Starting Off:
One of the most exciting aspects of investing in startups is the thrill of being there at the beginning of a new project that may result in some fruitful future returns. But prior to the last decade, the chances of an individual investing in a company before it registered with the SEC were about 0% unless they were an accredited investor. This essentially made investing in startups the privilege of the already wealthy while the rest of us were left in the dust.

Why Accredited Investor:
The logic behind establishing the title of the accredited investor was not meant to throttle the monetary power of the American people; rather, its goal was to protect them from losing everything. Naturally, investing in a private offering involves the possibility of loss, and the SEC thought it a good idea to establish a class of investors who’ve been proven to understand that risk and who also have the capital to lose. And thus, Rule 501 of Regulation D was born in 1982, ushering in the era of the accredited investor.

The problem is that the requirements for becoming an accredited investor were far beyond the earning power of the majority of America’s middle class. If someone wanted to become accredited, they would have needed to earn an annual income of $200k for the past two years or have $1M in assets (and that’s EXCLUDING their home). At least that number hasn’t changed with inflation, but it’s still a tiny portion of American households who’d qualify for the title with those requirements.

What Regulations:

Last week we talked about Regulation Crowdfunding, the practice codified in 2012, giving rise to crowdfunding platforms like Wefunder. Fortunately, the SEC and legislators came to a realization after the turn of the century and determined that Rule 501 was short-sighted. Last week we talked about Regulation Crowdfunding, the practice codified in 2012, giving rise to crowdfunding platforms like Wefunder. Since the 2010s, there have been multiple reexaminations of the requirements, which have opened up investing in startups for many more Americans. The buck didn’t stop there, though- as the SEC finally amended rule 501 in August of 2020 to create new categories of accredited investors that disregarded personal wealth. It took almost 40 years, but that’s pretty fast for the federal government.

Closing:
Expanding the definition of accredited investor opened a new door for gaining accredited status by becoming an investment adviser representative via FINRA’s Series 65 exam. This is excellent news for the more bookish of us, but choosing this path requires paying several fees and extra steps post-exam to keep the SEC happy.

The Results:
Thankfully Regulation of Crowdfunding has blown the doors off the whole thing and opened the startup space to even more people. It still may be a hassle to attain that Accredited title, but there are now so many more avenues for the individual investor to seize the day- make sure you’re one of them.

In today’s article, we discussed how regulation crowdfunding opened the world of startups to the average investor.

I wanted to highlight a business whose life-changing technology could not have been possible without Reg C, ATOM LIMBS.

Unlike lower-limb amputees (LLA), upper-limb amputees (ULA) are about half as likely to wear a prosthesis. This is largely because they are unwieldy, ineffective, and uncomfortable.

ATOM LIMBS seeks to change that by incorporating AI, modern robotics, and modern wearable technology into its revolutionary designs.

Having achieved its funding goals via Wefunder, ATOM LIMBS is an excellent example of the power Reg C has to change the market and the lives of others.

In the words of found and CEO Tyler Hayes: *No one* should have to live with a permanent injury or disability. We have reusable rockets and electric cars… it’s time for artificial limbs.

Watch Wefunder’s spotlight video or check them out here!

+ Know Your History – The Saga of Accredited Investor Status Pre-Expansion – (link)

+ The Nerds Know All – Harvard Law Examines the SEC’s expansion of Accredited Investor Definition – (link)

+ Back to School – An Overview of the Series 65 Exam – (link)

New year, new me…. Just not the way I thought, via investingcom