How to find the best pre-IPO investment platform

The private secondary market has taken off over the last decade as a viable tool for companies to generate capital and for investors seeking to diversify their portfolios. Companies are generally staying private for longer: In 1980, the median age of a company at its IPO was six years. That number grew to nearly 11 by 2024, according to Morningstar.  

‍

In the past, pre-IPO investors had to be employees of the company or high net worth individuals with access to a venture capital fund. Now, with the rise of platforms enabling secondary market transactions, this investment strategy is more accessible than ever before. Both accredited and non-accredited investors have the opportunity to get involved, with different platforms offering a range of investment minimums. For a deeper dive into how this shift is opening up the private market, explore our guide on investing in private companies.

‍

Your investment strategy can help determine which pre-IPO platform will be the best fit. Here are some of key differences:

• Venture Capital Funds: In the past, these funds were exclusively reserved for wealthy accredited investors. Now, platforms like Fundrise are making it possible for non-accredited investors to put their money into pooled funds supporting several late-stage startups.

‍

• Secondary Marketplaces: Here, investors can purchase pre-IPO stock from a company’s existing shareholders — its employees or early investors. Think the Bloomberg terminal, but for private companies. Platforms like the one operated by Augment Capital* are making it easier than ever before to tap into the private market, from displaying real-time pricing information to enabling end-to-end transactions. This approach also supports more grassroots investing strategies — check out our breakdown of the mom-and-pop approach to secondary markets to see how smaller investors are participating in this space.

‍

• Direct Brokerage Access: Some retail brokers have invested in private companies and will give their customers the chance to purchase select offerings. Fidelity, TradeStation, and TD Ameritrade are among the brokers providing this perk.

‍

Taking the time to do some extra homework can help ensure your transactions go smoothly.

Platform experience and trust signals

• Look for platforms with several years of operation under their belt. Evaluate the number of completed transactions and the quality of their relationships with private companies. 

Investor requirements

• Are you an accredited investor? Some pre-IPO platforms might be open only to this group, while others are beginning to welcome all U.S. investors regardless of their net worth.
• Check if the platform requires a minimum investment. These can significantly vary, from as low as $10 to higher amounts like $10,000.

Upfront fees, ongoing costs, and hidden markups

• Be wary of platforms advertising “no fees,” as this might mean added costs are hidden in higher share prices. Avoid platforms that don’t clearly explain all costs.
• Broker’s fees are often a standard part of any transaction. But there could also be ongoing costs like management fees and carried interest, or extra fees layered through Special Purpose Vehicles (SPVs).

Transparent transactions 

• The best pre-IPO platforms provide transparent, real-time pricing, data on past transactions, and clear bid-ask spreads.

Regulatory and compliance practices

• Ensure the platform is a registered broker-dealer or works with one. Platforms should also have a strong history of securing the necessary approvals from pre-IPO companies and operating within company transfer restrictions.

‍