Reference

3(c)(1) or 3(c)(7): the hundred-investor question

One caps you at 100 investors. The other has no cap but every investor must be a qualified purchaser. The trade-off decides who you can ever raise from.

A pooled investment fund is, on its face, an investment company — which would make it subject to the Investment Company Act of 1940 and its registration, governance and leverage rules. Private funds avoid that by fitting an exclusion. Two matter, and they sit next to each other in the statute.

What the statute says

Any issuer whose outstanding securities (other than short-term paper) are beneficially owned by not more than one hundred persons (or, in the case of a qualifying venture capital fund, 250 persons) and which is not making and does not presently propose to make a public offering of its securities.
15 U.S.C. § 80a-3(c)(1)
Any issuer, the outstanding securities of which are owned exclusively by persons who, at the time of acquisition of such securities, are qualified purchasers, and which is not making and does not at that time propose to make a public offering of such securities.
15 U.S.C. § 80a-3(c)(7)(A)

So: 3(c)(1) caps the number of investors and does not care much who they are. 3(c)(7) does not cap the number and cares a great deal who they are.

The 250-person carve-out most summaries omit

The parenthetical in 3(c)(1) is easy to miss and matters if you are raising a small venture fund: a qualifying venture capital fund may have 250 beneficial owners rather than 100. The definition and its size limit live elsewhere in the Act and have been amended, so check the current text against your own facts before relying on it.

Accredited is not qualified

These are different tests and conflating them is the most common error in this area. An accredited investor is broadly someone with $200,000 of income or $1 million of net worth excluding their home. A qualified purchaser is broadly someone with $5 million in investments. The gap between those two numbers is the entire practical difference between the exclusions.

A 3(c)(7) fund can accept an unlimited number of investors, but every one of them must clear the higher bar. For a first fund that usually means a smaller addressable universe, not a larger one.

What funds actually do

From the filing record

Of 36,426 pooled funds filing in 2025: 48% claimed 3(c)(1), 51% claimed 3(c)(7), and 7% claimed both.

In 2016 the split was 37% / 60%. The small-fund exclusion has gained eleven points in a decade and briefly overtook 3(c)(7) in 2021.

The 7% claiming both is worth pausing on. A fund does not operate under two exclusions at once; it is generally hedging at filing time, or running parallel vehicles. If you are reading a Form D to work out what someone is doing, that box tells you less than it appears to.

How to choose

3(c)(1) fits a first fund raised from a network: friends, former colleagues, angels, a family office or two. One hundred slots is more than most first funds fill.

3(c)(7) fits when you expect to exceed a hundred investors and your investors are institutions or genuinely wealthy individuals. It buys headroom you may not need yet.

The count is of beneficial owners, which is where the trouble usually is. Feeder funds, nominee arrangements and look-through rules can turn one investor on your cap table into many for this purpose. That is a question for counsel on your specific structure, not something to infer from a page like this one.

Primary sources

Quotations are from the official text as published, retrieved 2026-08-30. Statutes and rules change; check the current text before relying on any of this.

This is general information about how private funds are structured. It is not legal advice, it is not a recommendation, and it is not a substitute for advice about your own facts.

Independent publication. Advertising does not influence what is reported here.