Pre-IPO stocks are shares that a private company sells to investors before the company goes public (before its IPO). Most companies who sell pre-IPO stock use a process called pre-IPO placement.

Pre-IPO placements allow a company to raise funds before it goes public. The company can sell large blocks of shares at a fixed price and raise a predictable amount of money.

Pre-IPO investing is not easy and has a high entry barrier. A vast majority of pre-IPO shares – which are usually offered in large blocks – are purchased by deep-pocketed institutional investors. Individual investors can participate, but there are significant restrictions in most cases.

Many countries require individuals to meet specific criteria before being allowed to purchase pre-IPO shares. In the US, SEC rules restrict many private offerings to “accredited investors,” who must have significant income and net worth and demonstrated experience with investment markets.