How can professional investors access pre-IPO companies?

Four ways in

There are essentially four routes into a late-stage private company. Each solves a different problem, and each comes with its own constraints.

Why the format matters as much as the company

For many professional investors the obstacle is not finding an interesting company. It is that the available route does not fit how their portfolio is set up.

A private bank may not be able to hold unlisted shares in custody. A family office may not want to appear on a cap table or administer a shareholders' agreement. An asset manager may be restricted to transferable securities. In each case the exposure is acceptable and the format is not.

That is the gap a pre-IPO note is designed to fill: the same economic exposure, delivered as a security that clears through Euroclear, Clearstream and SIX like any bond. The mechanics are explained in more detail in how a pre-IPO note is structured .

The risks, stated plainly

Pre-IPO investing carries risks that do not disappear because the exposure is wrapped in a security. They should be understood before anything else.

• →Valuation. The price of the last funding round is not a market price, and later rounds or a listing can come in lower.
• →Liquidity. There is no guarantee that the company will list, or when. Even after a listing, a lock-up period usually applies before shares can be sold.
• →Information. Private companies disclose far less than listed ones, and investors rely on what the company chooses to share.
• →Concentration. A single-company exposure depends entirely on one business. A basket reduces that risk but does not remove it.
• →Structure. Every layer between the investor and the shares adds cost and dependence on other parties. A note is a limited recourse obligation, backed only by the assets of its compartment.

Questions to ask before committing

Whatever the route, a handful of questions separates a sound structure from a weak one.

• →What exactly does the vehicle own: the shares themselves, or a claim through another company?
• →At what valuation is the position being acquired, and how was that price set?
• →What happens at the listing: are investors paid in cash, or do they receive the shares?
• →What happens if the listing never takes place?
• →What is the total cost across every layer of the structure?
• →How often is the position valued, by whom, and on what basis?

One company, or a basket?

The first structural decision is how concentrated the exposure should be.

A single-company note is the purest form: the investor takes a view on one business and one listing. It suits situations where there is a clear conviction, or where the investor already knows the company well, for instance through the industry or an existing relationship.

A basket spreads the exposure across several late-stage companies, usually selected around a theme or a stage of development. It softens the impact of any single company failing to list or listing below expectations, at the cost of diluting the result when one of them does very well.

Neither is inherently better. What matters is that the choice is deliberate, and that the documentation states clearly what the vehicle holds and under what rules the composition can change.

Where a note fits, and where it does not

A note makes most sense when the investor wants exposure to a specific late-stage company or a small basket, and the obstacle is operational rather than economic: custody, mandate restrictions, or the administration of a direct shareholding.

It makes less sense for an investor who can already buy the shares directly without friction, or who wants a broad, professionally selected portfolio of private companies, where a fund may be the better tool.