How To Invest In Startups before IPO

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  • Direct Public Offerings. Several private companies decide to raise money from direct public offerings so they can sell their private stock to investors. In a direct public offering (DPO), companies usually sell stock to their customers, who might end up being more patient than Wall Street. In a DPO, the companies raise money straight from investors rather than arranging a broker to distribute the shares. The regulatory hurdles and costs can be much more attractive with DPOs than with other alternatives of selling ownership to the public. These offerings are most often for very small companies. You can read more about DPOs at Even though direct public offerings can be successful, they come with high risk and are only suited for investors who are willing to lose their full investment.
  • Pre-IPO stock marketplaces: Websites such as Sharespost ( and NASDAQ Private Market ( are striving to give investors the opportunity to purchase shares of companies while the companies are still private. You can purchase shares from other investors who hold the private shares, most often employees or founders of the companies. There are stringent rules on who can use these sites, be that as it may, as a buyer has to be an accredited investor. The SEC describes accredited investors as individuals with a net worth of more than $1 million or an minimum annual income of $200,000. These private exchanges are seeking to widen their appeal. Sharespost, for example, launched a mutual fund that lets investors invest a minimum of $2,500 in a basket of companies that have not yet sold stock to the open public.
  • Equity crowdfunding sites: If you’ve used the website Kickstarter, you most probably have a pretty good understanding how crowdfunding works. The idea is that if lots of people donate a small sum to an inventor with a great idea (but not enough money), the total amount can finance the development of the concept and turn it into a reality. Kickstarter contributions, though, are fundamentally donations. Equity crowdfunding aims to take this idea further by granting the masses to buy small percentages of ownership in very young companies. The rules permitting such financing to proceed were approved by the Securities and Exchange commission in 2015. Optimism is high that this type of funding will become popular and present entrepreneurs with a source of funds. But it’s still in inception and only for investors with money to squander. Some of the early players are, AngelList, and StartEngine. You can read the crux of the rules passed by the SEC at:

How To Invest In Startups before IPO Conclusion

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