When Facebook IPO'd at $38/share, early investors had paid cents. By the time retail could buy, 99% of the gains were already locked in.This pattern repeats across nearly every major tech company. Uber, Airbnb, Stripe, SpaceX - the exponential growth happens before the ticker symbol exists. We explored this pattern in detail with how SpaceX early investors made 100x.So why do most people only invest at IPO?Because until recently, pre-IPO investing was legally and practically off-limits to anyone without a seven-figure net worth or VC connections. That's changing.
The Numbers Don't LieLet's look at real data from major tech IPOs:CompanySeed ValuationIPO ValuationPre-IPO MultipleUber$4M$82B20,500xAirbnb$2.5M$47B18,800xFacebook$5M$104B20,800xStripe$20M$95B (peak)4,750xNow compare to post-IPO returns. Facebook's stock has roughly 5x'd since IPO - impressive by any standard. But 5x over 12+ years is nothing compared to 20,000x in the 8 years before.The lesson: If you're only investing at IPO, you're showing up to the party as the best guests are leaving.
Why Companies Stay Private LongerIn the 1990s, companies IPO'd at 4 years old on average. Today, it's 12+ years - and as Stripe's valuation rollercoaster shows, even the best companies stay private through enormous value creation. Why?Abundant private capital: Companies can raise billions without going publicRegulatory burden: Public company compliance costs tens of millions annuallyControl: Founders keep more control staying privateMarket volatility: Private valuations are smoother (even if artificially so)This shift has massive implications for wealth creation. The compounding years - when a company goes from $10M to $10B - now happen entirely in private markets. By the time you can buy shares on Robinhood, the 1000x is already done.
Pre-IPO Risks Are RealLet's be honest about the risks:Illiquidity: You may not be able to sell for yearsCompany failure: Startups fail. Even late-stage ones.Down rounds: Valuations can drop (see: Stripe's 50% cut in 2023)Information asymmetry: You know less than insidersDilution: Future funding rounds can dilute your stakeThese risks are why pre-IPO investing was historically restricted to accredited investors - people the SEC deemed able to absorb losses.But here's the counter-argument: IPO investing has risks too. You just see them more clearly because prices update every second. Pre-IPO risks are real, but so is the asymmetry of being early.
How to Access Pre-IPO DealsTraditional paths to pre-IPO investing:Be an accredited investor ($200K+ income or $1M+ net worth)Use secondary market platforms like Forge or EquityZen ($10K-$50K minimums)Join angel syndicates on AngelList or similarInvest through SPVs that pool capital from multiple investorsThese options are better than nothing, but they still have high barriers and often middling deal quality.IPO Genie is building a different model: AI-powered deal scoring, lower minimums through tokenized access, and transparent governance where token holders influence platform direction.
The Bottom LinePre-IPO vs IPO isn't really a fair comparison. It's like comparing buying Amazon at $18 (1997) vs $3,000 (2021). Both are "Amazon stock," but they represent completely different risk/reward profiles.Key takeaways:Most value creation happens before IPOCompanies stay private longer, extending this advantagePre-IPO has real risks (illiquidity, failure, dilution)But the risk-adjusted returns can be significantly betterNew platforms are making access more democraticThe question isn't whether pre-IPO investing is "better." It's whether you want access to the part of the curve where most of the compounding happens.Related: What is Pre-IPO Investing? | What is an IPO? | Secondary Markets Explained
Frequently Asked QuestionsQ: Is pre-IPO investing only for rich people?Traditionally yes - SEC rules required accredited investor status ($200K income or $1M net worth). However, new platforms and structures are lowering minimums. Regulation CF allows non-accredited investors to participate in some offerings with limits.Q: How long is money locked up in pre-IPO investments?Typically 3-7 years, sometimes longer. Unlike public stocks, you can't just sell whenever you want. Some secondary markets provide earlier liquidity, but at a cost.Q: What percentage of pre-IPO investments fail?It depends on the stage. Seed-stage startups fail at ~90% rates. Late-stage pre-IPO companies (Series C+) have much better odds - perhaps 20-30% fail to provide positive returns. Diversification across multiple deals is key.
