How to invest in private companies: accessing the private markets

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 a booming 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, or entity-based thresholds. That’s one of the biggest differences between private offerings and buying public stocks through a standard brokerage account.

That said, not every private deal is reserved 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 opportunities 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 see, how those deals are marketed, and what kind of paperwork comes with them.

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 business ahead of a potential future listing, which may or may not occur.

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 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 marketplace 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.

Investing in private companies may provide exposure to high-growth opportunities. 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 deals can open the door to private market opportunities, 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 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 marketplace also aims to help bring more liquidity to the private secondary market, another area where it has historically lacked.

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 Marketplace to learn more about private investment opportunities.