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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 most regular investors have been locked out of investing in private companies before they can go public.
If you’re looking to invest in private tech companies, consider these options...
1) Equity Crowdfunding: Websites like KickStarter and Indiegogo 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: Angel Investors provide the first form of outside capital to a startup and usually have a close personal connection with the founder. Angel Investors like Mark Cuban take money from their personal wealth instead of pooling it together with other investors.
3) Private Equity: Private Equity funds can invest or even outright purchase private tech companies. PE Funds like Apollo and BlackRock make money by eventually selling the purchased company or having it go public through an IPO. Investment minimums for these funds can be substantial - sometimes over $10,000,000.
4) Venture Capital: By investing in a tech company at an early stage, VC firms like Andreessen Horowitz and Sequoia Capital hope that the startup will someday be acquired or listed on a stock exchange in order to make a return on their investment. Similar to Private Equity, minimums to invest in Venture Capital firms are high and can only accommodate a handful of investors per fund.
5) Secondary Marketplaces: Secondary Marketplaces connect shareholders from private tech companies with investors looking to own a piece of that company. These Secondary Marketplaces provide investors with a pool of different tech companies to choose from - giving the opportunity to invest while they’re still private with investment minimums starting at $10,000.
Secondary Marketplaces like EquityZen have automated and simplified these historically painful transactions and made them accessible to the public in just a few clicks. Browse the open offerings, research and conduct due diligence and then invest.
Access to pre-IPO tech companies is made through an EquityZen investment vehicle. Investment opportunities posted on this website are "private placements" of securities that are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Investing in private companies may be considered highly speculative and involves a high degree of risk, including the risk of substantial loss of investment. Investors must be able to afford the loss of their entire investment. See our Risk Factors for a more detailed explanation of the risks involved by investing through EquityZen’s platform.