VC & PE Glossary
What Is Qualified Purchaser?
Updated
Definition
A qualified purchaser is an investor who meets a higher wealth threshold under U.S. securities law — generally $5 million or more in investments — allowing them to invest in certain private funds and 3(c)(7) vehicles without the same constraints as smaller accredited investors.
Useful for: LPs, Investors
A qualified purchaser is an investor satisfying Investment Company Act thresholds — typically individuals with at least $5 million in investments, or institutions with $25 million — entitling access to unregistered 3(c)(7) funds.
How it works
Fund counsel collects QP representations in subscription documents. Individuals count qualifying investment assets — securities, real estate held for investment, commodity interests — excluding primary residence and business property used in operations. Family companies and trusts have parallel tests. 3(c)(7) funds can accept up to 2,000 qualified purchasers without registering as investment companies, unlike 3(c)(1) funds capped at 100 accredited investors (with some exceptions).
Qualified purchaser is stricter than accredited investor ($1M net worth or $200K income). Some co-invest SPVs and crypto funds use QP-only structures for flexibility.
Why it matters
- LPs: Know your status before committing; QP-only funds reject subscriptions that do not qualify.
- GPs: Wrong investor mix can blow exemptions — a compliance failure with fund-level consequences.
- Founders: Usually indirect, but fund structure affects who can join SPVs in your round.
Common mistake
Equating accredited investor with qualified purchaser. Many angels qualify as accredited but not as QPs — and cannot join certain flagship fund vehicles.
Related ideas
Accredited investor, /glossary/erisa, 3(c)(1) vs 3(c)(7), and subscription documents.
Related terms
- Accredited Investor — An accredited investor is an individual or entity that meets SEC financial thresholds—such as income or net worth tests—and may participate in many private securities offerings with fewer disclosure requirements.
- ERISA — ERISA (Employee Retirement Income Security Act) is the U.S. law governing private pension and benefit plans—affecting how pension LPs invest in VC funds and how ESOPs operate.
Common questions
Short answers for founders, LPs, and operators