In the US, most angel deals are private offerings under the SEC's Regulation D, which generally limits buyers to accredited investors: $1 million net worth excluding your primary residence, $200,000 income ($300,000 joint) in each of the last two years, or certain licenses. You then sign a SAFE, convertible note or priced-round documents, plus an investor questionnaire.
Who counts as an accredited investor?
Most startup rounds are open only to accredited investors, so this definition decides whether you can invest at all. According to the SEC's accredited investor page, a person qualifies through any one of these:
Net worth above $1 million, alone or with a spouse or spousal equivalent, not counting your primary residence.
Income above $200,000, or $300,000 together with a spouse or spousal equivalent, in each of the two most recent years, with a reasonable expectation of the same this year.
Professional licenses: holding a Series 7, Series 65 or Series 82 license in good standing.
Insider status: being a director, executive officer or general partner of the company selling the securities.
Fund employees: being a knowledgeable employee of a private fund, for investments in that fund.
Entities can qualify too, for example by holding more than $5 million in investments or assets, or when every equity owner is accredited. Those dollar thresholds have not been raised for inflation since the 1980s, so more people meet them every year. If you're working out whether your finances are ready, how much money you need to start angel investing covers the practical side.
Which offering rules apply to a startup round?
A startup selling shares must either register the offering with the SEC, which no seed company does, or use an exemption. Three exemptions cover nearly every angel deal.
Rule 506(b): the quiet private round
This is the classic angel round. Under Rule 506(b), the company may not advertise or generally solicit the offering. It can sell to any number of accredited investors and to no more than 35 non-accredited investors in any 90-day period. Those non-accredited investors must be financially sophisticated, alone or with a representative, and must receive disclosure documents similar to a Regulation A offering. In practice, most startups simply keep their 506(b) rounds accredited-only and have investors confirm their status in a questionnaire.
Rule 506(c): the round that can be advertised
Under Rule 506(c), the company may advertise publicly, but every purchaser must be accredited, and the company must take reasonable steps to verify it. Verification has traditionally meant tax returns, bank statements or a letter from a CPA or lawyer. On March 12, 2025, SEC staff issued a no-action letter accepting high minimum investments, reported as $200,000 for individuals and $1 million for entities, plus written representations, as one way to meet that duty. It is a staff view, not a rule change.
Regulation Crowdfunding: open to everyone, with limits
Regulation Crowdfunding lets a company raise up to $5 million in 12 months from anyone, through an SEC-registered funding portal or broker-dealer. Non-accredited investors face limits across all crowdfunding offerings in 12 months: if either your annual income or net worth is below $124,000, you can invest the greater of $2,500 or 5% of the greater of the two; if both are at least $124,000, the limit is 10% of the greater, capped at $124,000. Accredited investors have no limit. Securities bought this way generally can't be resold for one year.
Filings you'll see, but don't make
For Regulation D rounds, the company files a Form D with the SEC within 15 days after the first sale, and states may require notice filings and fees. Form D filings are public on the SEC's EDGAR database, which is a quick way to check a company's prior raises. Rule 506 also bars offerings involving certain "bad actors," which is the company's job to check, though a large shareholder or promoter with a disciplinary history can disqualify a round.
What documents does an angel actually sign?
The paperwork depends on the instrument.
SAFE. A simple agreement for future equity: no interest, no maturity date, and conversion into shares at the next priced round, usually subject to a valuation cap, a discount or both. Pro rata rights often come in a separate side letter. The details are in the complete guide to SAFE notes.
Convertible note. Debt that converts into equity at the next round, with an interest rate and a maturity date. If the maturity date passes before a round, the note's terms decide what happens.
Priced-round documents. Usually based on the NVCA model documents: a stock purchase agreement, the amended certificate of incorporation (which sets the preferred stock's rights), an investors' rights agreement (information, registration and pro rata rights), a voting agreement (board seats and drag-along), and a right of first refusal and co-sale agreement. How to negotiate a term sheet as an angel investor explains which terms are worth pushing on.
Investor questionnaire or subscription agreement. Where you confirm you're accredited, investing for your own account and not for resale, and aware that you are buying restricted securities.
SPV documents. If you invest through a syndicate, you sign the vehicle's subscription agreement and operating agreement, which set fees, carried interest and what the manager can decide without you.
Restrictions that follow you after you invest
Shares bought in a Regulation D round are restricted securities. You can't freely resell them: you need an exemption, such as Rule 144, which for a company that doesn't file reports with the SEC requires holding the shares for at least a year. On top of securities law, the company's own documents usually require board consent and give the company a right of first refusal on any transfer.
Information rights come with duties too. Financials and board updates are usually confidential, and if a portfolio company later goes public, trading on material non-public information you received as an investor is insider trading.
Tax reporting is the last ongoing duty. SPVs send K-1s, sometimes late, and sales are reported on Form 8949. Keep records of purchase dates, amounts and any QSBS statements from the company, since tax benefits can depend on them years later. How you hold your investments, personally or through an entity, is a separate decision with its own trade-offs.
From the company's side, the same rules show up in the complete guide to startup legal compliance. More guides are in the angel investing section. None of this is legal advice; for a large or unusual deal, pay for an hour with a securities lawyer.
Frequently Asked Questions
Q:Can I invest in startups if I'm not accredited?
Yes, in limited ways. Regulation Crowdfunding is open to everyone, within the investment limits above, and a Rule 506(b) round may include up to 35 sophisticated non-accredited investors in any 90-day period, though most startups avoid that because of the disclosure it requires.
Q:Do I have to prove I'm accredited?
In a Rule 506(b) round, you usually confirm it in a questionnaire. In a Rule 506(c) round, the company must take reasonable steps to verify it, such as reviewing tax returns or a letter from a CPA or lawyer, or, per a 2025 SEC staff no-action letter, a high minimum investment plus written representations.
Q:Who files Form D, the startup or the investor?
The startup. It must file Form D with the SEC within 15 days after the first sale, and states may require their own notice filings. Investors don't file anything for the offering itself.
Q:Can I resell shares I bought in an angel round?
Not freely. They are restricted securities, so you need a resale exemption such as Rule 144, and the company's documents usually require consent and give it a right of first refusal. Regulation Crowdfunding securities generally can't be resold for one year.
Q:Do I need a lawyer to make an angel investment?
For a standard SAFE on unchanged template terms, many angels don't hire one. For a priced round, a negotiated side letter, a large check or anything unusual, a short review by a securities lawyer is cheap compared with the amount at risk.