What are 3(c)(1) and 3(c)(7) funds?

A 3(c)(1) fund may have no more than 100 beneficial owners, or 250 for a qualifying venture capital fund with no more than $12 million of contributions and uncalled commitments (raised from $10 million on September 30, 2024, and adjusted for inflation every five years). A 3(c)(7) fund has no such cap in the law but must be owned only by qualified purchasers. Neither may make a public offering of its securities.

Say a manager expects 400 investors. A 3(c)(1) fund is capped at 100 owners, so the manager would use a 3(c)(7) fund and admit only qualified purchasers. Simple example. Terms vary by fund.

The exclusion a fund uses decides how many investors it can take and how wealthy they must be.