How to Buy Private Stock: A Complete Investor’s Guide

Buying private stock can be a highly profitable investment strategy, offering opportunities to own shares in privately held companies before they go public. Unlike publicly traded stocks, private stocks are not listed on stock exchanges, making them less accessible but potentially more rewarding.

Investors interested in venture capital, startup investments, and pre-IPO companies often seek private stock for its growth potential and exclusive ownership benefits. However, higher risks, limited liquidity, and regulatory requirements make private stock investments more complex than traditional stocks.

In this guide, you’ll learn:

What private stock is and how it works
The benefits and risks of investing in private companies
How to find and evaluate private stock opportunities
The step-by-step process to buying private stock
Legal and financial considerations before investing

Let’s explore everything you need to know about buying private stock and making informed investment decisions!

What Is Private Stock?

Private stock refers to shares of a privately held company that are not traded on public stock exchanges like the NYSE or Nasdaq. Instead, these stocks are sold through private transactions, often to:

Venture capitalists & angel investors
Private equity firms
Employees through stock options
Accredited & institutional investors

Example: Companies like SpaceX, Stripe, and Shein are privately held, meaning their shares are only available to select investors.

Key takeaway: Private stock offers early investment opportunities in high-growth companies, but they come with higher risks and lower liquidity.

Benefits & Risks of Buying Private Stock

Before investing, it’s important to weigh the potential rewards and challenges of private stock ownership.

Benefits of Buying Private Stock
Early Investment in High-Growth Companies – Get in before an IPO, often at a lower valuation.
Exclusive Ownership & Influence – Private investors may have greater access to company leadership and strategic input.
Higher Return Potential – If the company grows, private stock can generate massive returns.
Diversification – Private equity investments add diversity beyond public markets.

Example: Early investors in Facebook (pre-IPO) saw their private stock value skyrocket after the company went public.

Risks of Buying Private Stock

Illiquidity – Private stock can’t be easily sold like public stocks.
Higher Risk of Business Failure – Many private companies never reach an IPO or fail altogether.
Regulatory & Accreditation Requirements – Some private stock deals require investors to be accredited (having a net worth of $1M+ or annual income of $200K+).
Long-Term Investment – Private stocks often require years of waiting before seeing a return.

Key takeaway: While private stocks offer high-growth opportunities, they require long-term commitment, careful due diligence, and risk tolerance.

How to Find Private Stock Investment Opportunities

Since private stocks aren’t available on stock exchanges, investors need to actively seek opportunities through:

Venture Capital & Private Equity Firms

Many private investments happen through venture capital (VC) and private equity (PE) funds.
Firms like Sequoia Capital, Andreessen Horowitz, and Blackstone invest in high-growth private companies.

Tip: Accredited investors can join a VC fund to access private stock opportunities.

Private Stock Marketplaces

Online platforms facilitate private stock buying & selling.
Examples:
EquityZen – Allows investors to buy shares of pre-IPO companies.
Forge Global – Connects buyers and sellers of private company stock.
SharesPost – Specializes in private equity investments.

Why it matters: These platforms help individual investors access private shares that were once exclusive to VCs.

Direct Investments & Angel Investing

Some startups allow direct investments through private fundraising rounds.
Investors can participate via:
Angel investment networks (AngelList, SeedInvest)
Crowdfunding platforms (StartEngine, Wefunder)
Company-led fundraising (Regulation D & Regulation A+ offerings)

Example: Angel investors who funded Uber in its early days earned huge returns after the IPO.

Key takeaway: Private stock investing requires active research, networking, and access to private investment platforms.

Step-by-Step Guide to Buying Private Stock

Step 1: Determine Your Eligibility

Some private stocks require investors to be accredited (net worth of $1M+ or high annual income).
Non-accredited investors can invest in equity crowdfunding platforms.

Research Private Companies

Evaluate company financials, growth projections, and competitive landscape.
Review pitch decks, SEC filings (if available), and investor reports.

Tip: Use sites like Crunchbase, CB Insights, and PitchBook to research private companies.

Find a Private Stock Seller or Investment Platform

Buy through venture capital, private equity, or secondary markets (EquityZen, Forge Global).
Network with company insiders (employees, early investors) who may want to sell shares.

Example: Employees of Airbnb were able to sell private shares before the IPO through secondary markets.

Perform Due Diligence & Valuation

Understand the company’s valuation and revenue potential.
Review the terms of investment (preferred stock vs. common stock).

Why it matters: Investing in private stock without proper valuation research can lead to financial losses.

Step 5: Finalize the Transaction & Sign Legal Agreements

Complete legal paperwork, including share purchase agreements.
Ensure compliance with SEC regulations (Regulation D, 506(b), or 506(c)).
Arrange payment through escrow or investment platform transactions.

Tip: Work with a financial advisor or attorney to review legal terms before investing.

Step 6: Hold & Monitor Your Investment

Private stock investments are long-term—expect a holding period of 5-10 years.
Stay updated on company growth, potential IPO announcements, or buyout opportunities.

Key takeaway: Private stock requires patience, but successful investments can yield significant profits when the company exits.

Legal & Financial Considerations Before Buying Private Stock

Verify company legitimacy – Ensure the business is properly registered and complies with SEC regulations.
Understand stock type – Private stocks may come as preferred shares, common shares, or convertible notes.
Plan for taxes – Private stock sales may be subject to capital gains tax upon sale.
Have an exit strategy – Private stocks are illiquid, so plan how you’ll sell shares in the future (IPO, acquisition, secondary market, etc.).

Conclusion

Buying private stock can be a highly profitable but complex investment. If done correctly, it allows investors to:

Own shares in high-growth companies before they go public.
Diversify portfolios with private equity investments.
Earn high returns upon IPO or company acquisition.

However, illiquidity, risk, and regulatory challenges make private stock a long-term investment suited for experienced or accredited investors.

Thinking of buying private stock? Start researching high-potential private companies today!