The most exciting investment opportunities often seem out of reach for everyday investors, especially when it comes to pre-IPO (initial public offering) companies like Stripe, SpaceX, and OpenAI. Although the JOBS Act in 2017 changed startup investing forever, which you can see through startup investing magnate Matt Milner's Crowdability right here, most of the market - especially for the bigger names - are strictly off limits.
Traditionally, gaining access to these private companies before they go public has been reserved for venture capitalists and institutional investors.
However, there’s a practical and indirect way to benefit from these high-profile companies without having direct access to their private rounds of funding: by investing in publicly traded companies that already hold a stake in them.
That said, this report will walk you through the strategy of investing in public companies that own a piece of these pre-IPO giants.
The potential upside is significant—when these companies eventually go public, early investors are often rewarded handsomely.
As a shareholder in the companies that invested early, you stand to benefit as well. Here’s a deep dive into how you can indirectly invest in Stripe, SpaceX, and OpenAI before their anticipated IPOs...
Pre-IPO companies are often considered high-reward investments because they are at the forefront of innovation and disruption within their industries.
Companies like Stripe are revolutionizing financial services, SpaceX is paving the way for commercial space travel, and OpenAI is pushing the boundaries of artificial intelligence.
The anticipation of these companies going public is generating buzz because of their rapid growth, groundbreaking technology, and the significant returns expected for their early investors.
However, access to these companies is limited.
Most pre-IPO investments happen behind closed doors, in private rounds led by venture capital firms or institutional investors. This is where the concept of "backdoor" investing comes into play.
By investing in publicly traded companies that have stakes in these pre-IPO businesses, you can gain exposure to their growth without needing direct access to their funding rounds.
This approach is both accessible and straightforward—any investor with a brokerage account can do it.
"Backdoor" investing involves buying shares of publicly traded companies that have already invested in pre-IPO startups.
These public companies may have participated in early funding rounds or hold a strategic stake in the private companies.
As these pre-IPO companies grow and eventually go public, the value of their stake in the companies increases, potentially driving up the stock price of the publicly traded investor.
For example, if Alphabet, Google’s parent company, holds a significant stake in SpaceX, an eventual IPO of SpaceX could lead to a sharp rise in Alphabet’s stock price, as the value of its stake increases.
As a shareholder in Alphabet, you would indirectly benefit from SpaceX’s success.
Now, let’s take a closer look at three of the most exciting pre-IPO companies—Stripe, SpaceX, and OpenAI—and how you can invest in them indirectly.
Stripe is a leader in the fintech world, offering businesses of all sizes a comprehensive platform to process payments, manage online operations, and optimize subscription services. With a strong focus on simplicity and developer-friendly tools, Stripe powers thousands of businesses around the globe, from small startups to large corporations like Amazon and Shopify. As e-commerce has exploded over the past decade, Stripe has positioned itself as a key player in the infrastructure that powers online transactions.
Stripe’s growth has been driven by its ability to make payment processing seamless and scalable for businesses across various industries. Its products include not just payment processing but also billing, invoicing, and financial management tools, making it an all-in-one solution for online businesses. The company’s technology also emphasizes security, fraud prevention, and compliance, ensuring that businesses can operate safely and efficiently.
As of early 2024, Stripe’s estimated valuation stands at $50 billion. This comes after a series of successful funding rounds and the growing demand for online payment solutions, driven in part by the shift toward e-commerce and digital-first businesses. Stripe has established itself as one of the most valuable private companies globally, and its valuation is expected to rise further as it moves closer to an IPO.
One of the best ways to gain exposure to Stripe’s future growth is through Visa (V), which made a strategic investment in the company. In 2015, Visa invested $900 million in Stripe as part of a partnership to innovate digital payment solutions. Visa’s investment is part of a broader initiative to expand its presence in the fintech space, particularly in areas like mobile payments and e-commerce. While the exact size of Visa’s current stake hasn’t been disclosed, Visa’s partnership with Stripe allows it to leverage the startup’s technology to enhance its own payment services.
By investing in Visa, you can indirectly benefit from Stripe’s eventual IPO. When Stripe goes public, Visa’s stake in the company could provide a significant boost to its stock, as early investors often see strong returns when their portfolio companies hit the public markets.
While Stripe has not confirmed an official IPO date, industry insiders expect the company to go public in late 2024 or early 2025. This timeline gives Visa’s stockholders a potential opportunity to see their investments benefit from Stripe’s public debut, making Visa a key player in this indirect investment strategy.
SpaceX, founded by Elon Musk in 2002, is pioneering a new era of commercial space exploration. Its innovations include reusable rockets, which have dramatically reduced the cost of space travel, and missions that range from deploying satellites to transporting astronauts to the International Space Station. With its eyes set on Mars, SpaceX is pushing the boundaries of what’s possible in space travel.
One of SpaceX’s most ambitious projects is Starlink, a satellite internet service designed to provide high-speed internet access to underserved and remote areas globally. Starlink has already launched thousands of satellites and is expected to play a major role in the company’s future revenue growth.
SpaceX’s estimated valuation currently sits between $127 billion and $150 billion, driven by its government contracts, commercial satellite launches, and the potential revenue from Starlink. The company’s valuation has continued to rise as it takes on more ambitious projects, solidifying its position as a leader in both space exploration and satellite communications.
A key way to invest in SpaceX indirectly is through Alphabet (GOOGL), the parent company of Google, which invested in SpaceX during multiple funding rounds. Alphabet now owns approximately 7.5% of SpaceX, making it one of the largest external investors. Alphabet’s investment in SpaceX is part of its broader strategy to diversify into future technologies, including space and AI.
Investing in Alphabet gives you indirect exposure to SpaceX’s growth. When SpaceX eventually goes public or if Starlink is spun off into a separate public company, Alphabet’s stock could see a significant boost as a result of its early stake in SpaceX.
While there’s no official timeline for SpaceX’s IPO, industry experts believe that Starlink could go public as early as 2025, potentially delivering a windfall to Alphabet’s shareholders. SpaceX’s own IPO is expected further down the line, but Starlink’s spinoff alone could generate substantial returns for investors.
OpenAI is a leading artificial intelligence research lab and technology developer. Known for its flagship product ChatGPT, OpenAI’s mission is to ensure that AI benefits all of humanity by developing safe and useful artificial general intelligence (AGI). OpenAI’s technology has been adopted by businesses across industries, from healthcare to finance, for a wide range of applications like natural language processing, data analysis, and automation.
As the demand for AI solutions continues to grow, OpenAI is positioned as a key player in the AI revolution, with significant potential for future growth. Its AI models, such as GPT-4, have set new standards for what’s possible in language processing, and the company’s ongoing research promises to push the boundaries even further.
As of early 2024, OpenAI is valued at approximately $157 billion, making it one of the most valuable private companies in the world. This valuation has been driven by the success of ChatGPT and other AI products, as well as the growing interest in AI technologies across all sectors of the economy.
The best way to gain indirect exposure to OpenAI is through Microsoft (MSFT), which has invested heavily in the company. Microsoft’s investment totals approximately $13.75 billion, making it OpenAI’s largest backer. In addition to its financial stake, Microsoft has integrated OpenAI’s technology into its own products, such as Azure cloud services and Microsoft 365 applications.
Owning Microsoft stock gives you a clear path to benefiting from OpenAI’s growth. As OpenAI continues to expand and move toward an eventual IPO, Microsoft’s stock could rise significantly due to its early and substantial investment.
OpenAI’s IPO is anticipated between 2025 and 2026, and when it happens, Microsoft is well-positioned to see a major financial upside. As OpenAI grows and potentially goes public, Microsoft’s shareholders stand to gain from its long-term involvement in the AI giant.
