An accredited investor is a wealthy person who meets specific requirements set by the US Securities and Exchange Commission (SEC) such that they can invest in your company with far fewer regulatory requirements on your part. As of this writing those requirements are (to quote the SEC):
- earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
- has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
In legalese from the SEC: “Unlike offerings registered with the SEC in which certain information is required to be disclosed, companies and private funds, such as a hedge fund or venture capital fund, engaging in these exempt offerings do not have to make prescribed disclosures to accredited investors.”
Note that there is no official “accreditation process” for accredited investors to sign up with the SEC. Companies have to make reasonable efforts to ensure that investors meet the test. Talk to a good securities lawyer if you want to understand more about this process!
Often interchangeable with (synonym for) “high net worth individual.”