Pre-IPO Investments

Disclaimer: Sharon Winsmith is not a financial advisor and is not engaged in the business of providing financial investment advice. The information contained on this page includes details regarding Sharon Winsmith’s personal investments. Nothing contained on this page or elsewhere on this website constitutes investment advice. We encourage you to do your own independent research and consult with your personal advisors before making any investment decisions.

A pre-IPO investment is when you purchase shares in a company before that company goes public. Anyone can go out and buy shares in a public company. However, what is not easy to do is to get in before the company is listed.

Taking companies public is where a large number of the ultra-wealthy in the U.S. have made their money. For example Jeff Bezos built Amazon and eventually took it public. Think how much money you would have made if you could have invested in AirBnB or Netflix before they were public companies.

The idea with making an investment in a company before it goes public is that you should generally be able to buy shares at a much lower price than the shares will trade for when it is ultimately listed on an exchange.

Stage of Investment

I think of pre-IPO investments as pretty close in time before the company is going to be listed on a public stock exchange. I wouldn’t make an investment in a company unless it is 1 or 2 year away from the target IPO date.

This should not be confused with investments made at earlier stages in a company’s growth such as angel investing. Rather, this is a period in time where the company has been around for many years, proved it has a viable business, already attracted investments from third-parties, and is clearly a candidate to be taken public.

How I Make Pre-IPO Investments

The most cost efficient way to invest in a company before it goes public is to know someone who can hook you up with the off-market shares. But in practice this rarely ever happens to most of us unless we have a close friend or family who is a unicorn working on building the next Tesla or Uber.

I invest in pre-IPO companies through funds that have offerings of a handful of companies available for you to pick from. To invest through these funds, you need to be an accredited investor.

Investment Funds

I have not been able to find a fund that I am extremely happy with that offers pre-IPO investments. My main key criticisms of these funds are:

1. Fees

Because the market here is so limited, the fees are laughable in many cases. I have seen fees as high as 50% where you split the profits on any shares you own 50/50 with the fund manager. Unlike real estate, the average person can’t go out and buy shares in a private company. This allows these funds to charge exorbitant fees due to the barriers to access.

2. Lack of Information

A key risk with making an investment in a private company is the lack of information about the company and its current financial situation. You really know very little about the company because it is not required to make any public filings until it is listed on an exchange. I would expect fund managers offering these investments to have routine discussions and more background information. However, that never seems to be the case. Most of the time, I seem to know more about the company than whoever I am speaking to at the fund, which doesn’t give you a warm and fuzzy feeling about investing money with them.

3. Poor Investor Relations

I have had some pretty scary experiences with some of these funds, including a situation where an employee of the fund told me they didn’t have any evidence of me having an investment there when I had made a significant wire transfer to them months before. Imagine how scary that was to hear!

When making pre-IPO investments through an investment fund, you have to understand that the benefit is really just access to the investments themselves. Unlike real estate syndications, you aren’t paying for the fund manager’s expertise or industry knowledge. They are merely just an intermediary through which you can have access to these types of investments.

A fund that I have worked with in the past who typically has a good list of offerings is StraightPath Venture Partners.

Risks of Pre-IPO Investments

I consider pre-IPO investments to be pretty risky. I generally limit myself to making 1 or 2 pre-IPO investments at a time. I generally never have more than 2% of my net worth tied up in pre-IPO investments at any given time.

The key risks from these types of investments include:

  • Company May Never Go Public: There is no assurance the company will ever go public. IPOs are canceled or postponed all the time. 
  • Lack of Public Information: There is limited to no information available at the time you make the investment on the company’s financial position. 
  • Barrier to Entry: It can be really difficult to find these opportunities so that you can invest. You typically have to be an insider at the company or know someone who is or invest through a fund. 
  • High Fees: Because of the difficulty finding these investment opportunities, there can be high fees associated with making the investment (i.e., when you invest through a fund). 
  • Lack of Control: You have no control over when the company goes public. This means you can never predict when you will recognize the gain from your investment. You may also want to sell pretty quickly after the IPO to lock in the gain which may give rise to short-term capital gains tax rates on any appreciation if you haven’t held the shares for more than 1 year. 
  • Limited Liquidity: Until the company goes public, you may not be able to sell your shares or you may incur fees if you do sell early.
You may be asking yourself if these investments are so risky, why would anyone ever make them? The answer is the upside potential is huge on these investments. You typically get to buy the shares at a discount before the company goes public. When the company does go public, the share price can skyrocket with no real cap on the total gains you can make.


I currently have a small investment in Triller. Triller is expected to go public in 2022 based on the most updated news. I will likely sell the shares pretty quickly after the company is listed rather than hold them for long-term growth potential.

Triller is a social media networking app that operates very similarly to TikTok.

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