Honestly curious because I know nothing: what regulations prevent non-millionaires from investing in startups? I thought that's what "friends and family" type of financing was...
SEC rules in the United States restrict the sale of unregistered shares in a corporation to 'qualified' investors. For an LLC or LLP you create your own rules which you outline in the Articles of Organization and they let you sell parts of the company to friends and family. I've seen several great links on the pros/cons of various company organizations here and elsewhere.
Even better, there is a major effort underway to legalize investing in startups by anyone. A bill (HR 2390 ) has already passed the House, and there's draft resolution in the Senate that would do the same thing. The main limitation will be that people won't be able to invest more than 1% of their net worth in any given startup, and that startups can't raise more than $1 million through it.
Love the concept but fear the implementation. We live in a world where one stupid person tries to feed a grizzly and gets killed, and the 'fix' is to ban hikers / campers from the region where the Grizzlies live. The US has temporarily lost the concept of 'personal responsiblity' and so when someone does something poorly and pays a price, every one who could do it and benefit are banned from participating.
This bill, if it becomes law, will survive until one stupid person loses their 1% net worth and then sues anybody and everybody because they were 'tricked' or otherwise decieved and then the whole thing will become illegal again. The reason the existing rules are not kicked out is because they are setup only to screw 'rich people' who are not considered a 'protected class' by the voters.
Yes, its a bit cynical but you can see evidence of this thinking everywhere. From banning dogs in National parks to making chemistry sets illegal.
