Venture investments are one of the most unknown tools for ordinary private investors to place their capital. This has happened because access to investments in startups and large private companies was previously only available to professional investors and funds with large capital.
But now the situation has changed. Private investors and traders with small capital can invest in the stocks of companies even before they go public.
This is a new tool for private investors, so it is important to talk about how startups grow in the over-the-counter market. And most importantly, how you can make money from it.
Funding Rounds
Businesses can attract financing from investors without going public through a process called funding rounds. Companies develop in stages, and at each stage, new venture investors are added, which increases the company’s value (market capitalization). The following funding rounds are usually distinguished:
Pre-seed – investments at the idea stage
Seed – investments at the launch stage
Round A – growth and scaling of a ready product
Round B – growth and scaling of an already successful company
Round C, D, E, etc. – subsequent rounds denoted by consecutive letters.
So at each of these rounds, new investors are added, increasing the overall price of the company. Let’s look at an example. The well-known food delivery service Glovo attracted $450 million in its latest funding round (F). Before that, the company was valued at around $455 million. The market capitalization doubled in just one round of investments. This means that the price of each individual share also doubled.
Another vivid example is the real estate rental service Airbnb. The company’s shares increased in price by more than 5,000% from round A to round D. During round A, Airbnb shares were worth $0.02. By round C, the shares were already trading at $40.71 per share, and by round D, the price had reached $105.
Of course, investing in very early rounds is risky. A significant portion of startups do not show such fantastic results, and many close in the first few years of operation. Therefore, for venture market trading, it is worth considering already established large companies at later stages of financing. These are so-called Pre-IPO companies. Large projects that have already proven their viability, successfully conducted several rounds of financing, and are preparing to go public.
Investing in Pre-IPO is much more reliable and secure than investing in startups at early stages of development. At the same time, the performance indicators are still very high. Dozens and even hundreds of percent of profit can be obtained if a Pre-IPO company attracts additional rounds of financing or conducts an IPO.
Among the available Pre-IPO companies for investment are such large names as SpaceX, Revolut, Clubhouse, Klarna, and many other large projects.
How can small-scale investors invest in Pre-IPO?
As mentioned earlier, venture investments are no longer a tool only for large investors with significant capital. Nowadays, buying Pre-IPO company shares is even possible through.
To do this, you need to select the stock of interest in the asset list and open the Pre-IPO tab. Next, you need to open the order placement menu and make a purchase.
All that remains is to wait for the increase in the share valuation. When the company conducts a successful investment round, the position will automatically close with a profit.
This is a medium-term investment with potentially high returns. Adding a Pre-IPO company to your portfolio can help diversify risks and generate profits from the growth of private company stock prices.
Try investing in Pre-IPO company stocks.
