Startup and fund investors are open to qualified accredited investors only.
According to the SEC regulations, in order for an individual to qualify as an accredited investor, he or she must accomplish at least one of the following:
1) earn an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income.
2) have a net worth exceeding $1 million, either individually or jointly with his or her spouse.
These investors are considered to be fully functional without all the restrictions of the SEC.
An employee benefit plan or a trust can qualify as an accredit investor if total assets are in excess of $5 million.
- Startups are very risky investments. Expect to lose your money and don’t invest more than you’re comfortable losing.
- Start small. Invest more as you learn more. And never invest more than 5% of your net worth in startups—these investments are risky and illiquid.
- Diversify. Only invest if you have enough capital to make 15-20 startup investments. Even still, you should expect your total losses to exceed your gains.
- Past performance does not predict future success. Just because a startup or fund has made money in the past, doesn't mean it will make money in the future.
- Co-invest with experienced investors and make sure you're getting roughly the same terms. If you're backing a syndicate, make sure the lead is an experienced investor.
- The lead investor in a syndicated startup may have conflicts of interest with you. For example, she may be an investor in a competitor.
- Shop around. Thousands of companies are raising money on AngelList. Don’t invest in a company just because it has good press or famous investors.
- Do your own research.
- Startups change plans constantly. And they don't need your permission to do so. Plans and forecasts are not predictions about the future.
- You may not have the same rights as other investors, including the right to invest in future financings or a board seat. So your returns may not be as good as theirs.
- Don't discuss a fundraising in public unless you're certain the company is raising publicly. It could get the company in trouble with regulators.
- Stick to the facts and don't make forecasts when you talk about a fundraising company. Investors and regulators can use non-facts or forecasts to go after the company.
- You must agree not to hold Venture/Science responsible for your losses or missed opportunities.
- Invest in a startup because you love their mission, not just for profit.
- When in doubt, don’t invest.