I spend my days studying how wealth grows and how it is lost. In recent years, the strongest growth among many headline companies has occurred before they reach public markets. That is the core idea I want to share. Private equity has captured more of a company’s value creation during its private years, and many investors only see what remains when the IPO happens. I will explain why this shift matters, what the potential risks look like, and how to think about access and suitability.
“Every 100,000 invested in SpaceX prior to its IPO, on average, it’ll return roughly 18,000,000 when it IPO’s next month.”
That claim gets attention. I raised it to illustrate the scale of growth investors believe is possible in certain private names. The numbers are sweeping, and they come with big assumptions. Still, they point to a real trend: more value is being built in the private phase, while the public phase often captures a later, slower stage of the company’s life.
The Shift: Value Creation Before the Bell
Twenty years ago, fast-growing firms reached public markets earlier. Investors who bought shares soon after the IPO could still capture huge upside. Today, many category leaders stay private much longer. They raise capital in late-stage rounds, grow revenue, expand margins, and scale worldwide before listing. By the time an IPO arrives, a larger share of the growth has already been realized by private holders.
That is why I highlight private equity as a tool. It can let investors participate while growth is compounding inside private markets. But it also introduces new risks. Illiquidity is the most obvious. You might not be able to sell when you want to. There are also questions about how often holdings are valued and how those valuations react when markets wobble. I will get to that.
View this post on Instagram
The SpaceX Example: Big Numbers, Bigger Assumptions
Consider one high-profile case many investors ask me about: SpaceX. The company has raised large sums privately over many years. In my comments, I referenced an estimated total of $11 billion invested in SpaceX stock. If the company is listed at an estimated $2 trillion valuation, the math suggests very large gains to early holders. The shorthand I used is this:
“If SpaceX IPOs at its estimated 2,000,000,000,000, the average return they’ll see is 180x their money.”
Translate that into a simple figure, and you get the headline: $100,000 turning into about $18,000,000. The idea is simple to grasp. The reality is more complex. Not every dollar went in at the same time, at the same price, or with the same rights. Late-stage rounds come with different terms than earlier rounds. Fees and carry can lower net returns for some investors. Taxes also matter. Most importantly, an estimated IPO value is not a guarantee.
Why discuss this example at all? It shows how much of the excitement and most of the financial impact can occur before a stock ever hits a public exchange. Many investors only see the end result on day one of trading and wonder where the growth went. Much of it happened while the company was still private.
Risk: Comparing Private Equity and Public Stocks
I also compared downside outcomes. Over the past twenty years, public stocks have had five negative years. My count for private equity was two. That surprised many people. The reasons are worth spelling out in plain terms.
Public stocks are marked to market every business day. When fear rises, prices can drop fast. Private holdings are valued less often and by appraisal. This can reduce the visible swings. It does not remove real risk. It may smooth it. In normal periods, that feature can look helpful, especially for long-term investors. In stress periods, it can also delay the full mark-down of assets. These are real differences in how risk shows up and when you feel it.
Another key difference is dispersion. Public index funds hold hundreds of names. A private equity fund may hold a few dozen. The winners can have outsize impact. So can the losers. Strong selection and careful sizing matter a lot. The headline that private equity had fewer negative calendar years helps explain the ride. It does not replace due diligence.
Two Reasons I Focus on Private Equity
The case I make rests on two simple points.
- Growth often accrues before a company goes public. That is where large compounding may occur.
- Reported volatility in private equity is often lower than in public markets. The downside can feel less painful during bad years.
Those points do not mean private equity is a fit for everyone. They do not cancel out liquidity risk. They also do not erase manager risk. They explain why more investors, from institutions to qualified individuals, are asking for access to these opportunities.
How Access Works in Practice
Access to private equity comes in many forms. Some investors use diversified private equity funds. Others use late-stage venture funds or specific vehicles that target pre-IPO shares. Some invest through feeder funds that pool capital for a single company or a set of high-profile names. Minimums, fees, lockups, and timing vary by option.
There are trade-offs. A diversified fund can reduce company-specific risk, but it adds a layer of fees and a long commitment period. A single-company vehicle can offer sharper exposure but heightens concentration risk. Secondary markets exist, but liquidity is not assured, and pricing can be wide.
Due diligence should cover the strategy, track record, sourcing edge, alignment of interests, and the manager’s history across good and bad cycles. You should also understand how valuations are set, how often they are updated, and how write-downs are handled.
What the Numbers Do—and Do Not—Say
Let’s revisit those big figures one more time. A projected $2 trillion IPO value and an average 180x return for early SpaceX investors make for striking headlines. They help illustrate why private markets attract attention. But no single outcome should drive a portfolio decision. Forecasts shift. IPO timing moves. Macro conditions matter. A hot listing window can turn cold. A cold window can warm up again. Anyone who claims certainty here is guessing.
I use bold numbers to make a point, not to promise results. The point is this: many groundbreaking companies now do more of their growing while private. If you only invest in public markets, you may miss much of that growth. If you add private equity, you could capture more of it. The price is complexity and illiquidity.
Risk Management: Simple Rules That Help
Private equity should sit inside a broader plan. Think in ranges, not absolutes. For many long-term investors who qualify, a single-digit to low-double-digit percentage allocation can be a starting point for discussion with an advisor. The exact level depends on time horizon, cash flow needs, and risk tolerance.
Do not rely on a single manager or company. Diversify across strategies, stages, and vintages. Avoid over-sizing a single theme, even if it feels obvious. If there is leverage in the strategy, understand how it works and what it can do in a downturn. Map out capital calls and distributions to align with your cash needs.
Lastly, keep the public side strong. Public stocks and bonds still do the heavy lifting in most plans. They offer daily liquidity and low-cost exposure. Private equity is a satellite, not the entire ship.
Why Volatility Feels Different
Many investors tell me private equity “feels” calmer. The quarterly marks explain some of that. The nature of ownership explains more. In a buy-and-build strategy, a manager can control the pace of acquisitions and improvements. That can smooth company-level results. In venture, the winners can be so large that they pull up fund outcomes even when several bets fail. But there are long stretches where little seems to happen. Then a financing, sale, or IPO moves valuations a lot at once. The pattern is different from daily market swings, but the economic risks are real.
For individuals, the biggest shock comes when they try to exit early and find that they cannot. Private equity asks for patience. That is part of why the asset class can deliver a return edge for those who accept it. You get paid to lock up your money. If you may need it soon, this is not the right tool.
What This Means for Investors
If you believe the best companies will continue to grow longer before listing, then having some exposure earlier in their life cycle can help. It does not need to be a bet on a single name, such as SpaceX. A thoughtful mix of late-stage growth, buyout, and secondary strategies can capture a share of private market growth across cycles.
For investors who prefer simplicity, staying public-only is a valid choice. Public markets still offer broad access to innovation. Many private champions become public champions and continue to create value after listing. But if you want a chance to participate before that point, private equity can serve that role.
Key Takeaways
- Much of today’s company growth occurs while firms remain private, thereby shifting returns away from the public phase.
- High-profile examples, such as SpaceX, show how large private gains can be, but they rely on assumptions and timing.
- Private equity often shows fewer negative years than public markets due to less frequent valuation marks and different control levers.
- Illiquidity, manager selection, and concentration are real risks. Diversification and sizing matter.
- Private equity should complement, not replace, core public holdings.
I am Taylor Sohns, CEO of LifeGoal Wealth Advisors, CIMA, and CFP. My goal is to educate, not sell. Private equity can be a powerful addition for the right investor, at the right size, with the right expectations. If you pursue it, do so with clear eyes. Know why you own it, how long you plan to hold it, and what could go wrong. The growth may be stronger before the IPO, but patience, discipline, and balance still decide the final result.
Frequently Asked Questions
Q: How is private equity different from public stocks in day-to-day risk?
Public stocks are priced every trading day, so swings show up immediately. Private holdings are valued less often, which can make drawdowns appear smoother, but it does not remove economic risk. Liquidity is also limited, so selling quickly may not be possible.
Q: Do examples like SpaceX mean I should invest in single-company vehicles?
Single-company exposure can work if you accept the risks of concentration and illiquidity. Many investors prefer diversified funds that spread risk across managers, stages, and sectors. The right choice depends on your goals, time horizon, and tolerance for loss.
Q: What allocation to private equity makes sense for a long-term plan?
There is no one-size answer. For qualified investors, a modest single-digit to low-double-digit percentage of total investable assets is a reasonable range to discuss with an advisor. Keep enough liquid assets for near-term needs and avoid overcommitting to long lockups.
Related Reading on Markets and Economy
- Trump’s Tariff Delay Triggers Market Surge
- Tesla Stock Faces Challenges as Trump Targets EV Incentives
- Trump’s Billionaire Cabinet Sparks Economic Policy Debate
- Elon Musk: Tesla Salaries Are Increasing
- U.S. Court Finds Terraform Labs Guilty of Defrauding Investors
- 0 Million Fraud Claims Aimed at Social Media Founder
- Florida Defense Contractor Faces Prison for Fraud
- Why Bitcoin Is Important for the Internet
