Qualifying Investments

In venture capital, a qualifying investment is a direct investment into a private company, while a non-qualifying investment is an investment into any other asset (including investments into other funds, cryptocurrency, real estate, secondaries transactions, and other alternative assets). Investors who participate in non-qualifying investments over a certain threshold (over 20% of their entire portfolio), and who manage $150M+ in investments overall (based on fair market value), may no longer benefit from certain VC exemptions. These managers 1) may have to register as an investment advisor with the SEC, which is a burdensome process that comes with additional reporting and financial audit requirements, and 2) can only raise money from “qualified clients,” defined as individuals who have a net worth over $2.2 million.