A Cause of Racial Inequities in Startup Fundraising & How to Fix It: Defining "Accredited Investor"

The friends and family round, what we have to underscore here is that it also brings in this definition of accredited investor that plays into how we can legally do offerings. But there's an accredited investor definition that means if you're going to invest in the most favorable type of offering, which typically falls under Reg D, and I won't geek out too much about it, you have to make at least $200,000 a year have made that for the past 2 years, or have a $300,000 household income and/or $1 million in net worth. Now, there are a lot of Black households that can afford to invest, but they fall below those thresholds. So to give you an example, if you look at the top 10 most affluent Black communities in America, they fall below— the average income falls below that threshold. And so, you know, there's only like 16% of Americans that qualify as accredited investors, and of that, like less than 2% are Black. And so that puts into context part of the reason why we can't really successfully raise friends and family rounds. And that's part of, you know, that's one of the solutions that I'm proposing is eliminating that income and net worth-based criteria and these financial literacy tests that are reminiscent of voter literacy tests that kept Black people from participating in, you know, the civic process. It's likewise keeping us from achieving wealth equitably. So, you know, I could wax poetic about that, but I'll just start there.

And check— it's techfundingequity.com too for some of the other stuff that Mariah's doing.