[arbitrage314]

Most startups are more than happy to take your money. Just email or meet with the founders, explain your enthusiasm for the company, and you're usually good to go!

For higher-profile deals, though--e.g., Uber--you wouldn't be able to invest such a small amount.

[balls187]

> Most startups are more than happy to take your money. Just email or meet with the founders, explain your enthusiasm for the company, and you're usually good to go!

I would be highly skeptical of any startup founder who is going to take money from just anyone. Taking in random investment dollars could come back to bite founders and company in the ass pretty badly. From the time demanded by the investor, to working on subsequent financing rounds, you could really shoot yourself in the foot by doing this.

This is one reason why Angels are more sought after than "friends and family."

> For higher-profile deals, though--e.g., Uber--you wouldn't be able to invest such a small amount.

No. For late stage investments, even if you had the capital, you're beholden to the terms dictated by whomever is leading the round. They're not going to invest large sums of money and want to share rights with just anyone with the cash.

[morgante]

While it's true that founders won't take money from just anyone, I actually think a software engineer with experience in the industry would be a great investor.

They can give you insight on tech problems/scaling, help with hiring, offer connections, etc. (Basically, most of the things you're looking for from investors besides money.)

A software engineer investing in your company is pretty different than your real estate mogul uncle trying to get in.

[DocSavage]

Doesn't this just apply to those with either sufficient net worth or earned income to qualify as an accredited investor? Or have you heard of startups taking the money of some new graduate making less than $200k/year with insufficient net worth?

[balls187]

In the US, this is the definition of Accredited Investor[1].

The SEC allows companies to sell shares privately, using Regulation D. Regulation D has a number of rules that govern it, such as, you cannot generally solicit your offering (for example: take an ad out in the NYT annoucning you are raising money).

You can raise unlimited funds from Accredited investors (see link). You don't need to provide information (via prospectus) to these investors, as it's assumed they have the acumen to obtain and understand the information to understand the investment being made.

Companies can also raise funds from up to 35 non-accredited investors. However, in doing so, must ensure due diligence that those non-accredited investors can bare the economic burden, are made to understand the investment, etc.

By and large, that amount of work is more than enough to turn some founders away from dealing with non accredited investors.

In certain cases, a pre-seed, initial funding round may come from a "friends and family" round.

The SEC recently passed a law allowing selling shares via Crowdfunding, but because it's fairly new, the risk* to future Venture rounds is unknown, and I'd expect founders to be tepid with adopting Crowdfunding as a viable method to raise money.

[1] http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8edfd12967d...

* Venture Capitalists (afaik) haven't published an opinion on crowd funding, so founders may inadvertently risk future startup financing rounds if they screw up their capilization table with a crowd funding round.

[arbitrage314]

Yeah, typically you have to make at least $200k/year or have a net worth of $500k (the term is "accredited investor").

Thanks to a new law, though, you no longer have to be accredited to invest small amounts.

[DocSavage]

I believe it's net worth of a million dollars (http://www.investor.gov/news-alerts/investor-bulletins/inves...). I've been following the crowdfunding legislation and it seems like there may be additional requirements to accept such investments if you are an early startup with just friends & family investments.

But the bottom line, I think, is that to do the strategy you suggest, you currently need to be an accredited investor if the startup is not already setup for crowdfunding.

[limeyx]

Excluding primary residence :)