Should we reduce the restrictions on who can angel invest?
grellas: Actually, the securities laws do permit investments by non-accredited investors within limits. For example, California has a so-called limited offering exemption by which a corporation can issue stock to up to 35 non-accredited investors in any given round who have a pre-existing relationship with the company or its founders and who warrant that they are acquiring the stock as an investment and not for resale (federal law also supports investment by non-accredited investors, as for example under Rule 504 of Regulation D). This exemption would generally allow, for example, for a company sale of stock to the employee who saves up $10K and wants to buy in an angel round.Though the law allows limited avenues for such non-accredited investments, the securities law rules nonetheless operate in practical terms to bar most such opportunities. VCs, for example, are very hesitant to invest in a company along with a lot of non-accredited investors. This means that startups will hesitate to open up such opportunities.Thus, the essential point of this piece is a good one. Why arbitrarily restrict the ability of individuals to invest in promising opportunities? The theory of the securities laws is that investor protection warrants the restrictions and this impulse, far from being on the decline today, remains strong (there are, for example, current attempts in Congress to increase the requirements for what it takes to qualify as an accredited investor). So the question becomes, in re-evaluating these requirements, should the law take a more, or a less, paternalistic direction. Protection is fine but it does have its costs in limiting choice.While I have not given much thought to how the restrictions might be eased, I would definitely say that the efforts currently afoot to tighten them would be a horrible mistake for the startup world, for founders and investors alike.