The SEC has set up two classes of investor, made up of accredited investors, and everyone else. The reason for this is simple -- the SEC was established to protect investors from potential fraud and con schemes. Of course, there are those who are more experienced, have invested in companies before, and have either the financial backing (lots of money) or institutional backing (from a bank) that sets them apart as not needing as much protection as the rest of us. Those investors are considered "accredited." So, if you've never invested in anything except to buy some stock on eTrade, chances are you are not an accredited investor. But that's okay -- once we get past our initial phase, we'll be able to invite you to join us in this new journey. At first, though, we are speaking only to accredited investors.
In the United States, to be considered an accredited investor, one must have a net worth of at least $1,000,000, excluding the value of one's primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year. The term "accredited investor" is defined in Rule 501 of Regulation D of the U.S. Securities and Exchange Commission (SEC).