You always hear the news of massive IPOs. Remember when Alibaba went public in 2014, raising a whopping $25 billion? Or what about in 2010, when General Motors raised $20.1 billion?

 

Indeed, when a big name hits the market, it’s big news (as it should be).

 

Yet it’s not those buying on the day of the IPO that typically enjoy the best investment gains. It’s those that invested during the seed, early, and growth stages. Think angel investors, venture capitalists, family offices, sovereign wealth funds, corporations, and others.

 

In an effort to bring more attention to the opportunities of pre-IPO investments, we’ve decided to highlight the most successful pre-IPO companies of all time. Our list covers those mostly pre-IPO companies that have never gone public or were acquired by a public company (as well as one special example of a pre-IPO investment). In all cases, these businesses have earned their investors seriously good returns.

 

All investors, even casual ones, should pay attention to these stories. Finding a similar pre-IPO company today could build wealth like no other investment. And that’s why everyone should consider pre-IPO firms as an .

 

Here, we’ll review the 10 most successful pre-IPO companies of all time. For each, we’ll offer a unique angle as to why it was such a successful pre-IPO company.

1. Most Valuable Pre-IPO Startup:

ByteDance, the parent company of the popular app TikTok and Douyin (the Chinese version), has reached a staggering valuation of somewhere between $105 and $140 billion, according to a Bloomberg report. The Beijing-based company, which also owns Toutiao, a content platform, is estimated to have generated more than $25 billion in ad revenue in 2020. That’s up from $7.2 billion in 2018.

 

So, what’s made ByteDance so successful? Many experts argue it’s the digital giant’s recommendation algorithm. It’s so good at predicting what videos and content you’d like to see that users spend more time on the app. As an article in the Harvard Business School Digital Initiative notes, the recommendation algorithm is the “secret sauce behind the world’s most valuable private startup.”

 

ByteDance has already received $7.4 billion in private investment and debt financing from names like Sequoia Capital China, Goldman Sachs, and Tiger Global Management. There are early talks going on for an IPO in Hong Kong, but we’ll see if that happens in 2021 or beyond.

 

2. Most Successful Pre-IPO Company That Went Public: Apple

This tech giant needs no introduction. Currently valued at $2.03 trillion, a simple $100 investment in Apple at the time of its IPO in 1980 would have been worth near $68,000 by the end of 2019. That’s incredible.

 

But if you go back earlier, you’ll see that the returns for Apple’s pre-IPO investors were even better. Mike Marrkula, the first angel investor in Apple, invested $250,000 into Apple in 1977 in exchange for 30% of the company. $170,000 was a loan and the remaining $80,000 was for equity. When Apple went public in December 1980, Marrkula’s $250,000 investment had turned into $203 million.

 

While getting more than on an Apple investment today is unlikely, the point is this: Apple was once a pre-IPO company. There are others like them today that could deliver savvy early investors similar returns.

 

3. Largest Private Company by Revenue: Vitol Group

For some, this name may not be that familiar, as Vitol Group is known for its secrecy and employees own a large portion of the company. Founded in 1966, Vitol Group is an energy and commodity trading company headquartered in the Netherlands. They also have a head office in Switzerland and operations spanning from Houston to London to Singapore.

 

Vitol Group makes our list of the most successful pre-IPO companies because of its eye-popping revenue. In 2018, for instance, the company generated $231 billion in revenue. For that year, its revenue was more than $50 billion more than the second-highest privately-held company, Trafigura, another commodity trader.

 

While it’s hard for casual investors to invest in Vitol Group, know that Vitol-backed companies have gone public in recent years. For example, Viva Energy went public in Australia in 2018, raising nearly $2 billion and delivering a big payday for Vitol (who acquired Viva in 2014).

 

4. Most Profitable VC Pre-IPO Investment: WhatsApp

WhatsApp has taken over messaging with its mobile-first design, ease of use and simplicity, robust group chat features, and contacts discovery. For many of the app’s 2 billion users, WhatsApp has replaced SMS. It’s also helped that WhatsApp entered the scene in 2009, making it the first mobile messaging app.

 

 

 

Facebook’s acquisition of WhatsApp was a deal unlike any other.

 

Now, it’s not that WhatsApp has a market cap that’s comparable to others on this list. It’s that the messaging app made its early investors a ton of money.

 

Sequoia Capital invested a total of $60 million in WhatsApp across Series A and Series B funding rounds. When Facebook acquired WhatsApp for $22 billion in 2014, the value of Sequoia’s investment reached $3 billion. They turned $60 million into $3 billion!

To this day, Facebook’s purchase of WhatsApp represents the largest acquisition of a VC-backed company ever.

 

5. Most Successful Emerging Market Pre-IPO Company: One97 Communications (Paytm)

With a valuation of more than $16 billion as of June 2020, One97 Communications, creators of the mobile wallet Paytm and e-commerce platform Paytm Mall, is now India’s most valuable startup.

 

Founded in 2010 in Noida, a region by New Delhi, One97 Communications has capitalized on digitization in India. Paytm Wallet, for example, is accepted by Uber and Indian Railways. The group has also made a splash in the promising gaming sector with Gamepind, a mobile gaming platform.

 

To date, Paytm has raised $4.4 billion from investors that include Berkshire Hathaway, SoftBank, and Alibaba. Considering the current valuation of $16 billion, growing use of digital payments, the popularity of gaming, and Paytm Mall’s ever-growing revenue, One97 should continue its stellar growth. And those investors should reap solid rewards in the future.

 

6. Most Successful Pre-IPO Company from Latin America: Nubank

Headquartered in São Paulo, Nubank opened its doors in 2014 and has become one of the most innovative fintech firms in the world. The company’s products include an international credit card, personal loans, and digital bank accounts.

 

As a payments processor, the company is cashing in on Brazil’s growing middle class and increasing digitization. In 2019, the company expanded to Mexico and will look to do more business throughout Latin America in the near future.

 

With a current valuation of $10 billion, Nubank is Latin America’s biggest pre-IPO startup. The company has raised a total of $1.4 billion from investors like Tencent and Goldman Sachs. As Nubank expands into other markets, its user base, funding, and valuation should all continue to increase. That’s good news for those who’ve already made the bet on them.

 

7. Most Successful Pre-IPO Company from Africa: Interswitch

Based in Lagos, Nigeria, Interswitch is a payment processing company that’s become one of Africa’s most successful startups ever. In 2019, a $200 million equity investment from Visa gave the firm a $1 billion valuation.

 

Founded in 2002, Interswitch’s success originally came from its ATM card technology and ability to connect different banks in Nigeria. As Africa’s digital payments and commerce ecosystem grows and matures, Interswitch is positioned to do well throughout the continent.

 

Adding to its value, Interswitch owns controlling stakes in numerous other financial firms, including Bankom, Uganda’s only licensed interbank switch. Expect them to raise more money for expansion in the future.

 

8. First Unicorn Ever: U.S. Steel

Let’s take a trip back in time. You can’t make a list of the most successful pre-IPO companies of all time without mentioning the United States Steel Corporation —  the first company in the world to reach a $1 billion valuation.

 

To know how the U.S. Steel Corporation achieved that valuation, we have to go back to 1901, when J.P Morgan financed the merger of numerous steel companies, including Andrew Carnegie’s Carnegie Steel Company. A month later, United States Steel went public and eclipsed a valuation of $1 billion.

 

So, long before we had the tech unicorns, there was an industrial boom and steel was at the center of it.  For anyone interested in pre-IPO investments, read the story of the U.S. Steel Corporation. You’ll find it fascinating.

 

9. Fastest Unicorn Ever: Bird

Bird scooters can reach 19 miles per hour. While that’s fast, but not as fast as Usain Bolt, who has reached 27.8 miles per hour, by the way, one thing Bird did faster than any other pre-IPO company was reach a $1 billion valuation.

 

So, how long did it take Bird to reach a $1 billion-plus valuation? It took well less than a year! The previous record, set by 3D printing company Desktop Metal, was 1.79 years. Now, that’s speeding past the competition.

 

While it remains to be seen if Bird’s success is sustainable, the scooter game has been good to early investors so far. The vehicle sharing platform, which mainly focuses on electric scooters, has received a total of $623 million from VC firms such as Sequoia Capital and Goldcrest Capital.

 

Getting in on the right pre-IPO investments

Now that we’ve covered the most successful pre-IPO companies of all time, you may wish to know more about how to invest in these unicorns. Like real estate funds, pre-IPO investments are good alternative investments that may not be subject to market swings like publicly traded companies. Any investor looking to possibly mitigate risk while having the potential for positive returns is wise to research pre-IPO companies.

 

Now, you may be thinking that you must be an qualified investor to put money into a pre-IPO startup. But that’s no longer true. Thanks to the JOBS Act in 2012, retail investors can invest in startups through crowdfunding rounds. Equity crowdfunding platforms such as AngelList and FundRise have made this as easy as clicking a few buttons.

 

If you don’t have as much time to do all the research yourself, there are even pre-IPO investment funds for passive investors. These funds connect retail investors with investment opportunities in startups.

 

For example, at HUDSONPOINT Capital, our strategic partnerships oversee a pre-IPO investment fund that leverages our vast network of early investors and startup employees. This enables us to provide insider shares to qualified retail clients. Our investments have included shares in successful startups like Airbnb, Lyft, Palanti, Impossible Foods and SpaceX.

 

Want to learn more about investing in pre-IPO startups? Please schedule a call to learn more about the pre-IPO shares we have available right now.

 

Please note that any investment involves risk including loss of principal. Some risks of investing directly or indirectly in real estate include declining real estate values, changing economic conditions and increasing interest rates. Private Shares are for qualified investors and involve a high degree of risk

There is a risk in buying pre–IPO shares is that the company may never IPO. In those cases, since the shares never trade on the open market, they are highly illiquid and it becomes more difficult (although not impossible) to sell them for a profit.

This is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation of any products or services. Opinions are subject to change with market conditions. The views and strategies may not be suitable for all investors and are not intended to be relied on for legal or tax advice.

Securities offered through National Securities Corporation Member FINRA/SIPC