How to Become a Private Investor

by Jonita Davis; Updated September 26, 2017

Private investors are a great asset to nonprofit foundations, educational institutions and healthcare organizations. They also provide individual start-up companies with the capital needed to get the business up and running. The benefit to the investors in each transaction is ownership in a new business, a return on their investment, tax breaks and maybe even the family name on a hospital wing or gymnasium.

Step 1

Calculate your net wealth. You must have enough liquid assets to cover not only the investment, but also any debts that may result. Nonprofits and usually look for investors with enough assets to cover the needs of the project. Many venture capital firms, charities and the like look for accredited investors as sanctioned by the SEC. The U.S. Securities Exchange Commission (SEC) has requirements for accredited investors like a $200,000 minimum income in the last 2 years (see Resources below).

Step 2

Look for a venture capital firm. It is a way to make a small investment in several start-up companies. Venture capital firms combine investments from individuals, corporations and foundation, making these funds available to companies who need seed money or capital for expansion. You can find firms to invest in areas of your interest.

Step 3

Contact your financial adviser for more information on opportunities for private investment. There are mutual funds created out of venture capital securities--a more disconnected way to be a private investor, but these investments carry less risk than direct investments. Your financial adviser can find the venture capital firms in your area of interest, as well.

Step 4

Retain an investment attorney to insure that your rights are protected throughout the transaction. The risk of fraud in private investment is very high. Therefore, before you hand your money over to a company, foundation or charity, consult an attorney who well versed in not only private investing, but also investments in general. He can spot a fraud and provide sound advice.

About the Author

Jonita Davis is freelance writer and marketing consultant. Her work has appeared in various print and online publications, including "The LaPorte County Herald Argus" and Work.com. Davis also authored the book, "Michigan City Marinas," which covers the history of the Michigan City Port Authority. Davis holds a bachelor's degree in English from Purdue University.