Accredited Investor

What Is an Accredited Investor?

An accredited investor is an individual, business entity, trust or other investing entity that, by virtue of meeting the criteria, is allowed to buy unregistered securities deemed higher risk because of reduced reporting obligations to the Securities and Exchange Commission (SEC). (Note: As part of its services to Nucleation Capital, our custodian, AngelList, provides free accreditation to investors applying to our fund, so you don’t need to have previously been accredited.)

In Regulation D, the SEC deems investors to be financially sophisticated and thus be qualified to invest in unlisted, private equity that is exempt from making public disclosure filings, if they can satisfy at least one of several alternative requirements regarding their income, net worth, amount of assets under management or professional experience. Accredited investors include high net worth individuals, investment professionals and their firms, banks, trusts, retirement accounts or plans, and certain other businesses such as insurance companies. The same standard applies whether the individual is a U.S. citizen or not.

Criteria #1: Meeting an Income Requirement

To meet the SEC’s accreditation requirement using personal income, an individual must have an annual income exceeding $200,000 for each of the last two years with the expectation of earning the same or higher income in the current year. The income requirement can also be met if an individual jointly declares income with a spouse, then the threshhold is income of $300,000 jointly over the same period.

Criteria #2: Meeting an Asset Requirement

Investors can also meet the accreditation requirement if they have investable assets exceeding $1 million, either individually or jointly with their spouse, which may not include the value of their primary residence. In order to meet this requirement, typically one would have to present evidence of the existence of officially-priced assets, such as an official custodian investment account statement or through the attestation of their investment manager.

So long as an investor can meet either the income or the asset criteria, they are able to invest in Nucleation Capital’s venture fund or syndication deals.

Additional Criteria: Qualified Clients, Qualified Purchasers & Professional Qualifications

There are several higher standards and certain professional credentials that the SEC has established for investors, which would also qualify to participate in Nucleation Capital investments. One is deemed a “Qualified Client” with assets in excess of $2 million.  A “Qualified Purchaser” is an accredited investor with assets exceeding $5 million. Entities consisting of equity owners who are each accredited investors entitles the entity itself to be deemed an accredited investor. Many entities such as IRAs, Self-Directed Pension Plans, Trusts, Charitable Corporations, Employee Benefit Plans and Private Investment Funds typically qualify as “Qualified Purchasers. The SEC also considers a person to be an accredited investor if they are a general partner, executive officer, or director for the company that is issuing the unregistered securities.

Finally, if a person can demonstrate sufficient education or job experience showing their professional knowledge of unregistered securities, they too can qualify to be considered an accredited investor. (This addition to the rule was approved in August 2020 and went into effect on December 8, 2020. )

How do I get accredited?

If you think you meet one or more of the listed criteria, you can apply to participate in the Nucleation Capital fund and the AngelList accreditation group will assist you in establishing your accreditation. To commence this process, you simply apply to the Nucleation Capital fund, which commences the process of registering an account with AngelList, our venture fund custodian. The setup process will walk you through steps that let you select your preferred method for accreditation. You can then submit the necessary information for the preferred criteria you can meet. This may include providing a copy of past tax returns, account statements or contact information for your financial manager. AngelList will review the information and/or contact your financial manager. This process can take as little as an hour or a day or two, depending upon the type of information provided.  (Note: Please do not submit any accreditation information directly to Nucleation Capital as we do not participate directly in the accreditation process. )