Small Investors Get Access to Pre-IPO Shares

"It is getting easier to invest in high-risk, high-reward private companies.

Now, all it takes is $5,000 to buy a stake in a firm that has not yet gone public. EquityZen and Forge Global, which are marketplaces for trading shares of private companies, are lowering the minimum investment from tens of thousands of dollars, the companies said.

The two marketplaces are also launching a partnership Tuesday with Yahoo Finance, in which they share their data on roughly 100 pre-IPO companies on the website.

This is the investment industry's latest play to put nonpublic companies in the hands of individual investors. Until recently, investing in private companies was the domain of institutional investors and ultrawealthy with the capital and connections to participate in fundraising rounds. Those often require seven-figure minimum investments and decadelong lockups.

Private-equity firms also are trying to attract some of the estimated $30 trillion held by U.S. individual investors.

Many nonpublic companies grow faster than publicly listed ones, which can mean higher returns. They also have limited transparency and less liquidity. They can have less stringent financial reporting requirements.

They are "secretive and opaque," said Jeff Hooke, a senior lecturer at Johns Hopkins University's Carey Business School, a critic of private markets.

Employees and early investors in startups are often looking to cash out, but they can't just turn around and sell their shares into an open market. Firms like EquityZen and Forge have built marketplaces that find individual investors to buy these shares.

The shares are often illiquid, and individual investors often expect to quickly trade in and out of investments. To address this, companies like EquityZen and Forge have created single-company funds that investors can buy into at smaller amounts.

Still, the process isn't as seamless as trading ETFs on apps like Robinhood. Trades can take days to finalize, and buyers are generally required to hold their stake for a minimum of six months. Forge and EquityZen charge commissions between 2% and 5% on each transaction.

Most data on how valuable private companies are is incomplete because it relies on fundraising data that can be years old. Forge says it has compiled bid-ask data from across its platform to calculate a daily price that reflects what firms are actually worth.

For example, Forge recently valued CoreWeave at $29 billion despite the company's recent pre-IPO filings signaling a valuation north of $30 billion.

Originally, Forge sold this data as part of a subscription. Chief Executive Kelly Rodriques said partnering with Yahoo to put some of it in front of the website's 100 million users adds more value to private markets than keeping it behind its own paywall.

"We're at a tipping point right now," he said. "Increased participation leads to greater liquidity."

The companies declined to comment on the financial structure of the partnership.

As companies remain private for longer in the moribund IPO market, more investors are worried about leaving potential returns on the table. The average company goes public today at 10.7 years old, compared with 6.9 years in 2015, according to Morningstar.

"A lot of the risk-return opportunity has been pushed into the private markets," said Christian Chan, chief investment officer of AssetMark, a technology platform for independent financial advisers.

Investing in private markets isn't always what it is cracked up to be.

Private-equity investments underperformed public markets last year for the third time in four years, according to a McKinsey report.

Investors must be "accredited" to participate in private-market deals such as through EquityZen and Forge, per Securities and Exchange Commission requirements. That means earning $200,000 annually (or $300,000 for couples) or having a net worth over $1 million, excluding a primary residence. Those thresholds haven't changed since the 1980s, so today roughly one in five U.S. households qualifies -- up from 1.8% in 1983, according to an SEC report.

Though the $5,000 minimum investment represents a new low for a stake in private companies, EquityZen Chief Executive Atish Davda said he would like to see it go even lower -- but not too low.

"Just because you can, doesn't mean you should," he said. "If I only have $50 to invest, am I better off taking my $50 and going on FanDuel or something?" he added, referring to the sports-betting company.” [1]

1. Small Investors Get Access to Pre-IPO Shares. Moise, Imani.  Wall Street Journal, Eastern edition; New York, N.Y.. 26 Mar 2025: B1.