Pre-IPO investing: How to buy shares in private companies before they go public

Pre-IPO investing in Canada: how it works and how to get access

Some of the world's most closely watched companies spend years as private companies before going public. Names like OpenAI, Anthropic, and Stripe have attracted significant attention while staying off public stock exchanges, with ownership limited to founders, employees, venture capital firms, and institutional investors.

Pre-IPO investing means gaining exposure to a private company before it completes an initial public offering. Private Markets at Questrade gives eligible accredited investors in Canada self-directed access to select Pre-IPO investments directly, without an advisor or exclusive network.

You choose specific offerings yourself rather than delegating to a fund manager or private banker. And Private Markets sits inside a familiar investing environment, alongside your public holdings, all accessible through a single login.

Pre-IPO investing involves risk, limited liquidity, and no guarantee a private company will ever go public.

What is Pre-IPO investing?

Pre-IPO investing is a key strategy within the broader Private Markets ecosystem—a category of investments that are not traded on public stock exchanges. While public markets are accessible to anyone with a brokerage account, Private Markets encompass assets like private credit, venture capital, and pre-IPO equity, which are typically accessed through specialized structures.

Pre-IPO investing means investing in a private company before its shares begin trading on a public stock exchange.

Private companies don't have shares available through a standard brokerage account. Ownership interests change hands through private transactions or investment vehicles built for qualified investors, and in most cases, you're not buying the company's shares directly.

A company may pursue an IPO, stay private, or be acquired, and the risks differ meaningfully from traditional stocks, mutual funds, or ETFs. How to invest in Pre-IPO companies depends on the structures involved and who is eligible.

What is a Pre-IPO company?

A Pre-IPO company is a private business that has not yet completed an initial public offering. Its shares are not publicly traded.

Pre-IPO companies vary significantly in size and maturity, from established businesses with substantial revenue to earlier-stage companies focused on product development. Ownership is typically split among founders, employees, venture capital and private equity investors, and institutional backers. The path from private to public can take several years, depending on market conditions, business performance, and shareholder objectives.

How Pre-IPO investing works

1. Confirm eligibility. Access requires meeting accredited investor requirements under Canadian securities regulations.

2. Capital is committed through a structure. Investors buy units in a feeder fund that holds interests in the private company through an SPV. This is not a standard stock purchase. There is no exchange involved.

3. The investment stays private. There is no public market to buy or sell units. Capital stays committed until a liquidity event occurs.

4. A liquidity event may occur. Potential outcomes include an IPO, acquisition, or merger. If the company goes public, a post-IPO lockup period (typically 90 to 180 days) applies before shares convert and transfer into investor accounts. If it never goes public, the investment stays private indefinitely.

What you're actually buying when you buy Pre-IPO shares

Through Private Markets at Questrade, you're not buying shares of the private company directly. Exposure comes through a Canadian feeder fund structure that invests into US-based special purpose vehicles (SPVs), which are legal entities created to pool investor capital and hold interests in the private company. Each unit you purchase corresponds to one private share of the underlying company, held within that structure.

This matters because the structure shapes everything that follows: liquidity, fees, how returns are distributed, tax implications, and what happens when the company eventually goes public. Units in the investment vehicle do not carry voting rights in the underlying company.

How a typical structure works

• Investor buys units in a Canadian feeder fund or limited partnership

• The fund allocates capital into a U.S. SPV or similar structure

• The SPV holds exposure to the private company

• Economic outcomes flow back through the structure to the investor, depending on terms

The exact structure, rights, and exposure vary across offerings. Offering documents provide the details on how each transaction is implemented.

Who can invest in Pre-IPO opportunities in Canada?

Pre-IPO opportunities at Questrade are restricted to Canadian accredited investors outside of Quebec (Quebec coming soon) who are not U.S. Persons (e.g., U.S. citizens or U.S. tax residents). These requirements exist because Private Markets investments involve heightened risk, limited liquidity, reduced transparency, valuation uncertainty, and the potential for loss of capital.

Under National Instrument 45-106, an individual qualifies as an accredited investor by meeting either of the following:

• Financial assets (such as cash and investments), net of related liabilities, exceeding $1,000,000 alone or with a spouse

• Net income before taxes exceeding $200,000 (or $300,000 combined with a spouse) in each of the two most recent calendar years, with a reasonable expectation of the same this year

Pre-IPO investments are available through non-registered individual accounts (Cash or Margin) only. Joint, corporate, trust, registered, and managed Questwealth accounts are not eligible. 

Investments are priced and settled in USD. You can invest using CAD or USD — if your account holds CAD, Questrade converts it to USD after your order is allocated. Your combined USD buying power must be sufficient to cover the investment amount plus the transaction fee. The minimum investment starts at $5,000 USD per order.

Verification requires submitting proof of income or net assets through Private Markets at Questrade, or you may auto-qualify based on existing net assets held at Questrade. Verification can take up to 5 business days and is valid for 12 months, with annual renewal required.

Meeting the eligibility threshold doesn't mean Pre-IPO investing is the right fit. Your overall risk profile encompassing liquidity needs, time horizon, and comfort with private market structures all matter before committing.

How to buy Pre-IPO shares in Canada

1. Browse available Private Markets offerings. Navigate to Private Markets at Questrade to explore available Pre-IPO opportunities. Availability changes, and access is not guaranteed.

2. Review offering details. Each offering includes the investment structure, fees (a one-time transaction fee at purchase and a one-time distribution fee at exit), lockup provisions, minimum investment amounts, and risk disclosures. Pre-IPO offerings are capped in size. Eligible investors may not receive their full requested allocation due to demand and platform rules.

3. Purchase units. A Pre-IPO stock purchase works differently from buying on an exchange. Investors buy units in the offering, not publicly listed shares. Units are not marginable. Units are limited and allocated on a first-come, first-served basis by time of order submission. You can cancel your order at any time before the offering closes.

4. Hold through the private period. There is no market to sell before a liquidity event. Capital stays committed for an extended period.

5. Understand what happens after an IPO. Following an IPO, a lockup period (typically 90 to 180 days) applies before shares convert and transfer into investor accounts. The exact process depends on the offering.

For the full step-by-step walkthrough, including order statuses, cancellation rules, and troubleshooting, see How to invest in a Pre-IPO opportunity.

What are the risks of Pre-IPO investing?

Pre-IPO investing carries risks that don't apply to publicly traded securities. They're worth understanding before committing capital.

Liquidity risk. There's no public exchange for Pre-IPO units. If you need to exit before a liquidity event, you generally can't.

Valuation risk. Private company valuations come from funding rounds or internal assessments, not continuous market pricing. They can shift significantly between reporting periods.

IPO uncertainty. A company may stay private, be acquired, or cancel its IPO entirely. There's no guarantee or timeline.

Company-specific risk. Pre-IPO investments concentrate in a single company. Performance, management decisions, and competitive position all drive the outcome.

Limited information. Private companies face fewer disclosure requirements than public ones, with less financial reporting and less visibility into operations than you'd get from a public filing.

Concentration risk. Holding a small number of private companies means company-specific events carry more weight in your overall exposure.

Post-IPO price risk. Even after a successful IPO, share prices fluctuate. Lockup expiration introduces additional supply to the market, which can affect pricing.

The bottom line: Only commit capital you are entirely prepared to lose.

What happens after the company goes public?

If a company completes an IPO, pre-IPO units may convert into publicly traded shares. But a public listing does not mean immediate liquidity for existing shareholders.

Lockup periods

A lockup period restricts certain shareholders from selling shares immediately following an IPO, typically lasting 90 to 180 days. These restrictions generally apply to founders, executives, employees, and early investors. The purpose is to support an orderly transition into public market trading.

How conversion works

Depending on the structure of the offering, investors may initially hold units or another form of private security rather than directly holding publicly traded shares. If the offering terms allow conversion, public shares may be transferred after the applicable lockup period.

Distributions may be public shares, cash, or a combination, depending on the terms of the specific offering.

If the company is acquired

If the company is acquired instead of going public, investors receive their proportional share of the acquisition proceeds. Depending on the terms, this may be distributed as cash, public shares (if the acquirer is publicly traded), or a combination.

If the company never goes public

An IPO is one possible outcome, not a guarantee. A company may remain private for an extended period, delay listing plans, or pursue alternative paths such as an acquisition. If the company never goes public, the investment stays in the fund indefinitely. There is no guaranteed timeline, and capital may remain locked up for years.

For full details on fees, tax considerations, NAV updates, and distribution mechanics, see What is Pre-IPO investing?

Pre-IPO investing vs. Private Credit

Pre-IPO investing and Private Credit both sit within Private Markets but work differently. Pre-IPO investing offers exposure to private company growth, with returns tied to a potential liquidity event. Private Credit focuses on lending, with the goal of achieving positive returns through interest income and principal repayment on a steadier, more predictable cash flow profile. Investors building a Private Markets allocation may find both categories complement each other within a broader portfolio.

For a comparison of Pre-IPO investing, IPO allocations, and post-IPO trading, see IPO vs Pre-IPO: key differences for investors.

Common terms

Pre-IPO stocks. Ownership interests in companies that have not yet completed an initial public offering.

Secondary market. A marketplace where existing shareholders buy and sell shares of privately held companies. Unlike public stock exchanges, secondary transactions are often subject to company approval, transfer restrictions, and limited pricing transparency.

Special purpose vehicle (SPV). A legal entity created to pool investor capital and hold interests in a specific private company on behalf of its investors.

Feeder fund. A Canadian limited partnership or fund structure that collects capital from investors and allocates it into an SPV or similar vehicle for exposure to private company equity.

Lockup period. A restriction that limits the ability of certain shareholders to sell or transfer shares for a period following a public listing, typically 90 to 180 days.

Liquidity event. A transaction that creates an opportunity for shareholders to convert their holdings into cash or publicly traded securities. Examples include an IPO, acquisition, or merger.

Accredited investor. An investor who meets specific financial criteria under Canadian securities regulations (National Instrument 45-106), qualifying them to participate in certain private market offerings.

Partial fill. When an investor receives fewer shares or units than requested due to strong demand or limited availability.

Browse available Pre-IPO offerings on Questrade. Don't have an account yet? Open an account to start investing.