Initial public offerings represent a significant wealth creation opportunity for retail non-accredited investors, who are mostly barred from the lucrative, yet risky segment of early and late-stage investing.
The IPOs of ambitious, and disruptive tech companies are often quite the spectacle, with millions of investors clamoring for a piece of the stellar listing gains associated with such offerings.
In 2020, in the midst of a raging pandemic, the US markets witnessed an unprecedented boom in IPOs, with 480 new offerings during the year, an increase of 100% compared to the previous year.
On average, each of these companies posted gains in excess of 40% on their first day of trading, helping create phenomenal value for investors within a short span of time, before cooling-off in recent months.
Despite the windfall gains associated with IPOs, they are also often compared to buying lotto tickets, especially off-late, with the demand and oversubscriptions resulting in share allotments being completely random.
While anyone can apply for an IPO, with simple and easy-to-use platforms such as Robinhood, getting allocations requires a stroke of luck.
Enter Pre-IPO Funds
The restriction of investment opportunities for non-accredited investors is almost akin to saying ‘You have to be rich, in order to get rich’, fortunately, there are some workarounds to get in on highly anticipated IPOs before the hordes cash in.
In this guide, you will find key alternatives to get exposure to such offerings as a retail investor, without breaking any laws, while also minimizing risks.
Being qualified institutional investors, publicly traded VC and private equity firms get the right of the first offer, and most of them do invest in highly anticipated upcoming IPOs to spruce returns for their own investors.
Companies such as BlackRock, Apollo Management Group, and The Carlyle Group are a few such publicly traded stocks to invest in if you want exposure to pre-IPO investments. There is also Strattners, a small start up fund manager in that space.
While there are dozens of roadblocks placed in front of retail investors, there are various workarounds and alternatives for those committed enough to find and make use of them and this guide talks about how to get in.
With that said, risky pre-IPO investing isn’t for everyone, and by design is mainly targeted at accredited investors, with sufficient know-how of market functioning.