The Rise of Pre-IPO Investing: How to Mitigate Risk in a Growing Market

Growing market opportunities have brought a growing number of entrants into the pre-IPO market. This can be really exciting. It creates accessibility for investors new to the market and more options for shareholders seeking liquidity. With more players and deals, however, comes more risk. This makes education, transparency and accountability to clients all the more important.

EquityZen’s goal over the past 10+ years has been to increase access to and transparency in the pre-IPO market. To do this, education is crucial. This is why we were proud to announce our partnership with Yahoo Finance in late March. We believe it is imperative for more individual investors to have access to the information necessary to make informed investment decisions in the private markets. Each individual investor has a different financial background, risk profile and knowledge of the market. Therefore, investing is not a one-size-fits-all endeavor. While we can’t control an investor’s unique financial position, we are dedicated to leveling the playing field when it comes to market knowledge. 

EquityZen’s platform hosts data on hundreds of private companies including buyer and seller interest, reference prices, capitalization table analysis¹, industry analysis, funding information and more. This data, backed by over 45,000 transactions completed on our platform, informs over 760,000 market participants on EquityZen’s platform. Our blog and Help Center are home to even more information about the private market investing — including market deep dives for those who like to geek out on the numbers like us. These are some of the ways we help investors make better informed decisions in the private markets.

While conducting due diligence on an investment before you invest is crucial, doing due diligence on the marketplace through which you invest is just as important. Recent news has reminded us that there is no such thing as a free lunch. Some marketplaces have touted zero-fee investments in private companies. The unfortunate truth is that if you aren’t paying fees, you’re paying some other way. In some cases, by paying for shares at an aggressive markup to their true market value. For this reason, transparency and data around private company valuations is crucial. 

As AI innovation continues and the IPO market begins to open up, we believe more strongly than ever that pre-IPO investments are an essential component of a broadly diversified portfolio.² As companies continue to stay private longer - leading the public market to shrink -  this opportunity will continue to grow. While it does, we will continue to take our responsibility as a leader and fiduciary in this market seriously.