The benefits of entering private markets closer to the finish line

New companies, particularly ones trying to solve complex problems, can take time to mature. Investors may patiently await the launch of promising technology or a unique idea's breakthrough with consumers, only to see it fall short of its full potential. 

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Those who enter private markets closer to the finish line, however, can potentially limit their risk exposure, without sacrificing potential for meaningful gains. 

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Later-stage investments in private companies come with their own risks, but the possible rewards are compelling. Investors looking for greater visibility and more predictable outcomes may want to consider late-stage private market opportunities. Here’s why. 

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Why late-stage pre-IPO investing skips the steepest part

Late-stage pre-IPO investing may help investors skip the steepest, riskiest part of private investing, such as the seed and Series A rounds. Early-stage companies are typically more likely to fail, and investors may have to wait longer to see profits. On the flip side, getting in when the company is still private means investors might be able to avoid the volatility that sometimes plagues stocks in the weeks after an IPO. 

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Take Newsmax, the right-wing news channel that went public in April. The stock surged to a high of $279 on the New York Stock Exchange right after the IPO, only to plummet to $52 a few days later. 

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Investing in companies before they go public — but after they have matured — might help you avoid a similar IPO rollercoaster. 

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It's easier than ever to access this sector of the market. Platforms like Augment’s* provide accredited investors the chance to invest in companies before they go public. The pre-IPO investment platform opens up new opportunities for qualified individuals and groups like pension funds. 

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Companies have traction, revenue, and product-market fit

You might be wondering about the benefits of waiting for private companies to mature. Entering the private market at later stages can offer a compelling risk-reward profile, greater visibility, and more predictable outcomes for investors. 

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Late-stage pre-IPO companies are usually more stable by that point in their trajectory, so that type of investment typically has a lower risk profile than an early-stage buy-in. Additionally, investing closer to an IPO often means less price volatility and fewer headaches, like long lock-up periods or sudden market dips right after the company lists.

Institutional interest in mature private companies

Institutional ownership in late-stage and other mature private companies has been on the rise over the last few years, according to a recent study published in The British Accounting Review. 

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Indeed, fewer companies choose to go public at all, due to the growing interest from institutional investors in late-stage private businesses. With access to significant funding from these investors, many companies no longer feel the urgency to list on the stock market. 

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In some cases, institutional backing may offer similar benefits to going public, without the added pressure and public scrutiny.

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Market trends driving demand for late-stage access

Multiple market trends are driving demand for late-stage access. 

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Tariffs and global uncertainty continue to weigh heavily on investor sentiment. High-growth companies are still the target, but investors are increasingly managing risk profiles given the public market’s recent volatility.

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As IPO timelines stretch, late-stage access can offer a strategic entry point into the private markets. This may be a better fit for certain investors' timelines and risk appetites. 

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On the flip side, there is a risk of overpaying, since later-stage valuations can be higher. There may also be greater competition for access, so it’s important to consider the best places to source deals. 

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Secondary markets creating liquidity before IPO

Companies are staying private longer for a myriad of reasons, including an influx of funding in the private market and executives’ desire to maintain control over their companies’ future. For stakeholders, that can mean their cash is tied up for longer, making liquidity a challenge. 

One of the big benefits of private secondary markets is that early investors have another viable way to cash out some or all of their investments without waiting for an IPO or acquisition. This can generate liquidity and free up cash for other purposes. 

The introduction of new private secondary platforms and trading opportunities gives investors a way to enter high-quality companies that may have been previously inaccessible. 

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Accessing late-stage opportunities with Augment

Looking for late-stage opportunities? Consider Augment, which helps investors connect with sellers of pre-IPO company shares. Accredited investors can access curated, late-stage opportunities that best fit with their portfolios. Augment’s platform also offers real-time quotes for top pre-IPO companies and the ability to negotiate with counterparties, while enabling end-to-end transactions. 

This exposure to private companies may present unique investment opportunities compared to public markets — albeit with similarly unique risks. Little is certain in the secondary markets, but one thing is clear: more options are better for investors. And with platforms like Augment empowering investors to back companies at any stage of their development, options abound. 

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*Securities transactions are executed on Augment Capital, LLC's ATS and offered through Augment Capital, LLC (member FINRA/SIPC). 

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Important Disclosures: Investing in private securities involves substantial risk, including the potential loss of principal. Private securities are typically illiquid, have limited pricing transparency, and often require longer holding periods. These investments are available exclusively to qualified accredited investors and offer no guarantee of returns. Additionally, past performance of private securities does not indicate or predict future results.

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