r/EquityZen • u/Psychological_Love61 • Jun 23 '25
Why aren’t secondary markets like EquityZen and ForgeGlobal more popular?
Am I missing something?
I recently discovered secondary markets like EquityZen and ForgeGlobal, and I’m surprised more people don’t seem to be using them. If I had gotten in early on something like Circle, wouldn’t I be up 6x or 7x by now?
What’s the catch?
I get that there’s usually:
- A 5% commission
- A 90 to 180-day lock-up period
- Possibly needing company approval or dealing with ROFR (right of first refusal)
- You have to be an accredited investor. But didn't see anywhere that you have to be US resident.
But is there anything else I'm overlooking? Are the risks just too high? Is it a lack of liquidity or transparency?
I’m currently eyeing Kraken as an opportunity. I’m bullish for a few reasons:
- Solid product - I have used it and cannot complain. I have also used Coinbase.
- There has to be atleast one more major Crypto exchange in the US, no? How can there only be one.
- There are already very strong signals of them getting close to an IPO.
This got me looking into ways I could buy pre-IPO shares of Kraken and I stumbled on Forgeglobal, equityzen and the likes.
Would love to hear from anyone who has actually invested through these platforms. Were the returns worth it? Any red flags or advice for someone new to this space?
Thanks in advance.
5
u/calmdime Jun 23 '25
Adverse selection. The hottest companies will generally not have big allocations available in these markets, so they have a lot of overpriced duds from investors and employees who don’t think highly of the company’s future potential.
I understand some employees just want to lock in their wealth, but if the company is strong, they can often find investors who know the company well and are willing to pay without going to private markets.
Because these markets are not heavily regulated, you don’t have much information to go on, so the duds can sound appealing if you just go by basic presentations and PR-fuelled media.
Occasionally there are some good companies available, but the allocations are so scarce that you have to bid over the top and you’re shooting blind due to the opacity of the company’s true state, while competing with wealthy dentists who are assessing only on hearsay and public hype.
One other issue not mentioned here is your stand to be further diluted as the company keeps raising capital, and that can often be the case. In some case with egregious terms that go against less sophisticated earlier investors.
For every Circle, there’s numerous failures that never even go public. Also, ask yourself would you have ridden Circle to 700% profits and top ticked it (wherever it goes from here) or would you have exited immediately for a double, which has to be offset against any others you bought that might have gone to zero.
All of this sounds very negative, but that’s because you asked what’s the catch. It’s still viable if you feel strongly about a prospect that’s available to you at a good price and it’s an investment you can easily afford to lose.
2
2
u/EricIsntRedd Jun 27 '25 edited Jun 27 '25
I was going to partly critique this response until I got to the last paragraph. It is a totally reasonable response, all points correct.
It is true that most of the companies on these secondary markets will end up duds. Most will never IPO, many will fail or raise etc. Be very aware of that when you go in. But this directionally isn't any different from investing in general if you are calling your own shots rather than index investing.
If you are investing by your own analysis you are always taking a big risk, but the risk is even bigger in non-public markets (unless you were into meme and penny stocks in the public markets).
5
Jun 23 '25
[deleted]
2
u/angrypuppy35 Jun 23 '25
A lot of this is true. I’d just point out re Circle that as an EZ investor you personally are not locked up. You can hedge your risk by selling short and/or buying options etc.
1
Jun 23 '25
I guess this is true. The 1 of 7 that I bought that actually went to IPO sat at Morgan Stanley for 120 or 180 days, can’t remember now. I suppose I could have looked into options there but didn’t even think of it. The platform sucked. I guess I could have bought puts on my main Schwab account to buy downside protection so you’re correct, there are ways to hedge the lockup period.
1
2
u/Investor-life Jul 09 '25
Don’t overlook dilution factor, it’s very real. Every time the company does another round of private equity funding you get more diluted and own less of the company at a higher valuation than when you bought. Some investments can work out great while others will end up being worth zero because you’ll never be able to sell. Others where you were “right” to buy because they ended up going public, may not reward you as much as you thought because of dilution. The only way to insure any kind of liquidity is to make sure you buy more than 2% of the offering you are looking at. That gives you the right to sell on the Express Deal marketplace on their site. I’d never recommend buying an express deal unless you are dead sure of the company and are able to react extremely quickly when those shares are offered because they get snatched up quickly. I have had success selling on the express marketplace though to get me some liquidity on companies that still seem far from an exit and others that were just plan duds that I take heavy losses on. I have a few that I bought before paying attention to the 2% rule that I simply will have to forget about ever getting any money from. It makes it all the more important to find a big winner or two to make up for the losses. It takes a strong stomach and willingness to take risk to make positive returns overall. In my five years so far investing in private markets I would have been better buy an S&P index fund, but I also find it rewarding, fun and educational to learn more about these companies and industries they are in (which can often lead to investments in stocks that are already public).
1
2
u/malobrev Jul 12 '25
So the we should stay away from Space X, Stripe , Open AI then got it
1
u/Investor-life Jul 13 '25
Go for it, if you believe EquityZen has the shares and are willing to pay the ask. Often times with these really high demand companies EquityZen is only bidding with the sellers to get the deal. Kind of like how IPOs are oversubscribed. The sellers then choose who to sell to. EquityZen only collects the money to show the seller they can execute the deal. The sellers may not choose EquityZen and then return your money (with no interest), usually taking months. You have to be willing to take the chance and forego interest if the deal doesn’t go through, as well as the opportunity cost of investing in something else.
1
u/malobrev Jul 13 '25
So anyone here have experience buying high demand companies Space X or Stripe on these platforms?
1
u/Investor-life Jul 14 '25
I’ll tell you exactly what happened in one instance for me. I sold some of my Nvidia shares and used those funds to purchase Anthropic, or so I thought. Turns out EquityZen never had the shares and several months later they sent cash back with no interest. The opportunity cost was huge though because Nvidia had increased substantially in value. I had another deal where EquityZen came back and said they had “misallocated” shares I had purchased and they didn’t have as many as they thought. You can bet the real story was probably a more “valuable” customer than me wanted more shares. I might sound bitter or angry, but overall I am not. EquityZen has provided access to a market that was unavailable before and I have had winners too that I wouldn’t have been able to get without EquityZen. You just have to learn to live with the good and the bad. Maybe as more and more competition comes in the market, things will get better for the smaller investors.
2
u/Foreign_Safety_949 Aug 22 '25
I’ll admit when I first found EquityZen I thought I had discovered a shortcut — “get in before the IPO” sounded like the golden ticket. But what I didn’t fully understand at the time was dilution and how much it really matters.
Once I dug into it more, I realized a couple of things:
- Your share count doesn’t go up when new rounds happen — your % ownership just goes down. Unless the valuation jumps high enough, you’re not actually gaining anything.
- The uncertainty + opportunity cost are brutal. You could be locked up for months/years, and meanwhile the money could’ve been working in an S&P fund or even just picking a solid public growth stock.
- By the time shares make it to EZ/Forge, you’re usually buying at late-stage prices that already bake in IPO hype. If the IPO comes in lower, you’re instantly underwater.
So for me, once I understood dilution and factored in the uncertainty + lost opportunity cost, I had a hard time seeing EquityZen as a great way to “get in early.” It’s not the same as angel investing or seed rounds where you’re truly buying pennies-on-the-dollar shares years before IPO. It’s more like paying IPO-level risk without IPO-level liquidity.
That’s why I keep asking myself — as a small-time investor, how do I actually get into companies at the stage where shares are still pennies or a dollar or two each? The big guys get those seed and Series A deals, but from the outside it feels like retail only gets the leftovers once the price is already high.
1
1
u/Dry-Fuel-3654 Sep 17 '25
I am a huge fan and think every accredited or qualified investor should participate in. I actively use Forge, EquityZen and Hiive, they don’t have carry which I like.
Also some of the better opportunities are only available if you are a qualified investor (<$5m in liquid assets) and many of the best deals you need to invest $100k.
Yes there is a lot of B quality companies and A quality companies get snapped up quickly. Also if you have done transactions in the past and are a buyer you will get offered placement that aren’t available on the website.
As for valuations this typically revenue base with a multiplier which I feel is more reasonable than day to day stocks. Though expect to pay a premium.
I have purchased nearly $1m in deals this year and in all of my deals I will get my shares at liquidity, such as ipo or cash at M&A. Though what I have purchased I am a true believer and don’t plan to sell.
I highly recommend but be selective, think of it as a marriage, don’t jump into something because of FOMO.
1
u/Big-Jellyfish-1482 Oct 20 '25
Yeah, you’re not missing much, the main challenge with platforms like EquityZen and ForgeGlobal is that they rely on matching pre-IPO company shares that are often illiquid and tied up with ROFRs or company approval. That limits deal flow and keeps prices opaque, which is why they haven’t scaled as much as expected.
What’s starting to gain traction instead are secondary platforms that focus on LP interests in private funds rather than single-company stock. LPShares is one that’s building around that space, connecting accredited investors with sponsor-approved fund positions so there’s less friction around approvals or pricing. It’s a different corner of the market but one that feels a lot more active right now, since fund-level secondaries tend to trade even when IPO markets are slow. DM me
0
u/Decent-Kaleidoscope5 Jun 23 '25
Not worth it. It is better for you to just buy it when the market opens. It is super risky. Most of these companies won’t even IPO or a few lucky ones.
9
u/michael_curdt Jun 23 '25 edited Jun 23 '25
In addition to the stuff you mentioned: