How to invest in private companies: accessing the private markets

Investing in private companies means buying an ownership interest in a business that does not trade on a public exchange. Instead of purchasing shares through the public stock market, investors may buy shares directly, through private equity funds, through a secondary marketplace, or through another private investment structure.

The appeal is access. Private companies can remain private for years before an exit such as an IPO, merger, or acquisition. For investors interested in private markets, that can create an opportunity to invest before a company goes public, if it ever does.

The tradeoff is risk. Private company shares are often highly illiquid, harder to value, and available only to investors who meet certain eligibility standards. This type of investment can offer exposure to growth-stage businesses, but it also carries a high degree of risk and is not suitable for all investors.

It’s been the boilerplate pitch for small businesses for what feels like forever: “We’re smaller and more agile.” Private startups may exhibit agility and innovation, presenting potential growth opportunities for investors.

On top of that, more companies are staying private for longer, as they now have access to other sources of capital. This could mean that private secondary transactions may provide access to certain growth opportunities.

The shift from public to private growth

For a long time, “success” on Wall Street was synonymous with going public. But an expanding private market may have changed that narrative. 

In 1980, the median age of a company at its initial public offering (IPO) was six years. By 2024, that number ballooned to nearly 11, per Morningstar.  

Meanwhile, according to Morgan Stanley and Capital IQ, over 17,000 private U.S. businesses reported an annual revenue of $100 million or more, as of February 2025. There were just around 4,000 public companies of the same size.

Control and long-term vision

Public companies must report their results on a quarterly and annual basis. This can lead to an outsized focus on short-term gains in the public sector.

But investing in a private company early in its lifecycle — when it might still be developing a product, for instance — necessitates a long-term approach. Many private companies never go public or get acquired, and investors should be prepared to hold shares indefinitely.

Many associate private investing solely with venture capital (VC).

This typically involves a professional firm throwing money behind a growing company, in exchange for a percentage of ownership, or equity. (Think Mr. Wonderful’s O’Leary Firms locking in a huge stake in a startup on Shark Tank.)

But not every investor can start a VC fund, which often requires investors to meet high income requirements. Even without this access, there are several ways to invest in private companies.

Accredited vs non-accredited investors in private investment

Before diving into the main pathways, it helps to understand who can actually participate.

Some private placements are only open to accredited or otherwise qualified investors, depending on how the offering is structured. In many cases, access generally requires meeting certain income, net worth, professional-licensing, or entity-based thresholds. That’s one of the biggest differences between private investments  and buying public stocks through a standard brokerage account.

That said, not every private deal is available for the same type of buyer. In some cases, non-accredited investors may be able to participate through exempt offerings like certain crowdfunding structures. Those structures can widen access, but the risks associated with private securities do not go away just because the minimum check is smaller.

The key takeaway: private investing is not one-size-fits-all. Eligibility shapes what deals you can participate in, how those deals are marketed, and what kind of paperwork comes with them.

The sections below cover the major pathways in more detail, including where access may be limited to accredited investors and where individual investors may have more flexibility.

Early-stage angel investing

This refers to early-stage investments in startups and small businesses in exchange for equity in the company, typically by a wealthy individual, rather than a VC firm. 

Mature private firms and pre-IPO access

This involves investing money into established private companies for a potential exit event, such as an IPO, merger, or acquisition — though there is no guarantee that any private company will pursue or complete such an event.

Employee equity and stock options as a source of pre-IPO access

One reason pre-IPO investment opportunities exist at all is that employees often hold equity long before a company ever goes public, if it ever does.

As many companies stay private longer, employees, founders, and early investors may look for ways to sell some of that ownership before a major exit. That can create opportunities for outside buyers looking to buy into a private company which may consider an IPO in the future.  

In other words, not every private sale comes directly from the company. Sometimes the available share supply comes from people who already own equity and want liquidity. That helps explain why secondary transactions have become such an important part of investing in private markets.

Of course, access does not guarantee value. Employee-held shares can come with transfer restrictions, internal approvals, and limited visibility into what the company is really worth. For investors, this is very different from buying listed securities through a regular brokerage platform.

Emerging access models

Emerging platforms and an evolving regulatory landscape are simplifying the process of investing in private companies. 

Investment crowdfunding, for instance, asks a slew of backers to each contribute a relatively small sum in exchange for equity shares in the company.

Investors also have access to a growing private secondary market, allowing them to buy and sell their shares of private companies. Learn how secondary markets work and how they improve access to private investments.

Platforms like Augment aim to make these transactions more efficient by connecting buyers and sellers electronically.

Augment’s network has created an alternative to traditional VC investment, which typically requires larger capital commitments. This increased access has simplified the process of investing in private companies.

A co-investment gives an investor the opportunity to invest alongside a private equity, venture capital, or other institutional sponsor in a specific company or transaction.

This differs from investing in a fund. In a fund, the manager decides how capital is allocated across a portfolio. In a co-investment, the investor gets more targeted exposure to one company or deal.

Co-investments can be attractive because they may provide access private investors would not find on their own. They may also offer a closer look at a company’s business model, valuation, and growth plan. But they still carry a high degree of risk. A single-company investment can be more concentrated than a fund, and the investor may have limited control over timing, governance, or exit options.

Buying private company shares is usually slower than buying public stock. A public trade can happen in seconds. A private transaction may take weeks or longer, depending on diligence, documentation, transfer restrictions, and company approval.

Step 1: Find an opportunity

An investor may find an opportunity through a private network, broker, fund, company offering, or existing shareholder. In many cases, individual investors must qualify as accredited investors before they can participate.

Step 2: Review the company and terms

Before deciding to buy shares, investors should review the company, share class, valuation, fees, transfer limits, available financial information, and expected holding period. Private companies usually provide less public disclosure than companies listed on a public exchange.

Step 3: Submit interest or negotiate price

Private shares do not have a clear public price. The buyer and seller may need to agree on price, terms, and timing before the transaction moves forward.

Step 4: Complete documents and funding

The investor will need to complete accreditation verification, identity checks, subscription documents, transfer forms, and risk acknowledgments. This process is not an offer or solicitation by itself, but part of the transaction workflow when an investment is available and suitable. It is important to note not all private company investments are suitable for all investors..

Step 5: Wait for approval and settlement

Some private company share transfers require company approval, transfer-agent review, or a right-of-first-refusal process. The transaction is not complete until approvals are cleared and settlement occurs.

Investing in private companies may provide investment portfolio diversification. Private investors can explore a much wider variety of companies beyond publicly traded firms, hand-picking those that align with their personal goals and risk tolerance.

On the flip side, it’s important to note private investments are generally less regulated than those in the public market. It’s crucial to thoroughly research and understand these risks before investing.

Factors investors consider when evaluating private companies 

Private investments can open the door to additional portfolio diversification, but they also demand more homework.

With public companies, investors can pull filings, track analyst coverage, and watch the market price update in real time. Private companies do not offer that same visibility. That makes due diligence one of the most important parts of the process.

Start with the basics. How does the business make money? Is revenue growing? Are margins improving? Does the company have real customer demand, or just a strong story? The most exciting opportunities are not always the strongest ones.

It also helps to look beyond the pitch. Investors should carefully review management quality, customer concentration, burn rate, competitive positioning, and the anticipated path to liquidity. A business can sound promising and still be a weak private investment if the price is too high or the downside is poorly understood.

Diversification is another important consideration. Private deals can take years to play out, and outcomes can vary widely. For investors seeking to gain exposure to high-growth businesses, discipline can matter just as much as access.

Why entity structure matters in a private investment

Not every private company is structured the same way, and that can shape the investment more than people expect.

Some businesses are organized as C-corporations, which is the structure most investors will recognize from venture-backed startups and other scalable growth companies. That setup is often more familiar because ownership is tied to stock, governance is clearer, and the shareholder model tends to be easier to follow.

Others operate as LLCs or partnerships. Those structures can still offer access to private businesses, but the economics may look different. Instead of buying stock, an investor may be purchasing a membership or partnership interest, which can affect distributions, voting rights, reporting, and overall net returns.

That does not automatically make one structure better than another. But it does mean investors should carefully understand what they are actually buying. A company’s growth story matters, but so does the legal structure behind the ownership.

Transparency, regulation & risk

Publicly traded companies must file financial statements with the SEC, allowing anyone to scrutinize their finances. Private companies, on the other hand, aren’t required to provide this information. This can make valuing a private company more difficult; there’s no publicly available stock price, for instance.

Platforms like Augment are working to address this lack of transparency by displaying real-time pricing estimates, updated regularly, for private companies. By making it easier for sellers to find qualified buyers, the Augment network also aims to help bring more liquidity to the private secondary market, another area where it has historically lacked.

Private company pricing is different from public stock pricing. Public companies trade on exchanges where market prices update throughout the day. Private companies do not have the same constant price signal.

To evaluate private company shares, investors may look at recent funding rounds, company growth, revenue quality, comparable public companies, market conditions, share class, and demand from other buyers. For pre-IPO companies, investors may also consider the likelihood and timing of a possible IPO, acquisition, tender offer, or another liquidity event.

Valuation is only one part of the decision. The price may look attractive, but the share class, transfer limits, company fundamentals, and exit path matter just as much. A lower price does not always mean a better investment if the risks are higher or liquidity is limited.

Private company investing does not end after the transaction closes. Because private shares do not trade on a public exchange, investors may need to monitor the position differently than they would with public stock.

Investors can watch for company updates, new funding rounds, tender offers, acquisitions, S-1 filings, leadership changes, or changes in market conditions. They may also revisit their valuation assumptions as new information becomes available.

Recordkeeping matters too. Investors should keep transaction documents, tax records, share details, and any company communications. Private investments often require patience, and monitoring can help investors stay realistic about risk, timing, and potential exit options.
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Exit options 

Private company investments can create upside, but exits are not guaranteed. Investors should understand possible outcomes before they commit capital.

IPO

An IPO may allow investors to eventually sell after the company goes public, subject to lockups, transfer rules, and market conditions. Not every private company completes an initial public offering.

Acquisition

A company may be acquired by another business. Depending on the deal terms, shareholders may receive cash, stock, or a mix of both.

Tender offer

A company or approved buyer may run a tender offer that lets eligible shareholders sell some or all of their shares. These events may be limited by seller eligibility, share class, and company rules.

Secondary sale

An investor may try to sell private company shares to another qualified buyer through a secondary transaction. This can provide liquidity without an IPO, but approval, transfer restrictions, and buyer demand may affect whether the sale closes.

No near-term exit

Some private companies remain private longer than expected. Others may never reach a major liquidity event. Investors should be prepared for the possibility of a long holding period or a partial or total loss.

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Is private company investing right for you?

Private company investing is not a fit for every investor. Before committing capital, investors should ask whether the opportunity fits their financial goals, risk tolerance, and liquidity needs.

Questions to ask before investing

Consider whether you can answer yes to the following:

• Can you afford to have this capital tied up for years?
• Can you tolerate a partial or total loss?
• Do you understand the company, share class, and transaction structure?
• Does the investment fit your broader portfolio?
• Have you reviewed the available disclosure and valuation inputs?
• Do you understand how and when you may be able to exit?
• Are you comfortable with the degree of risk involved?

Private equity and other alternative investments can add diversification, but they can also increase complexity. Investors should avoid treating private company shares like public stocks. They are different assets, with different rules, different risks, and different paths to liquidity.

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Common myths about investing in private companies

Myth: Every pre-IPO company eventually goes public

Some private companies do go public. Others are acquired, stay private, raise more private capital, or fail. An IPO should be viewed as a possibility, not a promise.

Myth: Private company shares are always cheaper before an IPO

Buying before an IPO does not automatically mean buying at a bargain. Valuation can already reflect high expectations, and later market conditions may change.

Myth: Accredited investor status makes an investment safer

Accreditation may determine eligibility, but it does not reduce investment risk. Private company investments can still be highly illiquid and speculative.

Myth: Famous companies are always better investments

A recognizable name can create excitement, but investors still need to evaluate fundamentals, valuation, competitive position, share class, and exit potential.

Myth: Private shares can be sold whenever needed

Private company shares are not like shares on a public exchange. Transfers may require approval, and there may not be enough buyer demand when an investor wants to sell.

Exploring private investments may be an option for investors looking to diversify their portfolio and fine-tune their financial strategy to better align with their personal goals and risk tolerance. As with any investment, outcomes vary, and a loss of principal is possible.

Want to learn more? Visit Augment's network to learn more about private investment opportunities.