How accredited investors are unlocking liquidity in the pre-IPO market

Startups are staying private longer and IPOs are becoming less frequent, due, in part, to the growing range of ways companies can raise money without going public. As a result, accredited investors are turning to the pre-IPO market to unlock liquidity. 

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Rather than waiting for a company to go public, these investors use private secondary markets and specialized platforms to buy and sell shares in late-stage private companies. As more accredited investors seek early exposure to private companies, participation in the private secondary market has grown.

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They’re also unlocking liquidity. Here’s how. 

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Why liquidity matters in pre-IPO investing

Liquidity used to be a major challenge in pre-IPO investing. In the past, early-stage shareholders often had to wait until a company went public or got acquired to exit their investments. 

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That lack of liquidity can be an issue for employees and founders who need funds for big life decisions. Similarly, fund managers and venture capitalists may want to realize value and free up funds for other investments.

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Pre-IPO investing does not work in the same way as regulated exchanges like the Nasdaq or NYSE. Shares of public companies are often highly liquid, as there is usually a high volume of buyers and sellers. In contrast, shareholders of private companies have historically not benefited from this liquidity. However, that is changing with the growth of private secondary markets.

How liquidity unlocks portfolio flexibility

‍Increased liquidity can provide more options for investors to make informed moves that can optimize their portfolio strategies and help fine-tune their positions in response to market shifts and evolving diversification needs. 

Private secondary markets make it easier for accredited investors to buy and sell assets quickly. This can increase the flow of activity, creating more liquidity for private company stocks. Explore the key benefits of secondary market investing, from price discovery to earlier exit opportunities.  Increased liquidity can give stakeholders more freedom and flexibility in how they manage their portfolios.

The rise of pre-IPO marketplaces and secondary platforms

Pre-IPO marketplaces and secondary platforms trade privately held companies that are not listed on stock exchanges like the NYSE or Nasdaq. Private market transaction volumes have surged by at least $80 million in the last 15 years.

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The platforms are growing in popularity, spurred by technological advancements, changing regulations, institutional engagement, and other factors. New pre-IPO investment platforms provide another avenue for accredited investors to gain exposure to companies while they remain private. Secondary markets are playing a key role in expanding access to these opportunities, creating more flexibility for investors outside traditional venture capital networks.

How pre-IPO platforms work

Private companies might have the end goal of going public, but in the meantime, founders will likely issue equity to venture capitalists and private equity firms to raise money. Startups often also offer equity to employees as a way to attract top talent. 

Shareholders and founders no longer have to wait for a company to go public to sell their stock. Instead, they can use pre-IPO platforms to connect with buyers, increasing liquidity for private company shares.‍

However, investing in the private market may involve different risks from trading shares of public companies. For example, even if liquidity could be more accessible, finding a buyer could still be difficult. There's also less public information, making it harder to value the company. Investors should consider these factors carefully. Here’s what to look for before investing in late-stage private companies, where liquidity, valuations, and governance can vary significantly.

Other ways shareholders unlock pre-IPO liquidity

Borrowing against stock instead of selling

Selling shares is one way to unlock liquidity before an IPO — but it is not the only one.

Some shareholders may choose to borrow against their private-company equity instead. In that setup, the stock acts as collateral, giving the holder access to capital without forcing an immediate exit. For employees, founders, and early investors who still believe in a company’s upside, that can be an appealing way to create flexibility while keeping exposure intact.Borrowing against private-company stock carries its own risks, including interest costs and the possibility that a decline in the company's estimated value could require additional collateral or repayment.

This option has become more relevant as pre-ipo companies stay private longer. When the path to a public listing stretches out, shareholders may need a way to access cash before a traditional liquidity event arrives.

Why liquidity without selling can matter

Not every shareholder wants to part with stock just to solve a short-term cash need.

In some cases, the goal is simply to provide liquidity while preserving future upside. A shareholder may want funds for a major expense, portfolio restructuring, or a new opportunity, but still wants to benefit from the company’s next phase of growth. That is one reason these solutions continue to evolve.

Of course, borrowing is not frictionless. Terms, timing, and interest rates can all shape whether it makes sense. But in the right situation, it offers a different answer to the same core problem: how to access value before a company goes public, if it ever does.

Comparing liquidity approaches: selling, borrowing, and waiting 

Selling shares

For some holders, selling is one option investors consider when the priority is a defined, immediate outcome.

Secondary transactions and tender offers can work well when the goal is straightforward: reduce concentration, lock in value, and move from paper wealth to usable capital. For shareholders who want a defined liquidity event, selling can be the most direct route.

This can be especially useful for people who no longer want all of their financial future tied to one private company. In that case, the ability to sell their shares may matter more than holding out for every bit of future upside.

Borrowing against shares 

Other holders may want liquidity without giving up exposure.

That is where borrowing can come in. Instead of selling stock outright, a shareholder can use it to. This is one factor some shareholders consider when they still believe  in the business but have near-term personal or financial needs that cannot wait for a potential exit that may never occur.

In that sense, borrowing and selling solve different problems. One is more about access to liquidity. The other is about access to liquidity, without fully stepping away from the company’s future.

Waiting for a future liquidity event

Sometimes the best move is to do nothing yet.

A shareholder may decide to wait if the company appears close to a funding event, tender window, or another form of exit opportunities. In those cases, holding on may feel more attractive than selling early or taking on financing costs.

But waiting is still a choice. And in private markets, timing can move slowly and nothing is guaranteed. A hoped-for initial public offering may take longer than expected or never happen at all, which is part of why more shareholders are exploring a broader set of liquidity options.

Selling vs. borrowing vs. waiting for an exit

Three paths, three tradeoffs

When shareholders need liquidity, they usually face three main choices: sell, borrow, or wait.

Selling can create immediate certainty, but it reduces future upside. Borrowing can unlock value without a full exit, but it comes with costs and structure. Waiting avoids both of those moves, but it leaves the shareholder exposed to more time and more uncertainty.

That is why the best path often depends on what the shareholder actually needs. Some want immediate flexibility. Some want to stay exposed to upside. Some are willing to wait for a potential liquidity event if the timing looks favorable.

What to think through before choosing

Before choosing a path, it helps to look at the basics.

How soon is liquidity needed? How confident is the shareholder in the company’s growth prospects? How concentrated is the position? And how much downside or delay is realistic?

Those questions do not remove the uncertainty, but they do help frame the decision.

Tax and financial-planning considerations

Why timing matters

Liquidity decisions are not just about access. Timing matters too.

A sale, a loan, or a structured window can all have different financial effects depending on when they happen and why. For some shareholders, the biggest issue may be a near-term tax liability. For others, the focus may be on aligning liquidity with larger financial goals or reducing pressure from a concentrated position.

That is one reason private-company shareholders often pause before acting. The right path is not always the fastest one.

Why outside input can still help

Even in a market with better tools and more access, these decisions can still benefit from outside perspective.

A tax professional, lender, or experienced advisor may help clarify tradeoffs before a shareholder commits to a sale or financing structure. That does not change the core goal, which is still liquidity, but it can improve the process around it.

That can be especially useful when a shareholder is weighing tender offers, financing, or a partial sale as part of a larger plan. In more complex situations, that kind of consideration can matter just as much as price.

Augment

Augment Capital operates a platform connecting shareholders of private companies with accredited investors for secondary transactions. The platform publishes pricing estimates for private-company shares and facilitates transactions between buyers and sellers. Which companies are available on the platform changes over time; investors should confirm current listings directly with the platform before relying on them.

Final thoughts: Investing with flexibility in private markets

The private market is changing, and accredited investors have more tools than ever to navigate it with confidence. Instead of waiting, they can now access  potential earlier exposure to a company's growth through platforms designed to improve transparency and liquidity. 

What was once a slow and rigid process is becoming more flexible, giving investors greater control over how and when they engage with private companies. This has made liquidity more accessible than in the past, though private-market liquidity generally remains more limited than in public markets.


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Important Disclosures: Augment Markets Inc. is a technology company offering software and data services. Brokerage services are offered through Augment Capital LLC, an affiliated broker-dealer and member FINRA/SIPC. Investment advisory services are offered through Augment Advisors LLC, an SEC-registered investment adviser.

This material has been prepared for informational purposes only. None of the information provided represents a recommendation, an offer or the solicitation of an offer to buy or sell any security. The information provided does not constitute investment, legal, tax, or accounting advice. You should consult with qualified professionals before making any investment decisions. Investing in private securities involves substantial risk, including the potential loss of principal. Private securities are typically illiquid, have limited pricing transparency, and often require longer holding periods. These investments are available exclusively to qualified accredited investors and offer no guarantee of returns. An IPO or other liquidity event is not guaranteed. Additionally, past performance of private securities does not indicate or predict future results. Share price data are estimates only, based on proprietary data from Caplight and Augment Markets Inc. and its affiliates.