In the US, this is the definition of Accredited Investor[1].<p>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).<p>You can raise unlimited funds from Accredited investors (see link). You don&#x27;t need to provide information (via prospectus) to these investors, as it&#x27;s assumed they have the acumen to obtain and understand the information to understand the investment being made.<p>Companies can <i>also</i> 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.<p>By and large, that amount of work is more than enough to turn some founders away from dealing with non accredited investors.<p>In certain cases, a pre-seed, initial funding round may come from a &quot;friends and family&quot; round.<p>The SEC recently passed a law allowing selling shares via Crowdfunding, but because it&#x27;s fairly new, the risk* to future Venture rounds is unknown, and I&#x27;d expect founders to be tepid with adopting Crowdfunding as a viable method to raise money.<p>[1] <a href="http:&#x2F;&#x2F;www.ecfr.gov&#x2F;cgi-bin&#x2F;retrieveECFR?gp=&amp;SID=8edfd12967d69c024485029d968ee737&amp;r=SECTION&amp;n=17y3.0.1.1.12.0.46.176" rel="nofollow">http:&#x2F;&#x2F;www.ecfr.gov&#x2F;cgi-bin&#x2F;retrieveECFR?gp=&amp;SID=8edfd12967d...</a><p>* Venture Capitalists (afaik) haven&#x27;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.