Investing in Venture Capital: A Step-by-Step Guide

If you want to get in on the ground floor of some of the most exciting business ideas available, investing in venture capital can be your gateway to a whole new world of investment opportunities. Becoming a venture capital investor takes more effort than just opening a brokerage account, so you'll need to look at your options to gain access to these investments. The following guide will help you work through the process and find the best way to invest in venture capital to meet your needs.

The Securities and Exchange Commission seeks to protect investors by limiting their access to high-risk investments like venture capital opportunities. However, the SEC recognizes that certain experienced investors don't need the same protections as the general public, and the laws and regulations that the SEC follows have provisions defining what's known as an accredited investor. If you meet the requirements of an accredited investor, then you can invest in venture capital investments without either you the company you invest in running afoul of any legal requirements.

To qualify as an accredited investor, you have to meet at least one of several financial conditions. Income of $200,000 or joint marital income of $300,000 in each of the past two years is enough to become an accredited investor. Net worth of $1 million excluding any equity in your principal residence is also a sufficient condition. You can also qualify for special treatment if you are an executive officer, direct, or general partner of the business in which you want to make a venture capital investment.

Source: Fool.com