Most people have never invested in a startup, not for lack of interest or insight, but because the system was never designed for them. Three barriers stand between aspiring investors and early-stage deals: accreditation, capital, and access to deals. Any one of them is enough to keep the investing door closed.
However, we are seeing an emerging trend aimed at overcoming these barriers: groups of friends or colleagues are pooling their money, and in doing so, creating something that looks and operates a lot like a micro-fund. Why does this matter?
Startup fundraising typically follows the same path. Early-stage companies begin by bootstrapping and raising from their family and friends. From there, they move to angel investors, which typically means investors who can write “angel” size cheques of $25,000-$50,000 per deal and meet financial thresholds to be accredited investors (for example, earning $200,000 a year or holding $1 million in assets).
For many aspiring and capable investors, this archetype of the angel is just out of reach. Many engineers, lawyers or MBA graduates – who are out in the corporate world and exposed to the tech or startup ecosystem – have a deep interest in investing in startups, the insight into people or industries to try to spot a winner, access to deals through their network, and extra cash to put into startups instead of ETFs. Yet, they don’t meet the angel investor profile.
This is where the pooled model becomes interesting. When a group of friends combine their capital into a single investment vehicle with the right legal structure – often called a special purpose vehicle (SPV) or a syndicate – something shifts. They become large enough to write real cheques, diversified enough to behave like a portfolio, and organized enough to get into rooms that none of them could have accessed alone.
A new form of investor participation is beginning to take shape, one that sits outside the traditional accredited investor or angel framework. With the right legal and practical structure, groups of friends, professionals, and industry insiders can now pool their capital and access deals that were once reserved for a far narrower circle. If you want to learn more, see our articles on SPV and self-certified investors.
If you have any questions about this article or wish to learn more, please contact our firm. Oziel Law communications and legal articles are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. To obtain additional details or advice about a specific matter, please contact our lawyers.