The Big Money in Startups Comes From Investing Before the IPO
The hippest investment strategy of the moment is backing tech companies while they’re still private.
In January, WeWork—the real estate rental company that captured Silicon Valley’s attention with its hip, well-appointed co-working spaces—raised $1 billion in what it thought would be its final funding round before going public. Now those ambitions lie in tatters, after the money-burning company was forced to oust its founder and chief executive officer and seek new financing.
That’s a cautionary tale for anyone who’s thinking of putting money into a private company—the IPO may not be the payday investors hope for. But private investing still holds a mystique. As the WeWork drama unfolded in early October, about 50 people gathered one evening in the heart of San Francisco’s financial district to learn how they could get in on backing private startups.