Buried inside of the new banking bill is a provision that will raise the requirements to be an accredited investor. The new bill is proposed by Chris Dodd, the senator from Connecticut. The requirements are increasing from $1m in net worth or $250k in annual income to $2.3 million in net worth or $450k in annual income. Angel investment will also have to undergo a 120 day SEC review.
http://hnsummary.com/2010/03/30/get-the-anti-startup-and-ant...
$2.3M is that amount adjusted for inflation.
You can make a case that the $1M limit was too low (at the time Reagan signed the bill), but imo it doesn't make sense to argue that - in general - any limit should not be adjusted for inflation
You're forgetting that most of those folks also have hefty mortgages, so their net ownership of their houses is considerably less than the value of their house. (I doubt that the median price of houses in the valley is high enough that "virtually all" are worth >$1M.)
However, none of this matters because the definition of "net worth" used for determining whether someone is an "accredited investor" specifically excludes many things, including residences.
There's a huge drop-off from $1M to $2M in assets, no matter how defined. These things obey power laws.
The figures quoted are pulled out of their hat -- they just took the old figures and adjusted for the last 30 years of inflation since they were set. Nothing in the bill says the SEC has to do that.