Do you have to be mega-rich to invest in companies pre-IPO?
"Short answer: No. Being connected is very helpful and there is no consequence by securities regulators against the investor by figuring out how to acquire pre-IPO stock. Long answer: Yes, you generally have to be an ""Accredited Investor"" which basically means you EARN over $200,000/yr yourself (or $300,000 joint) and have been doing so for several years and expect to continue doing so  OR have at least 1 million dollars of net worth ( this is joint worth with you and spouse). The Securities Exchange Commission and FINRA have put a lot of effort into keeping most classes of people away from a long list of investments." "No you don't have to be super-rich.  But... the companies do not have to sell you shares, and as others mention the government actively restricts and regulates the advertising and sales of shares, so how do you invest?  The easiest way to obtain a stake is to work at a pre-IPO company, preferably at a high level (e.g. Director/VP of under water basket weaving, or whatever).    You might be offered shares or options as part of a compensation package.  There are exemptions to the accredited investor rule for employees and a general exemption for a small number of unsolicited investors.  Also, the accredited investor rule is enforced against companies, not investors, and the trend is for investors to self-certify. The ""crime"" being defined is not investing in things the government thinks are too risky for you.  Instead, the ""crime"" being defined is offering shares to the public in a small business that is probably going to fail and might even be a scam from the beginning.   To invest your money in pre-IPO shares is on average a losing adventure, and it is easy to become irrationally optimistic.  The problem with these shares is that you can't sell them, and may not be able to sell them immediately when the company does have an IPO on NASDAQ or another market.  Even the executive options can have lock up clauses and it may be that only the founders and a few early investors make money." There are a couple of ways to buy into a private company.  First, the company can use equity crowd funding (approved under the JOBS act, you don't need to be an accredited investor for this).   The offering can be within one state (i.e. Intrastate offerings) which don't have the same SEC regulations but will be governed by state law.   Small companies (small assets, under $1 million) can be made under Regulation D, Rule 504.  For assets under $5 million, there is Rule 505, which allows a limited number of non-accredited investors.  Unfortunately, there aren't a lot of 504 and 505 issues. Rule 506 issues are common, and it does allow a few non-accredited investors (I think 35), but non-accredited investors have to be given lots of disclosure, so often companies use a Rule 506 issue but only for accredited investors.
Yes. There are exceptions under the pre-JOBS laws to allow unaccredited investors (off the top of my head I don't remember the limit, but 35 sounds right). However, it increases the amount of information the company has to give to those investors.   Post-JOBS you're allowed to have up to 500 unaccredited investors and as far as I know, it doesn't really change the information the company has to give. Two methods:  1: Become really close friend with Marky. Probably have to take a bullet for him or something.   2: Become a major client of the investment bank that will launch the IPO (most likely Goldman), and the bank will offer you some shares before the IPO. In order to become a major client you probably have to spend several millions per year in transaction fee. "The ""coin flip"" argument made in the article is absurd.  My old boss had a saying, ""the harder I work, the luckier I get.""  He came from nothing, worked maniacally to become an Olympian, and later in life became a multi-millionaire.  This is a common story among self-made people.  I DO think that the rich have significant advantages:  education, contact networks, access to startup capital, etc.  These are very helpful, but don't assure success.  Their lack is not insurmountable by the ambitious.  I also think those advantages have expanded in recent years.  Monetary policy has resulted in a large pool of investable funds being made available to to the financial sector, who earn high incomes with rent-seeking tactics." "Just skimming through the Wikipedia article on airberlin, I notice there is more to the story than simply ""airberlin's IPO failed, so they postponed it and did it anyways."" 3 points to keep in mind about IPOs:  1) An IPO is the mechanism for taking a private company and setting it up for shares to be owned by ""the public"".  2) The process of selling shares to the public often allows original owners and/or early investors to ""cash out"". Most countries (including member nations of the EU) limit some transactions like pre-IPO companies to ""accredited investors"".  3) Selling shares to the public also can allow the company to access more funds for growth. This is particularly important in a capital-intensive business like an airline; new B737-MAX costs >$110M. New A320neo costs >$105M USD.  Ultimately, the question of a successful IPO depends on how you define success. Initially, there was a lot of concern that the IPO was set up with too much focus on goal #2... allowing the management & owners to cash out.  It looks like the first approach was not meeting good opinions in the market during 2006. A major concern was that the initial approach focused on management only cashing out its shares and no money actually going to the company to support its future.  The investment bankers restructured the IPO, including the issuance of more new shares so that more $ could end up in the company's accounts, not just in the accounts of the management.  If anything, it's still a pretty successful IPO given that the shares were successfully listed, the company collected the money it needed to invest and grow, and the management still cashed out." Turukawa's answer is quite good, and for your own specific situation, you might begin by being sceptical about what you are getting for investing a few thousand dollars.  With the exception of Paul Graham's Y-Combinator, there are very few opportunities to invest at that type of level, and Y-Combinator provides a lot of other assistance besides their modest initial investment.   I can tell from your post that you think like an investor.  It is highly unlikely that the entrepreneurial programmers that you will be backing will be wired that way.   From the modest amount that you are investing, you are unlikely to be the lead investor in this opportunity.  If you are interested in proceeding, simply stick along for the ride, examining the terms and documents that more significant investors will be demanding.  Remain positive and supportive, but simply wait to sign on the dotted line until others have done the heavy lifting. For more insights into startups themselves, see Paul Graham's essays at www.paulgraham.com.  He's the real deal, and his recent essays will provide you with current insights about software startups. Good luck. It depends a large part on your broker's relationship with the issuing bank how early you can participate in the IPO round. But the nature of the stock market means the hotter the stock and the closer to the market (away from the issuing bank) you have to buy the higher the price you'll pay. The stock market is a secondary market, meaning the only things for sale are shares already owned by someone. As a result, for a hot stock the individual investor will have to wait for another investor (not the issuing bank) to trade (sell) the stock. "Thank you for the in-depth, detailed explanation; it's refreshing to see a concise, non verbose explanation on reddit.  I have a couple of questions, if that's alright.   Firstly, concerning mezzanine investors. Based on my understanding from Google, these people invest after a venture has been partially financed (can I use venture like that in a financial context, or does it refer specifically to venture capital?) so they would receive a smaller return, yes? Is mezzanine investing particularly profitable? It sounds like you'd need a wide portfolio.  Secondly, why is dilution so important further down the road? Is it to do with valuation?  Finally, at what point would a company aim to meet an IPO? Is it case specific, or is there a general understanding of the ""best time""?  Thank you so much for answering my questions." "Previous answers have done a great job with the ""Should I invest?"" question.   One thing you may be overlooking is the question ""Am I allowed to invest?"" For most offerings of stock in a startup, investors are required to be accredited by the SEC's definition.  See this helpful quora post for more information on requirements to invest in startups. To be honest, if a startup is looking for investors to put in ""a few thousand dollars"" each, this would raise my alarm bells.  The cost and hassle of the paperwork to (legitimately) issue shares in that small of number would lead me just to use a credit card to keep me going until I was able to raise a larger amount of capital." The most significant capability that an investor must have is the knowledge on the way to look for the high dividend stocks. Through accumulating good information relating to towards the stocks that you are finding is the better way of getting the perfect and profitable investments. It is really important to learn what makes a particular stock better and superior compared to other.   Traders are essential to start a complete analysis and investigation before getting their money on any business projects. Obviously, investors certainly want to have an investment that could guarantee an effective expense for a very reasonable cost the moment of getting it. The chances of crucial to invest in a market that you might be aware and qualified about. So, creating a comparison and compare in one business to a different is totally essential so as to find the high dividend stock. "We just got in an argument in another thread, and I don't necessarily want to continue it, but was browsing your comments and saw this. I can say from personal experience (I have several high net worth clients) that this isn't true. The rich do the opposite of leave their money laying around. They invest it to make more money. They buy office buildings, fund new companies, buy up stocks, and drive investment in general. Someone has to do these things. Office buildings can't just be owned by ""the people"". Someone with a ton of money has to come along and fund them.   For example, one of my friends knows Elon Musk (founder of Pay-Pal, Tesla Motors, Solar City, and Space X). He is *worth* $2 billion, but was living on other people's couches (including my friend's) after he sold Pay-Pal because he had just poured all of his cash into starting Tesla Motors. He was a billionaire without a penny to his name (well I'm sure he had a little cash lying around, but was essentially asset rich, cash broke).   THAT is what most ultra rich people are like. They invest their money, they don't just horde it away in a savings account. The things people like Musk do create jobs and sometimes entire industries (or three entire industries in his case). I'm by no means arguing that this is right or wrong, but to say rich people just have money lying around is absurd. You don't get rich by saving money in the bank, you get rich by spending it.  I'm in my early 20's, but already own multiple apartment buildings. I'm not rich yet and am in the same boat as Musk was. I have tons of assets, but almost no cash I can spend. However, you bet my efforts are creating jobs. I'm employing people to renovate and people to repair and maintain these buildings. I'm helping stop the bleeding in the real estate market, but, according to the narrative, I'm evil because my ""income"" is six figures." You can apply for a position with any company you like, whether or not you are a shareholder. However, owning shares in a company, even lots of shares in a company, does not entitle you to having them even look at your resume for any job, let alone the CEO position. You generally cannot buy your way into a job.  The hiring team, if they are doing their job correctly, will only hire you if you are qualified for the job, not based on what your investments are. Stockholders get a vote at the shareholders' meeting and a portion of the profits (dividend), and that's about it.  They usually don't even get a discount on products, let alone a job. Of course, if you own a significant percentage of the stock, you can influence the selections to the board of directors.  With enough friends on the board, you could theoretically get yourself in the CEO position that way. There are several problems with your reasoning: if I buy one share of GOOGLE now for $830, I could have $860 within the end of tonight -- totally possible and maybe even likely. You can do the same thing with 1,000,000 shares of google, and it's just as likely to go down as go up.   if I were to invest $1,000.00 in gold to have $1,000.00 worth of gold, it's no different than keeping $1,000.00 in cash It's VERY different.  Gold can be just as volatile as stocks, so it certainly is different as just keeping it in cash. Benefits of a larger portfolio: "I think you came up with a worthy Masters/PhD research project, it is a great question. This is in Australia so it is difficult for me to have complete perspective.  However, I can speak about the US of A. To your first point relatively few people inherit their wealth.  According to a brief web search about 38% of billionaires, and 20% of millionaires inherited their wealth.  The rest are self-made. Again, in the US, income mobility is very common.  Some act like high level earners are just born that way, but studies have shown that a great deal of income mobility exists.  I personally know people that have grown up without indoor plumbing, and extremely poor but now earn in the top 5% of wage earners.   Quid's points are valid.  For example a Starbucks, new I-Phone, and a brake job on your car are somewhat catastrophic if your income is 50K/year, hurts if your income is 100K, and an inconvenience if you make 250K/year.  These situations are normal and happen regularly.  The first person may have to take a pay day loan to pay for these items, the second credit card interest, the third probably has the money in the bank.  All of this exaggerates the effect of an ""emergency"" on one's net worth.    To me there is also a chicken-and-egg effect in wealth building and income.  How does one build wealth?  By investing wisely, planning ahead, budgeting, delaying gratification, finding opportunities, etc...  Now if you take those same skills to your workplace isn't it likely you will receive more responsibility, promotions and raises?  I believe so.  And this too exaggerates the effect on one's net worth.  If investing helps you to earn more, then you will have more to invest. To me one of the untold stories of this graph is not just investing, but first building a stable financial base.  Having a sufficient emergency fund, having enough and the right kind of insurance, keeping loans to a minimum.  Without doing those things first investments might need to be withdrawn, often at an inopportune time, for emergency purposes. Thanks for asking this!" You can say it's a bad proxy but practically all the richest people have their money tied up in equities, and it would be foolish for them not to. You have to include that somehow. Net worth is not just liquid assets Many CEOs I have heard of earn a lot more than 200k. In fact a lot earn more than 1M and then get bonuses as well. Many wealthy people increase there wealth by investing in property, the stock market, businesses and other assets that will produce them good capital growth. Oh yeh, and luck usually has very little to do with their success.