NEW YORK (TheStreet) -- Ever wish you could get in with the big boys investing in companies before they go public? Consider EquityZen.
EquityZen is an online platform that allows accredited investors to buy shares in companies that are still privately held, CEO Atish Davda, explained Wednesday.
Many companies are staying private for much longer, which means there are employees and early investors looking to unload their holdings, depending on their other needs. Those people come to EquityZen and are ultimately the ones who supply the stock.
Accredited investors, those who bring $20,000 to their account, are generally bound by the same rules that apply to insiders once the companies go public. Usually it's a 180-day lockup period, Davda said. Then the investors are allotted their shares and are free to do as they wish with them, either holding on to them or selling them.
He claims EquityZen only focuses on private companies that already have large institutional investors involved. So it also gives investors a chance to potentially follow alongside private equity firms, such as Andreessen Horowitz, in picking similar investments.
For the time being, EquityZen solely works with tech stocks, he added.
As for risk, Davda says the lack of liquidity makes privately held securities inherently more risky than publicly traded stocks. However, that doesn't mean investors should ignore private companies completely, it just means their allocation should be smaller than their allocation to public equities.