How to Invest in Pre-IPO Companies

Many of the fastest-growing companies in the world, from OpenAI and Stripe to Revolut and Databricks, are still private. By the time they go public, much of their growth may already have happened. That's why investors increasingly look for ways to buy shares before an IPO. This guide explains the main routes into pre-IPO companies, who can use them, what they cost, and the risks that catch inexperienced investors out.

Why pre-IPO investing has grown

Companies now stay private much longer than they used to. A decade or more of growth can happen before a listing, and some of the largest companies have reached valuations in the hundreds of billions of dollars while private. Our guide to the largest private companies in the world lists many of them. Public market investors who only buy listed shares miss that phase. At the same time, early employees and investors want to sell some shares before an IPO, creating a supply of shares for buyers.

Who can invest

In most countries, private company shares can only be sold to certain types of investors. In the US, most offerings are limited to "accredited investors", individuals who meet income or net-worth thresholds, or to institutions. Canada, the UK, the EU and other markets have similar categories, often called professional, sophisticated or high-net-worth investors. These rules exist because private companies don't publish the detailed financial information public companies must, and their shares are hard to sell. Some newer routes open access to ordinary investors, which we cover below.

The main ways to invest

1. Secondary marketplaces

Platforms such as Forge, EquityZen, Caplight and others match buyers with employees and early investors who want to sell. Buyers usually invest through a special purpose vehicle (SPV) that holds the shares, rather than owning them directly. Minimums are often in the thousands or tens of thousands of dollars, and fees can include a placement fee, annual management fee and a share of profits. Many companies restrict share transfers, so deals can take weeks and sometimes fail if the company exercises a right of first refusal.

2. Private funds

Venture capital and growth equity funds buy shares in many private companies. Traditionally limited to institutions and wealthy investors, some now offer feeder funds with lower minimums. Our guide to funds of funds explains how pooled vehicles provide diversified exposure. Fees are typically a management fee plus carried interest.

3. Interval and evergreen funds

Some registered funds hold private company shares and allow investors to buy and redeem periodically, with lower minimums. They provide diversification and regulation, but often charge higher fees and limit how much can be withdrawn at a time.

4. Listed vehicles

Some exchange-traded funds and listed investment trusts hold stakes in private companies. In 2026, OpenAI said it would be included in several ARK Invest funds. Buying a listed fund gives daily liquidity and small minimums, but private holdings are usually a small part of the fund and are valued periodically.

5. Participation in funding rounds

Occasionally, companies let individuals invest directly. OpenAI's 2026 round included almost US$3 billion from individual investors through bank wealth channels, and ElevenLabs allowed retail investors to take part through Robinhood Ventures. These opportunities are rare and usually go to clients of large banks or platforms.

6. Equity crowdfunding

Regulated crowdfunding platforms let ordinary investors buy small stakes in startups, usually at earlier stages than pre-IPO companies. Risks are high and most investments never return money.

7. Working at the company

Employees receive stock options or shares and can often sell some through tender offers. Our guide to employee option pools explains how employee equity works.

Understanding the price you pay

Pre-IPO prices can be confusing. Key points:

• Headline valuations come from preferred shares. Investors in funding rounds usually buy preferred shares with protections like liquidation preferences. Secondary buyers often get common shares, which are worth less. Common shares frequently trade at a discount to the last round price.
• Secondary prices vary. Prices on platforms reflect limited supply and demand and can be well above or below the last official valuation. Our profiles note when secondary prices have diverged, as with Figure AI and Epic Games.
• Fees add up. SPV fees, carried interest and transaction costs can reduce returns significantly.
• Dilution. Future funding rounds issue new shares, reducing your percentage ownership.

The main risks

1. Illiquidity: you may not be able to sell for years, and an IPO may never happen.
2. Limited information: private companies don't publish full financial statements. Our guide to researching a private company explains what you can find.
3. Valuation risk: companies can raise later rounds at lower prices. See our guide to down rounds.
4. IPO prices can be lower: some companies list below their last private valuation; Razorpay's reported IPO target was below its 2021 valuation.
5. Lock-ups: after an IPO, existing shareholders usually can't sell for a period, often six months.
6. Structure risk: owning shares through an SPV adds counterparty and administrative risk.
7. Concentration: a single-company bet can go to zero.

How to research a pre-IPO company

• Check the latest funding round, its date and lead investors in our company database.
• Look for disclosed revenue, growth and profitability, and how they're defined. Our guide to ARR versus revenue helps.
• Compare the valuation with similar public companies using valuation multiples.
• Read about competition, regulation and key risks.
• Understand exactly what you are buying: share class, SPV terms and fees.

A simple example

Suppose a company's last funding round valued it at US$10 billion, and a secondary platform offers common shares at a price implying US$8 billion through an SPV with a 5% upfront fee and 10% carried interest. If the company later lists at US$15 billion and the shares trade there after the lock-up, your gross return would be about 88% on the US$8 billion entry price. After fees, it might be closer to 70%. If the company lists at US$7 billion, you would lose money even though it went public. If it never lists, you may hold an illiquid asset for years.

Is pre-IPO investing right for you?

Pre-IPO investments suit investors who can afford to lose the money, don't need it for many years, and understand the company and structure. Many professionals limit private holdings to a small share of their portfolio and diversify across several companies or funds rather than betting on one.

Due diligence on the vehicle, not just the company

When you buy pre-IPO exposure through an SPV or fund, you are relying on the manager as well as the company. Check who manages the vehicle, how long they have been operating, whether the shares have actually been acquired and transferred with the company's approval, and how the vehicle is audited. Some vehicles hold forward contracts, promises to deliver shares later, rather than shares themselves, which adds risk if the seller defaults or the company blocks the transfer. Ask for documents showing exactly what the vehicle owns.

Also check what happens at an IPO or acquisition: whether the vehicle distributes shares to investors, sells them and distributes cash, and how long that takes. Lock-up periods and administrative steps can mean months pass before you can sell.

Tax considerations

Tax treatment of pre-IPO investments varies by country and structure. Gains on shares held through funds or SPVs may be taxed differently from directly held shares, and losses may be hard to use. In some countries, investments in qualifying small companies receive tax relief. Because rules are complex and change, investors should take tax advice for their own situation before committing significant sums.

Warning signs

• Offers that promise guaranteed returns or "certain" IPO dates.
• Pressure to commit quickly before you can review documents.
• Sellers who can't show proof of share ownership or company approval.
• Unregulated platforms or individuals approaching you through social media.

Pre-IPO investing has attracted fraud, particularly around high-profile names. If an offer seems too good to be true, or comes from an unsolicited contact, treat it with great caution.