Guide
How to Invest in Pre-IPO Companies
Primary rounds, secondary purchases, SPVs, and pre-IPO funds — what each route costs, what it restricts, and which are actually available to individual investors.
There are four ways capital reaches a private company. Most writing on this subject treats them as interchangeable. They are not — the difference between them is usually larger than the difference between the companies inside them.
Before the Four Routes: What You Are Buying
A share of a late-stage private company is not a smaller version of a public share. It is a different instrument.
Public shares are fungible, priced continuously, freely transferable, and backed by mandatory quarterly disclosure. Private shares are typically one of several classes with different rights, priced only when someone negotiates a transaction, transferable only with company consent, and backed by whatever information the company chooses to share.
Every route below is a different way of holding that instrument — or, more often, a different way of holding something one or two layers removed from it.
The Four Routes
Route 1 Primary Rounds
What it is. Investing directly into the company as it raises new capital. Your money goes to the company's balance sheet and you receive newly issued shares.
Who gets access. Institutions, existing holders exercising pro-rata rights, and strategic investors. At the late stage, allocations are effectively spoken for before a round is announced. OpenAI's $122 billion round in March 2026 was anchored by Amazon, NVIDIA, and SoftBank. [MAY-26] There was no individual allocation.
What it costs. Nothing in fees, if you can get in. The price is the round price.
The catch. For virtually all individual investors, this route does not exist. When someone offers you "access to the primary round," they are almost always offering you an SPV — Route 3 — with a fee layer attached.
Route 2 Secondary Purchases
What it is. Buying existing shares from an employee, a founder, or an early investor. The company receives nothing; you are stepping into someone else's position.
Where it happens. Forge Global, Hiive, EquityZen, and Nasdaq Private Market operate marketplaces that match buyers and sellers in named private companies. Brokers arrange transactions off-platform.
What it costs. Platform or broker fees, typically a few percent, plus whatever spread is embedded in the quoted price.
The catch. Almost every private company holds a right of first refusal. When you agree terms with a seller, the company is notified and may match your offer, taking the shares itself.
Pricing discipline. Secondary transactions should price at a discount to the last primary round to compensate for illiquidity and information asymmetry. A 20 to 30 percent discount is typical and reasonable.
Route 3 Special Purpose Vehicles
What it is. A single-purpose entity — usually a Delaware LLC — formed to hold one position in one company. Investors buy interests in the LLC. The LLC holds the shares.
Why it dominates. This is how most individual capital actually reaches late-stage private companies. A sponsor aggregates twenty or fifty investors into one entity, and the company sees one holder on its cap table rather than fifty.
What you own. An interest in the vehicle. Not the shares. This determines your voting rights (none), your information rights (whatever the sponsor passes through), your exit timing, and your net return.
What it costs. Typically 1 to 2 percent annually in management fees plus 10 to 20 percent carried interest on gains.
The layering problem. Some vehicles hold interests in other vehicles. Read the structure diagram before the pitch deck.
Full guide to SPVsRoute 4 Pre-IPO Funds
What it is. A pooled vehicle holding a portfolio of private positions.
The trade. Diversification across names and vintages, in exchange for fee layers and no ability to choose positions. If you want exposure to the category rather than to a company, this is the honest way to get it.
What it costs. Fund-level management fee and carry, plus — in fund-of-funds or feeder structures — a second layer of the same.
Where it fits. Better suited to investors who want private-market exposure as an allocation than to investors with a view on a specific company. If you are reading a company page to decide whether to buy that company, a fund is not what you are looking for.
Side by Side
| Feature | Primary | Secondary | SPV | Fund |
|---|---|---|---|---|
| Money goes to | Company | Selling shareholder | Selling shareholder or company | Portfolio companies |
| You own | Shares directly | Shares directly | LLC interest | Fund interest |
| Realistic access | Institutions only | Accredited, via marketplace | Accredited, via sponsor | Accredited |
| Typical fees | None | 2–5% + spread | 1–2% + 10–20% carry | 2% + 20% |
| Company consent | N/A | Yes — ROFR applies | Yes | Handled at fund level |
| Position selection | Yes | Yes | Yes | No |
Sizing and Discipline
Size for permanent total loss
Every position should be sized such that a complete write-off does not materially affect your broader portfolio. The common institutional benchmark is no more than 1 to 3 percent of net worth in any single pre-IPO position, and no more than 10 to 15 percent across all of them combined.
Evaluate against opportunity cost
The question is not "is this company worth $100 billion?" It is "what return justifies holding this illiquid for five to seven years, against public market exposure compounding over the same period?" Many pre-IPO positions fail that test even when the underlying business succeeds.
Diversify across vintage and theme
A portfolio concentrated in one cycle or one theme carries correlated risk. Ninety-two percent of the 2026 pipeline value sits in AI-adjacent companies — a sector-level repricing would hit nearly every position simultaneously. [MAY-26]
Plan for the lock-up
Assume your position is illiquid for 6 to 12 months after the company lists, not until it lists.
Before You Commit
- What exactly do I own — shares, an LLC interest, or an interest in another vehicle?
- What are the total fees, including any spread embedded in the price?
- Who is the sponsor, what have they done before, and how are they compensated?
- Does the company hold a right of first refusal, and what is the notice period?
- What is the last primary mark, when was it set, and what discount am I getting to it?
- What happens at IPO — do I receive shares in kind or cash proceeds, and on what timetable?
- What is the tax treatment for me specifically?