Who invests in startups

Northwind Labs wants to raise $1.5M. Ada has four possible sources: her former manager, an accelerator, a seed fund, and a famous large firm that offers $250K. The four checks are all money, but they are not the same money. Each investor wants something different from Northwind, and each one brings different costs and risks. This lesson shows you who invests in startups and what each type of investor wants.

The investor ladder

Investors climb the ladder with the company. Each step gives larger checks and asks for more proof. The usual order is:

Founders, friends, and family, who invest small amounts mostly on trust
Angels, who invest their own money
Accelerators, which give a fixed check and a short program
Pre-seed and seed funds, which are small professional funds
Multistage firms, which are very large firms that invest at all stages
Growth and crossover investors, which come in at the late stages.

Corporate investors, family offices, and solo GPs can appear at almost all steps. The rest of this lesson takes each type in turn.

Angels

An angel investor is a person who invests personal money in very young companies. An angel decides alone, so an angel can say yes in one day. Angels also invest partly on what they think of the founder. The Y Combinator seed guide of 2016 said that angels usually invest “$25k to $100k or more.”

In 2024, 445,535 angels were active in the US. Together, they invested $17.9B in 55,346 companies. That is approximately $323,000 for each company, but that value is the total from all the angels in a company, not one check. Angels invested in 22.6% of the proposals that they received, approximately 1 in 4.4.

The accredited investor rules

US securities law limits most private startup offerings to an accredited investor. The theory is that these persons have sufficient money or knowledge to survive a total loss. On its page last reviewed on April 24, 2026, the SEC lists these tests for a person:

Income of more than $200,000 in each of the two prior years, with a reasonable expectation of the same this year
Joint income with a spouse or partner of more than $300,000 in each of the two prior years, with the same expectation
A net worth of more than $1M, alone or with a spouse or partner, without the value of the primary home
A Series 7, Series 65, or Series 82 license in good standing
A position as a director, executive officer, or general partner of the company that sells the securities.

One passed test is sufficient. The home rule surprises many persons. The home does not count as an asset, and its loan does not count as a debt. The rule has two exceptions:

If the home loan is larger than the home value, the part of the loan above the value counts as a debt.
If the home loan increased in the 60 days before the investment, the increase counts as a debt. This exception does not apply when the new loan paid for the home.

The second exception closes a gap. Without it, a person can borrow against the home just before an investment and count the cash as an asset.

Predict first

The SEC set the $200,000 income test and the $1M net worth test in 1982 and did not change the dollar amounts. In 2022, what percentage of US households passed the financial tests?

Type a guess before you continue. A guess first, even a wrong one, makes the answer easier to remember.

Try the tests on a person. The default numbers fail twice, for the two most common reasons.

Check

Are you an accredited investor?

Most startup rounds sell only to accredited investors. Enter a person's numbers and see which SEC tests pass.

Income test

Count the income of

Income two years ago

Income last year

Income expected this year

Net worth test

Savings and investments

Everything you own except your home.

Other debts

Car loans, cards, and other loans.

Value of your home

Loan on your home

Series 7, 65, or 82 license in good standing

Income test: Fail; More than $200K each year
Net worth test: Fail; $780K without the home
License test: Fail
Result: Not accredited

The income was not more than $200K two years ago. The test asks for more than $200K in each of the two prior years, and the same expectation for this year.

With the home, the net worth is $1.08M. But the rule does not count the home, so the net worth for the test is only $780K, not more than $1M.

No test passes. Most startups do not take money from this person, because a sale to a non-accredited investor brings more rules and more documents.

The rules can change. On September 30, 2026, the SEC asked for public comment on a CPA license as a new path. It also asked about other credentials, such as the CFA charter. These are proposals, not law. The House passed the INVEST Act 302 to 123 on December 11, 2025. The bill puts the tests into law and adjusts them for inflation every five years. As of September 30, 2026, the Senate did not vote on it.

Syndicates and SPVs

A syndicate is a lead angel who finds a deal and asks other investors to invest with the lead. The money goes into a special purpose vehicle, or SPV: a small fund for one deal. Your cap table then shows one investor, the SPV, not 40 small investors. For this work, the lead gets carried interest, a share of the profit, usually 20%.

SPV raises            $1,000,000
SPV gets at the sale $10,000,000
Profit              = $10,000,000 − $1,000,000 = $9,000,000
Carry to the lead   = 20% × $9,000,000         = $1,800,000
SPV investors get   = $10,000,000 − $1,800,000 = $8,200,000

SPVs cost money to set up. On AngelList in November 2026, a standard SPV cost $8,000 to set up, plus $2,000 of state fees, with a minimum raise of $80,000. The law also limits the number of investors. Under the usual exemption, a fund can have a maximum of 100 owners. A “qualifying venture capital fund” of $12M or less can have 250.

Work it out

A syndicate lead raises a $500K SPV with 20% carry. Later, the company sells, and the SPV gets $3M. How much carry does the lead get?

Scouts

A scout is usually a founder or an operator who invests a large firm’s money in small checks. In return, the scout gets a share of the profit. Firms use scouts to see deals early. Sequoia started the best-known scout program in 2009. In 2019, TechCrunch reported that each Sequoia scout got up to $100,000 to invest, with Sequoia’s approval for each check. A check from a scout can send the same signal as a check from the firm itself.

Accelerators

An accelerator invests the same standard amount in each company that it accepts and runs a program of fixed length, usually 3 months. In November 2026, two well-known deals were:

Y Combinator: $500,000, as $125,000 on a post-money SAFE for 7% and $375,000 on an uncapped SAFE with a most favored nation (MFN) clause
Techstars, from the fall 2025 batch: $220,000, as $20,000 on a convertible equity agreement for 5% and $200,000 on an uncapped MFN SAFE.

The MFN clause gives the second SAFE the best terms that the company later gives other SAFE investors. Thus the second SAFE adds a percentage that depends on your later caps. The fixed part has an implied price: $125,000 ÷ 7% = $1.79M post-money for YC. That is not a market price. Founders also pay for the program, the network, and the brand. The lesson on the YC deal does the full calculation.

Venture funds of all sizes

A venture fund invests the money of its own investors, the limited partners. The next lesson explains how funds work. Here, the important difference is size. The size of a fund sets the size of its checks and the size of the exit that it wants.

A micro-VC is a small fund that invests at pre-seed and seed. One to three partners usually manage it. A solo GP is a fund with only one manager. A solo GP can decide in one day and frequently gives hands-on aid. Its weak points are small reserves for later checks and the risk of one person.

Most new funds are small, but most of the money goes to a few large funds.

A multistage fund invests from seed to the last round before an IPO. For a firm of that size, a $1M seed check is very small. The check is frequently an option to buy a much larger stake later.

Corporate investors, family offices, and late-stage funds

A corporate venture unit, or CVC, invests money from the balance sheet of its parent company. It wants financial returns, and it also wants strategic benefits: early access to technology, partnerships, or future acquisitions. In 2026 to September 30, corporate investors were in only 20.7% of US deals by count. But the deals with a corporate investor were 80.1% of all US deal value, because of very large AI deals. PitchBook also reported that several corporate venture programs closed in 2026.

A family office manages the money of one wealthy family. It can invest directly, as an angel or a fund does, or as a limited partner in venture funds. In a PwC study of more than 20,000 family offices, venture capital was 31% of family-office investments in H1 2025. At the peak in H1 2022, it was 38%.

At the late stages, a crossover fund invests in private companies and in public stocks. In 2026 to September 30, crossover funds were in 43% of US rounds of $100M or more. In 2021, they were in 60%.

The lead and the followers

The lead investor sets the price and the terms, does most of the due diligence, and usually writes the largest check. The lead also frequently takes a board seat. A follow investor invests on the lead’s terms, with a smaller check. CRV says that leads usually commit 40% to 60% of a round, and that follow checks are usually $50,000 to $500,000.

A typical seed round can look like this:

Seed fund (lead)      $1,500,000   50% of the round, takes a board seat
Five angels             $500,000   $100,000 each
Two small funds       $1,000,000   $500,000 each
Round                 $3,000,000

CRV calls the commitment of a credible lead “the critical first domino.” When a lead commits, the other investors move quickly.

Signaling risk

Ada’s fourth offer was $250K from a famous multistage firm. That check carries signaling risk. If the firm does not invest in your next round, other investors ask what the firm knows that they do not know. In 2010, the investor Chris Dixon wrote that a company in this position is “probably dead.”

Old data shows the two sides. In a 2013 study by CB Insights, 59% of companies with a seed fund and a large firm raised a next round. The rate was 54% with only a large firm and 32% with only a seed fund. On average, the large firm helped. The risk is in the case where the large firm does not invest again, and the study did not measure that case. Before you take the check, ask the firm how it decides on later checks.

How a firm decides

At a venture firm, a partner who likes your company becomes your champion. The champion writes a memo and brings you to the partner meeting or the investment committee. Origin Ventures asked 15 venture funds about their process. It reports that VCs “say no to 99% of deals,” mostly before a vote. Give your champion a clear story for the memo: the market, why now, why you, the progress, and the risks.

Match the investor to the round

Each type of investor fits a different purpose:

Investor	What it wants	What to watch for
Angel	A founder that the angel trusts, and a large win	Many small names on your cap table
Syndicate	A deal for its backers	Fees and carry, and the limit on investors
Accelerator	A standard stake in many companies	The second SAFE adds a percentage
Micro-VC or solo GP	Early ownership in a few companies	Small reserves for your later rounds
Seed fund	To lead your seed round	The board seat and the terms
Multistage firm	An option on the winners	Signaling risk if it does not invest again
Corporate investor	Strategy and returns	Its competitors can stay away
Family office	Returns for one family	Its pace can change suddenly

Quiz · question 1 of 6

Test what you learned

Alex has a $700K home with a $300K loan. Alex also has $600K in investments, no other debt, income of $150K each year, and no securities license. Is Alex an accredited investor?

In this lesson you will learn