Public stocks and the like are heavily regulated. If we let random people invest in startups, a bunch of people would get scammed out of their money, then there would be calls for more regulation to protect investors, which would only serve to hurt startups. Meanwhile, none of those little investors would make any money because the median startup is a bad investment (vs the median public company, which is an ok investment). Nearly all of the startup returns come from a small number of outliers, and those outliers will most likely continue getting funding from larger investors.
Public stocks and the like are heavily regulated, yes, and they can still drive anyone's bankroll to zero. And via leverage or iteration you can make them as risky and rapid-loss-prone as private investments (or even outright scams). See for example: forex, real-estate, and casino ads in every medium.
So this rule protects fools from losing their money in private investing, but they still have a thousand other ways to lose their money. Meanwhile, this rule also prevents lots of people of moderate means from making wise, moderate investments in areas they know well.
These sorts of from-the-masses, for-the-masses investments wouldn't necessarily follow the valley hit-driven model of "nearly all of the startup returns come from a small number of outliers".
But even if they did, why shouldn't people of all wealth levels be able to take their chances on finding an outlier? The current rule essentially says: the very best investments are only, by legal rule, allowed to the already-wealthy. Everyone else, here, buy a scratch-off.
