An important aspect of raising capital in a private placement is the involvement of accredited investors. While private placements do not require the issuer to register its securities with the SEC, it does require that the issuer only sell the private securities to investors that qualify as accredited investors under the standards set forth by the SEC in Regulation D of the Securities Act of 1933.
Accredited investors can be either individuals or entities that qualify under the SEC’s terms. Entities often include venture capital firms. For detailed standards and requirements defining an accredited investor, see also accredited investor.