Back startups with your eyes open.
Since 2016, anyone can invest in early-stage companies through Reg CF platforms. It's exciting, and it's risky. Here's what to understand before you put money in.
The honest version: most startups fail. When they do, crowd investors usually lose everything they put in. Shares are hard to sell for years. Only invest money you can afford to lose entirely, and spread it across many companies rather than betting on one.
How much can you invest?
Reg CF caps what non-accredited investors can put in across all crowdfunding offerings in a 12-month period. The cap is based on your annual income and net worth (excluding your primary home). Spouses can calculate jointly.
| If… | Your 12-month limit |
|---|---|
| Income or net worth is under $124,000 | The greater of $2,500 or 5% of the greater of your income or net worth |
| Both are $124,000 or more | 10% of the greater of the two, capped at $124,000 |
| You're accredited | No limit |
Limit calculator
Educational estimate only. The platform you invest through will verify your limit.
What you're actually buying
Read the security type before the pitch. It decides what you own and when, if ever, you get paid.
| Security | What it is | When you might see a return | Watch for |
|---|---|---|---|
| SAFE | A right to future shares, not shares today | Converts to equity in a later priced round or a sale | Valuation cap and discount; no conversion if no later round happens |
| Convertible note | A loan meant to convert into equity | Converts at a later round, or repaid at maturity | Interest rate, maturity date, what happens if it never converts |
| Common stock | Ownership in the company, often non-voting | Acquisition, IPO, or (rarely) dividends | Valuation, voting rights, dilution from later rounds |
| Preferred stock | Ownership with priority in a sale | Same as common, but paid out first | Liquidation preference terms |
| Revenue share | A share of revenue up to a multiple of your investment | Regular payments as the company earns | Payment multiple, revenue definition, maximum term |
Five habits of careful crowd investors
- Read the Form C, not just the campaign page. The campaign is marketing; the Form C is the legal disclosure.
- Check the valuation against reality. A $30M valuation on $200K in revenue needs a very good reason.
- Look at how they'll use the money. Vague "growth" or large founder salaries are a flag.
- Diversify. Small checks into many companies beat one big bet.
- Plan to hold for 5–10 years. Resale is restricted for one year, and there's rarely a market after that.
Get the Reg CF Brief
A monthly email on how crowdfunding works, rule changes, and what to look for in an offering. Education only — we never tell you what to buy.