The recent stock market volatility has many high-net-worth investors seeking opportunities outside of the publicly traded markets that might have higher growth potential over the next few years with less short term volatility than public tech stocks.
One issue investing in tech companies after they IPO is that many times most of the exponential growth has already occurred prior to going public.
So, how do you invest directly in a private tech company before they go public so that you can take advantage of the exponential growth potential?
Companies like EquityZen offer services to connect accredited investors with employees who would like to sell shares of their privately held tech stock.
This is a great way to invest directly into a tech company prior to them going public, without dealing with venture capital or private equity firms and paying high management fees and holding periods.
This route allows the investor to maintain control of their position and directly own shares of the company stock instead of indirectly through a fund or VC firm.
If you are a high-net-worth investor or accredited investor, you’ll be able to view the company’s current listing of privately held stock for sale.
You can also keep up with pre-IPO insights by following EquityZen’s blog here.
Investing in pre-IPO tech companies is speculative in nature, and a high level of due diligence is necessary before investing. You’ll also need to be comfortable losing the entire amount if the company fails, so limiting your investment to a small percentage of your total net worth is smart.
Now that the publicly traded markets are breaking through record highs, we expect the popularity of pre-IPO investing to rise into 2020 and beyond.
Summary: Most of the exponential growth in tech companies occur pre-IPO. High-net-worth and accredited investors are seeking private tech investments and using services like EquityZen to efficiently find these opportunities. Investing in privately owned tech companies involves speculative risks, and accredited investors should limit their exposure to a small percentage of their net worth.
Trent Grzegorczyk is the founder and principal of MICAPITAL, a registered investment advisor. Trent works with business owners, professionals, and high-net-worth individuals. Over the past 9 plus years, he and his colleagues have advised on over $3 billion in client assets. Trent enjoys cross country cycling, traveling, hiking, and resides in Traverse City, Michigan with his wife Alayna.