Four Ways to Access Private Investments
If you’re interested in investing in private tech companies, there are four options to consider. A Financial Advisor can be helpful in thinking through private investments and how these concentrated investments fit into your broader financial plan.
In 2005, Sean Parker and Mark Zuckerberg hired a graffiti artist to paint the walls of the Facebook office and offered him either cash or stock as payment. He took the stock.
7 years later when Facebook went public his stock was worth over $200,000,000.
While not all of us can be so lucky, it’s no surprise that it is a challenge for individual investors to get access to private investments – before – they can go public or be acquired.
However, if you’re interested in investing in private tech companies, there are a few options to consider. A Financial Advisor can be helpful in thinking through private investments and how these concentrated investments fit into your broader financial plan.
1) Equity Crowdfunding: Open Community Investing
There are a variety of crowdfunding websites like KickStarter and Indiegogo that provide anyone with the opportunity to “back” a project and in return receive special perks, an early release of the product, or equity in the company. Investment minimums are low – but since anyone can create a project, the risk of losing your money could be significant.
2) Angel Investing: “Friends and Family” Rounds
Angel Investing provide the first form of outside capital to a startup, and those investments usually occur where there is a close personal connection with the founder. Given the early stage, these investments are higher risk with oftentimes higher potential for return.
3) Private Equity and Venture Capital: Institutional Investing
Private Equity funds invest in and often outright purchase private tech companies that tend to be more mature businesses. Venture Capital funds tend to invest in earlier stage private companies with high potential growth. Individuals can hold LP interests in private equity and venture capital partnerships, which typically have high minimums.
4) Secondary Marketplaces: Buy and Sell Private Stock
Secondary Marketplaces, such as EquityZen, connect shareholders from private tech companies with investors who want access to the private market. These Secondary Marketplaces provide investors with a pool of different tech companies to choose from (like SpaceX, Stripe and Warby Parker), which gives individual investors the opportunity to invest in exciting new technology companies while they’re still private. They enable investors to browse investment opportunities, conduct research and diligence, and invest.
If you own private investments or are considering adding them to your investment portfolio, we can help you find the right Financial Advisor to give you advice on those investments and how they should fit into your broader investment strategy. Learn more about the advisory firms on our platform here.