How to invest in startups before an IPO

Public U.S. equity markets have continued to march higher so far in 2025, seemingly shrugging off macro uncertainty and a potentially slowing economy. The so-called “Magnificent 7” stocks — including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — have continued to propel the S&P 500 to new heights. Tech companies, driven by massive spending on AI tools and infrastructure, continue to generate strong returns despite potential softness in other areas of the economy. Based on the success of three more tech companies (Broadcom, Oracle, and Netflix), the Magnificent 7 has recently expanded to become the “Ten Titans.”²

For equity investors, the strong performance of this small number of companies has led the market to become extremely top heavy. Collectively, the top 10 stocks in the S&P 500 represent nearly 40% of the overall value of the entire index.³ This level of concentration means that the performance of a handful of companies exerts an outsized impact on the overall U.S. equity market. In other words, long-term large-cap equity investors are making implicit bets that AI and other similar trends will continue to push these stocks, and the overall market, higher.⁴

For investors seeking diversification and growth opportunities outside of these 10 behemoths, they can look to publicly traded mid- or small-cap companies. But they could also consider purchasing shares in companies that have not yet gone public. The private Magnificent 7 — comprised of Anduril, Anthropic, Databricks, OpenAI, SpaceX, Stripe and xAI — contains some of the largest and most innovative private companies and goes beyond simply the largest AI names in the private market.⁵

For investors who may be looking to add pure-play AI names to their portfolios, the private market contains many companies, including powerhouses like Anthropic, xAI and Perplexity, among many others. Indeed, private market AI companies have generated strong recent performance. For the 12-month period ended June 30, 2025, theForge AI thematic basket⁶ returned 132.4%, far outpacing both private and public market counterparts over this time period.⁷ In comparison, the Forge Private Market Index (FPMI) returned 37.6%, while the Invesco QQQ ETF (which seeks to track the Nasdaq-100 Index) returned 15.8% over the same period. AI and related technologies clearly appear to be a major contributor to performance in both public and private markets.

The rise of venture capital and investing in startups

Understanding the venture capital funding lifecycle

Before diving into how investors can access late-stage private companies, it is worth understanding how these companies receive funding throughout their lifecycles. In many cases, a founder (or co-founders) has an idea for a company and raises initial capital from family, friends, and angel investors to fund their company’s growth. As successful startups begin to increase revenue, they often seek funding from venture capitalists (VCs), which pool together capital and invest in numerous startups in a fund or other structure.

The risks and rewards of early-stage startup investing

VCs usually undertake these investments with the understanding that while many companies in their portfolios will only generate modest returns, or even fail, a few will take off and potentially produce outsized gains. Historically, the gains have been realized after one of their portfolio companies completes an IPO (or in some cases, is sold to another company). At that point, many of the early investors can see massive profits, though it is important to remember that far more companies fail than make it to a successful IPO.

Access to venture capital for individual investors

While there has been some democratization of VC fund access in recent years, these investments tend to primarily only be available to institutional investors, such as pension funds, university endowments, foundations, and family offices. For most individual investors, access to the earliest-stage startups is generally not available unless they are angel investors or are providing funds to a family member or friend’s startup. However, investors do have the potential to invest in startups once they become larger companies, and platforms like Forge can provide access to these opportunities.

How to invest in pre-IPO companies

The evolving landscape of pre-IPO opportunities

The opportunity set for investors interested in private companies has grown significantly in recent years. While in the past, many of the largest and most successful startups saw an IPO as the ultimate goal to achieve liquidity for early investors and founders. Today, many companies are delaying or foregoing IPOs, with the average time between a company’s founding and its IPO increasing from just under seven years in 2014 to nearly 11 years in 2024.⁸

Benefits of investing in companies before they go public

What’s the result of this shift in companies staying private for longer? Investors may be able to buy shares in some of the largest and most dynamic firms in the private market, as well as seek to find the next industry leader before it become more broadly recognized by other investors. Investors seeking access to large-cap private companies can find names like SpaceX (with an estimated valuation of nearly $ billion)⁹ and OpenAI (with an estimated valuation of approximately $500 billion)¹⁰.While SpaceX and OpenAI are two high-profile examples and not representative of the overall private market, they are far from the only private companies to experience significant growth in the past several years.¹¹

The expanding universe of unicorns and sector diversity

For investors seeking smaller companies, there is a growing opportunity set in that area as well. According to VC firm Andreesen Horowitz, today there are more than 1,000 tech “unicorns” worth over $1 billion in the private market, with a collective value of nearly $5 trillion.¹² And after several challenging years, new unicorns continue to be born. In 2Q25, 24 startups became unicorns, the highest number since the Q322.¹³ While the private market, particularly in AI-related areas, continues to mint unicorns, the 24 newly created unicorns represented a cross-section of sectors spanning areas including robotics, healthcare, and transportation.

How to buy shares of private companies on Forge

Navigating the process of purchasing pre-IPO shares

How can investors buy equity in these pre-IPO companies? Unlike when purchasing a publicly listed stock or exchange-traded fund (ETF), investors cannot simply log on to their online brokerage account and click a button or two to execute a trade. Instead, they need to look to marketplaces like Forge that match buyers and sellers of shares of private companies. For individuals who may be interested in buying pre-IPO shares of a specific company on Forge, they can read this guide for detailed explanation of the purchase steps. It is important to note that only eligible investors have the ability to purchase pre-IPO shares, and there may be limited or no shares of a particular company available to purchase at any given time.

Eligibility requirements for investing in private companies

It is also important to remember that not everyone is eligible to invest in private companies. Only institutional investors with assets above $5 million and individuals who meet SEC guidelines for accredited investors have the ability to buy shares of private companies.

Take the next step

If you’re interested in learning about the process of purchasing shares of a pre-IPO company, we recommend reading “How to buy private shares on Forge: A complete guide,” which offers a step-by-step overview to the process. And if you are ready to dive into the world of private market investing, you can sign up for Forge today to gain access to industry-leading data including Forge Price™, trading history, and other resources.