My net worth doesn't reach the minimum needed to be considered an "accredited investor" by the IRS.
Is there a way I can still invest in startups on AngelList?
I'm not sure why they have this limitation when most of the angels are only investing in chunks of $10 to $25K per startup.
Reasons why AngelList requires you to be an accredited investor and startups tend not to take money from them:
1. Investors who are not accredited tend to be needy.
To understand why that is, you have to look at the numbers. Most startups fail. For the ones that do end up succeeding, the chances for an investor to make a profit on their investment is several years away.
Accredited investors likely do tens of deals a year, so they understand the risks. They're okay with their investment going down the drain because it's a numbers game for them. Just one hit in a sea of misses can make their overall ROI positive.
2. Extra paperwork and legal costs.
Startups have to give non-accredited investors disclosure documents that are generally the same as those used in registered offerings. This is in order to comply with regulations -- look at SEC Rules 502 and 506(b).