For the highly speculative business of investing in unproven companies, the SEC only allows accredited investors. That may change once the regulator formulates rules on equity crowd funding, or selling small amounts of equity to many investors, as allowed by the Jumpstart Our Business Startups, or JOBS, Act, passed in 2012.
Until then, private offerings are currently only open to accredited investors. But technology has recently given the process a new twist. MicroVentures is a full-fledged broker dealer with an online investment platform for investors interested in startups. It's currently limited to the well-heeled investor and the investment options are fully vetted.
On the MicroVentures website, accredited investors can peruse the offerings online and invest between $5,000 and $30,000 in return for shares in a startup. After that the SEC enforces specific and complicated rules about selling restricted securities.
"If it's still a private company and there is liquidity, they have to hold it for a year or get a legal opinion. After a company goes public there is a lock-up period, usually 180 days for pre-(initial public offering) investors, but it depends on the company and who the investor is and how much they invested," says Tim Sullivan, CEO at MicroVentures.
MicroVentures has funded some well-known companies, including Twitter and Yelp.