredited Investors.

Jeff "fuzzy" Wenzel
4 min readJul 27


Photo by Joshua Mayo on Unsplash

In the evolving landscape of finance and investment, online capital fundraising has grown as a significant trend. This is where investors get a share of the company in exchange for their funds, and it has opened up a myriad of opportunities for startups and small businesses. Importantly, the advent of regulations like Reg D, Reg A, and Reg CF has transformed the game, enabling non-accredited investors to participate in these capital raises. This blog post will delve into the specifics of these opportunities.

What is an Accredited Investor?

Before we delve into the different regulations that have opened up the world of investing to non-accredited investors, let’s first define what an accredited investor is. Traditionally, investment in private companies has been reserved for “accredited investors” — a category defined by the Securities and Exchange Commission (SEC) that includes individuals with a net worth of more than $1 million (excluding their primary residence), or an annual income of $200,000 (or $300,000 with a spouse) for the last two years with an expectation of maintaining that income level in the current year.

The rationale behind this categorization is to protect unsophisticated investors from potential risks of investing in private, less regulated entities. However, this limitation also excluded a substantial portion of the population from participating in lucrative investment opportunities. Thanks to the Jumpstart Our Business Startups (JOBS) Act of 2012, several doors have opened for non-accredited investors to partake in private equity investment.

Regulation D

Regulation D (Reg D) offers some exemptions that allow companies to raise capital without having to register their securities. Before the JOBS Act, this was exclusively available to accredited investors. However, the introduction of Rule 506(c) under the JOBS Act changed the dynamics. It allowed businesses to publicly advertise their capital raise but limited the investors to accredited ones only.

On the other hand, Rule 506(b) allows for a company to raise an unlimited amount of funds from accredited investors and up to 35 non-accredited investors. However, there is a caveat: the company must have a pre-existing relationship with these non-accredited investors, and it cannot publicly advertise the offering.

A classic example of a successful Rule 506(b) offering was when the private spaceflight company, SpaceX, raised $100 million in 2020, a portion of which came from non-accredited investors who had pre-existing relationships with the company.

Regulation A+

Regulation A+ (Reg A+) is often termed as a ‘mini-IPO’. It was also introduced as a part of the JOBS Act and opens the door for non-accredited investors wider than Reg D. Under Reg A+, companies can raise up to $75 million in a 12-month period from both accredited and non-accredited investors.

There are two tiers in Reg A+ offerings:

  • Tier 1: Allows businesses to raise up to $20 million in a 12-month period. These offerings require companies to undergo state securities review in addition to SEC review, but financial statements need not be audited.
  • Tier 2: Allows businesses to raise between $20 million and $75 million. Although it preempts state review, Tier 2 requires audited financial statements and ongoing reporting obligations.

Reg A+ offerings can be marketed publicly, a significant advantage for companies seeking to raise capital. For instance, the electric vehicle startup Elio Motors successfully raised $17 million in a Reg A+ offering in 2015, paving the way for other companies to follow suit.

Regulation Crowdfunding (Reg CF)

Regulation Crowdfunding (Reg CF) has had the most transformative impact on investment access for non-accredited investors. Reg CF allows private companies to raise up to $5 million in a 12-month period from both accredited and non-accredited investors.

Under Reg CF, non-accredited investors are limited in how much they can invest in a 12-month period. These limits are based on the investor’s net worth and annual income. Furthermore, these offerings must be made through an SEC-registered intermediary, either a broker-dealer or a funding portal.

Reg CF has democratized access to investment opportunities. Take, for example, the gaming company, Play Impossible. They conducted a successful Reg CF campaign, raising nearly $800,000 in 2017 through SeedInvest, an online capital fundraising portal. This not only funded their innovative “smart” game ball but also enabled non-accredited investors to become stakeholders in their venture.

Wrapping Up

The democratization of access to investment opportunities through regulations like Reg D, Reg A+, and Reg CF is an exciting development in the investment world. These regulations have broken down barriers and enabled non-accredited investors to tap into the high-growth potential of startups and small businesses. However, as with any investment, it’s crucial to thoroughly research and understand the potential risks involved. For non-accredited investors looking to take advantage of these opportunities, knowledge is power and due diligence is key.

In the future, we can expect further developments in the regulatory landscape that continue to open the world of investing to even more people. Until then, non-accredited investors can make the most of these opportunities, supporting the companies they believe in, and in turn, reaping the potential rewards.



Jeff "fuzzy" Wenzel

Startup Fundraising Re-Imagined 🤔 Retail Investor 💰 Startup Advisor 🏆 Innovation Enthusiast 🥳