How to Invest in Private Companies

Private company investing can be challenging, especially for retail investors, because shares of privately held companies are not available to trade on public exchanges.

Typically, investing directly in private companies, i.e., by angel investing or private equity, is reserved for qualified or accredited investors who meet specific financial criteria.

But due to the growing interest in private company investing, more investors can now access these companies through certain platforms, as well as types of mutual funds and exchange-traded funds (ETFs).

This expansion of private capital markets may well continue. According to estimates from Deloitte, funds allocated to private capital through various channels — which include private companies and other assets not available on public exchanges — could grow from about $80 billion in 2025 to $2.4 trillion in 2030.

Investors need to bear in mind, however, that investing in private companies is less liquid, less well-regulated, and less transparent than investing in public securities, which trade on public exchanges and are required to file certain documents with the Securities and Exchange Commission (SEC). This makes private-company investing higher risk, and it requires more due diligence.

Recent Growth in Private Markets

Thanks to an expansion of funding opportunities for private companies, which typically can’t access investment capital through channels that public companies do, private markets have been expanding.

Consider that there are more than 17,000 private businesses that have annual revenues greater than $100 million in the U.S., according to Morgan Stanley. Meanwhile, there are fewer than 4,060 public companies of a similar size.

This speaks to the greater access to capital, which is also enabling private companies to remain private longer, delaying the need for an acquisition or initial public offering (IPO).

What Does It Mean to Invest in Private Companies

A privately held company is owned by either a small number of shareholders or employees and does not trade its shares on the stock market. Thus investors can’t buy stocks online or through a traditional brokerage. Instead, company shares are owned, traded, or exchanged in private.

This gives company stakeholders more control over the organization — but they also bear more responsibility for the company’s performance. When you invest in private markets, ownership is typically concentrated among founders, early employees, institutional investors, and sometimes a small group of outside backers.

This structure allows companies to focus on their long-term strategy — but it also means fewer protections and less transparency for investors.

For individuals, the appeal is straightforward: access to companies at an early stage, before they become household names. But that opportunity comes with tradeoffs — particularly around risk, liquidity, and access to information.

Public vs. Private Companies: Key Differences

The distinction between public and private companies is important to understand.

Public companies are required to disclose detailed financial information, adhere to strict accounting standards, and answer to regulators like the U.S. Securities and Exchange Commission (SEC). Shares of public companies are priced by the market, which creates transparency and liquidity.

Private companies, by contrast, operate largely without this sort of public accountability. Financial disclosures aren’t always required, valuations aren’t typically driven by the markets, and shares may not change hands for years at a time, impacting liquidity.

Thus, investors in private companies are effectively trading transparency and regulatory oversight for the possibility of higher growth, which comes at the price of much higher risk to the investor, who may be weighing safe investments in today’s market as well.

How Private Companies Operate

Private companies range from small family-owned businesses to global giants. They may be organized as sole proprietorships, partnerships, or LLCs. A chief factor these companies share in common, though, is they can operate outside of normal industry regulations and oversight.

That means, on the one hand management teams can focus on building the business without the pressure of market demand or regulatory strictures. On the other, investors get significantly less data. Financial statements, if shared at all, can be selective and unaudited.

This opacity makes private company valuation more art than science. Without a public share price, investors rely on funding rounds, comparable company analysis, and internal projections to estimate what a business is worth.

Private Companies and Liquidity

In addition, because private companies aren’t publicly traded, investments in these firms can be highly illiquid.

Capital may be locked up for a period of years before a company is sold or goes public. These days, that period may be longer, according to a Morningstar analysis. Because private companies are attracting more investor capital, some are taking longer to go public, with the median age increasing from about 7 years in 2014 to roughly 11 years in 2025.

This increases the risk exposure for investors, who may lose the opportunity to invest elsewhere — and who may not see the ultimate return they had expected.

The Lifecycle of a Private Company (Startup to IPO)

Most private companies follow a well-worn path:

•   Seed stage – Founders raise capital to test an idea.

•   Early growth (Series A/B) – The business gains traction and begins to scale.

•   Late stage (Series C and beyond) – Expansion accelerates, often with large institutional backing.

•   Exit – IPO, acquisition, or secondary sale.

For investors, the earlier the entry point, the higher the potential upside — but also the higher the risk. The dream scenario is backing a “unicorn”: a private company valued at over $1 billion. In reality, only a tiny fraction of startups reach that level.

And, as noted above, investors interested in self-directed investing may be able to find new vehicles that allow private company investment.

5 Ways to Invest in Private Companies

There are several ways to invest in private companies, though not all of them will be available to every investor. While investing online typically provides access to a range of conventional securities, investors interested in private markets must consider other channels — and an analysis by Deloitte suggests that retail investors are taking advantage of new investment opportunities.

1. Angel Investing and Venture Capital

Early-stage investing, often called angel investing, involves making an investment in a fledgling company in exchange for ownership of that company. This tends to be the riskiest stage to invest in, as companies at this stage are small, young, and typically unproven.

In addition, angel investors typically put up their own capital, and may provide mentorship to a startup as well. Nonetheless, the risk of loss is high, as most startups fail. For this reason, angel investors must be accredited investors.

An accredited investor is an individual or entity that meets certain criteria, and can thus invest in hedge funds, private equity, and more.

Understanding private equity vs venture capital is important. VC investors typically work for big firms that specialize in private company investing. They don’t invest their own money, but rather the money of those who have put their money at the disposal of the VC company.

In that sense, VC firms aren’t like angel investors; they enter the picture later, once the company has a longer track record.

2. Equity Crowdfunding

Equity crowdfunding is one avenue that can allow everyday investors to access private markets. Platforms like StartEngine and Republic operate under Regulation Crowdfunding (Reg CF), allowing non-accredited investors to invest relatively small amounts in early-stage companies.

While this democratizes access, it doesn’t eliminate risk. Many of these companies are extremely early-stage, and the likelihood of loss remains high.

3. Pre-IPO Investing Platforms

A newer category of platforms gives eligible investors access to companies just before they go public through an initial public offering. This is appealing to investors who hope to take advantage of any post-IPO spikes in share value. There are a few ways to buy pre-IPO stock.

There are certain platforms that allow investors to make investments in pre-IPO companies. Those platforms tend to work in one of a few ways, usually by offering investors access to specialized brokers who work with private equity firms, or by directly connecting investors with companies, allowing them to make direct purchases of stock.

Minimums, eligibility requirements, and liquidity constraints still apply.

Recommended: What Is the IPO Process?

4. Private Equity Funds

Investors can also get involved in private company investing through private equity funds. Private equity firms invest in private companies, in hopes that the equity they acquire will one day be much more valuable.

Private equity firms invest in more mature private businesses, often taking controlling stakes and actively managing operations to increase value. Major players operate large funds that acquire, restructure, and eventually sell companies.

These funds are typically limited to institutional and high-net-worth investors, with high minimum investments and long lock-up periods, and as such are typically not accessible for most ordinary investors.

5. Indirect Investing via Public Funds

For most retail investors, the most practical route into private markets is indirect exposure through publicly traded securities. These options have expanded, thanks to rule changes that allow mutual funds and ETFs to invest up to 15% of a fund’s assets in securities that are deemed illiquid (these can include private companies and funds).

In addition, retail investors can consider:

•   Publicly traded private equity firms

•   Venture capital-focused ETFs

•   Mutual funds with allocations to private companies

In some cases, it’s possible that private investors might also obtain shares sold on the secondary market, via a platform that specializes in brokering sales between interested investors and those selling, say, equity-compensation shares from a private company employer.

While this strategy doesn’t offer direct investment, it can provide diversification, liquidity, and regulatory oversight — making it a more accessible entry point for many investors who don’t have access to private markets through other channels.

Do You Need to Be an Accredited Investor?

Yes, certain private investments require you to be an accredited investor or meet certain specifications to qualify for a certain type of private investment.

Requirements for Accredited Investors

For individuals to qualify as accredited investors, according to the SEC, they need to have a net worth of more than $1 million (excluding their primary residence), and income of more than $200,000 individually, or $300,000 with a spouse or partner, for the prior two years.

There are also professional criteria which may be met, which includes being an investment professional in good standing and holding certain licenses. There are a few other potential qualifications, but those are the most broad.

Benefits and Risks of Private Market Investing

There are pros and cons to investing in private companies that investors should be aware of.

Potential Rewards: High Growth and Diversification

Because private companies are often smaller businesses, they may offer investors an opportunity to get more involved behind the scenes. This might mean that an investor could play a role in operational decisions and have a more integrated relationship with the business than they could if they were investing in a large, public company.

In an ideal scenario, if you invested in a private company, you’d get in earlier than you would when a company goes public. This could translate to a larger or more valuable equity stake, bigger long-term gains, or possibly a more influential role. But that depends on numerous factors as the company evolves, and there are no guarantees.

Like most alternative investments, private investments can also add diversification to a portfolio, as their performance may not be highly correlated with public markets.

In some cases, investing in a private company might mean that you can set up an exit provision for your investment — meaning you could set conditions so that your investment will be repaid at an agreed-upon rate of return by a certain date.

Key Risks: Illiquidity and Volatility

One of the biggest risks involved in investing in a private company is that you’ll have less access to information about company fundamentals than you would with a public company.

Not only is it more challenging to obtain data in order to understand how the company performance compares to the rest of the industry (so company valuation is opaque), private companies are also not held to the same standards as publicly traded ones.

For example, because of SEC oversight, public companies are held to rigorous transparency and accounting standards. In contrast, private companies generally are not. From an investor’s standpoint, this means that you may sometimes be in the dark about how the business is doing.

And even though there may be an opportunity to set up an exit provision as an investor in a private company, unless you make such a provision, it could be a huge challenge to get out of your investment.

How to Evaluate a Private Company

Just like investing in public stock exchanges, there are some steps that investors may want to follow as a sort of best-practices approach to investing in private companies.

Due Diligence: What to Look For

Doing sufficient research is essential when investing in a private company. As noted, this may be difficult as there’s going to be less available information about private companies versus public ones. You also won’t be able to research charts and look at stock performance to get a sense of what a company’s future holds.

In that sense, without publicly filed documents, it’s incumbent on the investor to take a more investigative approach, focusing on some key areas that may provide indicators about company performance and market competition:

•   The founding team and their track record

•   Market size and competitive landscape

•   Revenue model and potential growth trajectory

•   Capital structure and existing investors

Managing Your Private Investments

As with any investment — public, or private — investors will want to keep an eye on their holdings.

Tracking Performance and Updates

Monitoring your investment in a private company is not going to be the same as monitoring the stocks you manage in your portfolio. You won’t be able to go on a financial news website and look at the day’s share prices.

Instead, you’ll likely need to stay on top of status reports and financial statements that are often provided to private investors in order to learn how business is operating.

Investors may also have to rely on qualitative judgment — assessing the company’s vision, leadership, and overall business capabilities.

Exit Strategies: How Do You Get Your Money Back?

When an investor “exits” an investment in a private company, it means that they’re able to sell their shares or equity and effectively cash out. If an investor bought in at an early stage and the company increased in value over the years, the investor might see significant gains. But there are no guarantees.

For many private investors, the time to exit is when a company ultimately goes public. But there may be other times that are more favorable to investors—for example, an acquisition or a secondary market sale — depending on the company.

In some cases, as noted above, an exit strategy may be part of the initial investment.

What Are Common Myths About Investing in Private Companies?

As with any type of investment, private companies can be the subject of hype. The most common is the get-rich-quick myth: That private capital markets abound with opportunities to invest in the next big thing.

In reality the failure rate of many private companies is quite high. About two-thirds of businesses don’t last a decade after they’re established, according to the Bureau of Labor Statistics.

Some further misconceptions about private investing include that it’s only for the ultra-rich, that every investment may offer high returns (along with high risks), and that profits will come quickly. An investment may take years to ultimately pay off — if it does at all.

Is Private Market Investing Right for You?

Once you know more about private markets, there are still some questions to consider.

Assessing Your Risk Tolerance

Are you okay with taking on a significant degree of risk? Private company investing, with its lack of transparency and oversight, comes with more risk exposure. Evaluate how much risk you can handle financially, as well as your personal tolerance for risk,

Aligning Investments with Personal Goals

Consider how your investments in private markets align with your overall investing goals. It’s important to remember that private markets are not only higher risk but also less liquid. Any capital you invest could be tied up for a longer period of time than it would be with more conventional investments, which may impact your goals.

The Takeaway

Investing in private companies entails buying or acquiring equity in companies that are not publicly traded, meaning you can’t buy shares on the public stock exchanges. Because this is a higher risk type of investing, there is a possibility of bigger gains, but the potential downside of these companies is significant.

Private markets are not regulated by the SEC in the same way that conventional markets are, with less stringent reporting rules, for example.

Investing in private companies is not for everyone, and there may be stipulations involved that prevent some investors from doing it. If you’re interested, it may be best to speak with a financial professional before making any moves.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Can I buy stock in a private company if I’m not accredited?

It’s unlikely that you can obtain shares in a private company without meeting the criteria for an accredited investor. That said, there are other avenues available, including publicly traded private equity firms, and certain types of ETFs and mutual funds.

Is investing in private companies safe?

Investing in private companies is a high-risk endeavor. Public companies are held to a level of transparency and accountability that helps to make the risks associated with those companies more visible. Private companies don’t have to share key information, therefore investors may find it hard to know what they’re getting into.

What is the minimum amount needed to invest in a private company?

There isn’t a limit to how much capital needed to invest in private companies, but to be an accredited investor, there are income and net worth limits that may apply.

How is interest in private market investing changing?

Thanks to the evolution of new investment opportunities, private market investing is showing new growth in 2025 and 2026. Artificial intelligence is one source of investor interest, and the use of private credit is fueling overall expansion.

---

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Before investing, carefully consider the investment objectives, risks, charges, and expenses detailed in a Fund’s prospectus. This document contains important information and must be read carefully prior to investing; you can find the current prospectus by clicking the link on the Fund’s respective page.
Alternative investments are highly risky and may not be suitable for all investors. These investments often involve leveraging, speculative practices, and the potential for complete loss of investment. They typically charge high fees, lack diversification, and can be highly illiquid and volatile. Be aware that both registered and unregistered alternative investments, including Interval Funds, are not subject to the same regulatory requirements as mutual funds, and their illiquid nature may restrict your ability to trade on your timeline. Always review the specific fee schedule for Interval Funds within their prospectus.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of losing principal. Key risks include, but are not limited to, unproven management, significant company debt, and lack of operating history. For a comprehensive discussion of these risks, please refer to SoFi Securities' IPO Risk Disclosure Statement. This is not a recommendation. Investors must carefully read the offering prospectus to determine if an offering is consistent with their objectives, risk tolerance, and financial situation. New offerings often have high demand and limited shares. Many investors may receive no shares, and any allocations may be significantly smaller than the shares requested in their initial offer (Indication of Interest). For more information on the allocation process, please visit IPO Allocation Procedures.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Mutual Funds (MFs): Investors should read and carefully consider the information contained in the prospectus, which contains the Mutual Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or SoFi's customer service at: 1.855.456.7634. Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risks. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may have tax implications.

Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN-Q126-022