What is Pre-IPO and How This Market Works

Pre-IPO investing is buying shares of a private company, or an interest in a vehicle that holds them, before the company’s IPO. The market runs on private placements and secondary sales: the company, employees and early investors sell; funds and accredited investors buy; deals close as direct transfers, through SPVs or funds, or in tender offers.

Why does a pre-IPO market exist?

Because companies stay private longer, and their shareholders want cash before an IPO. By Jay Ritter’s data (University of Florida), the median US company that listed in 2025 was 12 years old; in 1999–2000 it was 5.

Meanwhile, employees and early investors hold shares they cannot sell on an exchange: PitchBook counts that 48.5% of US unicorns had their first venture round in 2016 or earlier. The pre-IPO market connects these holders with buyers.

Who sells and who buys pre-IPO shares?

The company and its shareholders sell; professional investors and accredited individuals buy.

• The company sells new shares in a funding round: this is the primary market (see our guide to primary and secondary markets).
• Employees, founders and early investors sell existing shares to get cash before an exit.
• Buyers are venture and growth funds, dedicated secondary funds, family offices, wealth managers and individuals through platforms.

In the US, an individual buyer usually has to be an accredited investor: income above $200,000 ($300,000 with a spouse or partner) in each of the past two years, or net worth above $1 million excluding the primary residence. A Rule 506(b) offering may also admit up to 35 non-accredited but financially sophisticated investors in any 90 days; a Rule 506(c) offering accepts only verified accredited investors, as the SEC’s bulletin on private placements explains. Other countries apply their own tests.

How do investors get into pre-IPO deals?

Through five routes that differ in what the investor actually owns.

A direct purchase needs the company’s cooperation. In the model documents of the US National Venture Capital Association, the company has a right of first refusal: it may buy the shares a key holder wants to sell on the same terms.

An SPV (special purpose vehicle) pools smaller tickets into one shareholder. On Sydecar, the median secondary SPV in 2025 raised $930,000 from nine investors and charged a 2% management fee and 10% carried interest, according to PitchBook’s 2025 secondary market review. AMCH, which publishes this blog, runs a platform where some pre-IPO deals are offered through SPVs.

A tender offer lets many holders sell at once at a price the company sets. Among the largest in 2025 were OpenAI’s $6.6 billion and SpaceX’s $2.6 billion, PitchBook reports. More in our tender offer guide.

How does a pre-IPO deal work step by step?

1. Check the seller. The SEC advises confirming that the seller is registered or licensed.
2. Read the documents. A private placement memorandum is optional and typically not reviewed by any regulator; check financial statements and fees.
3. Get the transfer approved. The company’s agreements may restrict a secondary sale.
4. Close and hold. Money and shares (or SPV units) change hands, and the wait for a liquidity event begins.

How do pre-IPO investors exit?

Through an IPO, an acquisition, a tender offer or a private sale. The SEC tells private placement investors to be prepared to hold indefinitely.

A common resale rule requires holding restricted shares for at least a year if the company does not file periodic reports with the SEC, and six months if it does; most private companies do not file them. Then a buyer still has to be found; why timing is hard to predict is explained in our guide to private market liquidity.

Even an IPO does not end the wait: existing shareholders usually sign a lock-up, as described in Pre-IPO vs IPO.

What are the risks of pre-IPO investing?

Losing the whole investment, waiting with no exit and buying on incomplete information.

• Total loss. The company may fail or never go public, and a market for its shares may never develop.
• Limited disclosure. An issuer selling only to accredited investors decides what to disclose, so a fair price is hard to judge.
• Structure. FINRA’s 2026 oversight report found firms selling pre-IPO funds without confirming that the fund held or had access to the shares.
• Concentration. On Hiive, a marketplace now called Clarity, the 20 most traded companies made up 86.4% of secondary trading value in Q4 2025.
• Fraud. The SEC’s investor alert lists red flags: claims that an IPO is “imminent”, no investor requirements, pressure to cash out retirement accounts.

The SEC’s guidance is that private placement investors should be able to afford a total loss. The full process is in our complete guide to pre-IPO investing.