Can a wealthy investor invest in or make a deal with a company before it goes public / IPO?
Yes, an investment can be made in a company before IPO. The valuation process is similar as that done for arriving at IPO or for a normal listed company. The difference may be the premium perceived for the idea in question. This would differ from one investor to other. For example, whether Facebook will be able to grow at the rate and generate enough revenues and win against competition is all a mathematical model based on projections. There are quite a few times the projection would go wrong, and quite a few times it would go correct. An individual investor cannot generally borrow from banks to invest into a company (listed or otherwise) (or for any other purpose) if he does not have any collateral that can be kept as security by the bank. An individual can get a loan only if he has sufficient collateral. The exceptions being small personal loans depending on one's credit history. The Private Equity placement arm of banks or firms in the business of private equity invest in start-up and most of the time make an educated guess based on their experience. More than half of their investments into start-ups end up as wiped out. An occasional one or two companies are ones that they make a windfall gain on. "Yes, it is common for investors to make equity investments in technology companies pre-IPO.  There are technology incubators like Y Combinator that exist to make ""angel"" investments, which are early-stage equity investments in private technology companies (these investments are sometimes in notes that are convertible to equity, but are very similar to a stock investment).  Wealthy individuals can also make angel investments (e.g. Peter Thiel made a $500K investment in Facebook in 2004 for 10.2% of the company).  Additionally, venture capital firms exist to make equity investments in private companies.  In the US, you need to be an Accredited Investor to make private equity investments (income greater than $200K or net worth greater than $1 million), but you probably need a lot more money than the minimum and connections to get in on these deals in reality." "IPO is ""Initial Public Offering"". Just so you know. The valuations are done based on the company business model, intellectual property, products, market shares, revenues and profits, assets, and future projections. You know, the usual stuff. Yes, it is. And very frequently done. In fact, I can't think of any company that is now publicly traded, that didn't start this way. The first investor, the one who founds the company, is the first one who invests in it after raising the capital (even if it is from his own bank account to pay the fees for filing the incorporation papers). What is the difference between ""normal"" investor and ""angel""? What do you refer to as ""angel""? How is it abnormal to you? Any investor can play a role, depending on the stake he/she has in the company. If the stake is large enough - the role will be significant. If the stake is the majority - the investor will in fact be able major decisions regarding the company. How he bought the stocks, whether through a closed offering, initial investment or on a stock exchange - doesn't matter at all. You may have heard of the term ""angels"" with regards to high-tech start up companies. These are private investors (not funds) that invest their own money in start ups at very early stages. They're called ""angels"" because they invest at stages at which it is very hard for entrepreneurs to raise money: there's no product, no real business, usually it is a stage of just an idea or a patent with maybe initial prototype and some preliminary business analysis. These people gamble, in a sense, and each investment is very small (relatively to their wealth) - tens of thousands of dollars, sometimes a hundred or two thousands, and they make a lot of these. Some may fail and they lose the money, but those that succeed - bring very high returns. Imagine investing 10K for 5% stake at Google 15 years ago. Those people are as investors as anyone else, and yes, depending on their stake in the company, they can influence its decisions."
In and of itself it wasn't. But could the ill will it left with the general investing public make people more wary of future IPOs and thus, lower their potential starting points?  Thereby leading to a drought of IPOs as companies don't see themselves getting as much. "The recommendation is not to make the investment. In general, a company does not have to sell their shares to you or allow you to become an investor, because, as you have stated, it is a private company not quoted on the stock market.   If everyone were trustworthy, you could buy the tools for $11000 -- so that you own the tools -- and sign a lease of the tools to the company whereby they pay you $X/month.  The lease should be reviewed by a lawyer before it is signed, and perhaps give the buyer the right to demand back the tools at any time.  However, even this arrangement is very risky, because the ""company"" could simply steal or damage the tools and disappear.   It is not an investment that I would make, because it sounds too good to be true.  $2800/mo steady cash flow for $11,000 invested.  No, I don't think so.   The following information may also be useful, either to you, or future readers: If you still want to make this investment, then you should know that: The offering for sale of shares by companies located in the USA is subject to a wild array of complex laws.  This is true in many other countries as well.  These laws,  called securities laws or regulations,  can require certain disclosures, require that investors have a high net worth so that they can afford to lose the money or conduct their own investigations and legal actions, or require that the investors know the company founders personally, and can prohibit or limit resale by the buyer/investor.  Promoters who say you can still invest and are ignoring or disobeying the securities laws are being at least negligent, but more likely are dishonest and probably criminal.  Even if you trust in the investment, can you trust negligent managers to do a good job executing that investment? What about dishonest managers?  What about criminals and thieves?" "You are probably going to hate my answer, but... If there was an easy way to ID stocks like FB that were going to do what FB did, then those stocks wouldn't exist and do that because they would be priced higher at the IPO. The fact is there is always some doubt, no one knows the future, and sometimes value only becomes clear with time. Everyone wants to buy a stock before it rises right? It will only be worth a rise if it makes more profit though, and once it is established as making more profit the price will be already up, because why wouldn't it be? That means to buy a real winner you have to buy before it is completely obvious to everyone that it is going to make more profit in the future, and that means stock prices trade at speculative prices, based on expected future performance, not current or past performance. Now I'm not saying past and future performance has nothing in common, but there is a reason that a thousand financially oriented websites quote a disclaimer like ""past performance is not necessarily a guide to future performance"". Now maybe this is sort of obvious, but looking at your image, excluding things like market capital that you've not restricted, the PE ratio is based on CURRENT price and PAST earnings, the dividend yield is based on PAST publications of what the dividend will be and CURRENT price, the price to book is based on PAST publication of the company balance sheet and CURRENT price, the EPS is based on PAST earnings and the published number of shares, and the ROI and net profit margin in based on published PAST profits and earnings and costs and number of shares. So it must be understood that every criteria chosen is PAST data that analysts have been looking at for a lot longer than you have with a lot more additional information and experience with it. The only information that is even CURRENT is the price. Thus, my ultimate conclusive point is, you can't based your stock picks on criteria like this because it's based on past information and current stock price, and the current stock price is based on the markets opinion of relative future performance. The only way to make a good stock pick is understand the business, understand its market, and possibly understand world economics as it pertains to that market and business. You can use various criteria as an initial filter to find companies and investigate them, but which criteria you use is entirely your preference. You might invest only in profitable companies (ones that make money and probably pay regular dividends), thus excluding something like an oil exploration company, which will just lose money, and lose it, and lose some more, forever... unless it hits the jackpot, in which case you might suddenly find yourself sitting on a huge profit. It's a question of risk and preference. Regarding your concern for false data. Google defines the Return on investment (TTM) (%) as: Trailing twelve month Income after taxes divided by the average (Total Long-Term Debt + Long-Term Liabilities + Shareholders Equity), expressed as a percentage. If you really think they have it wrong you could contact them, but it's probably correct for whatever past data or last annual financial results it's based on." &gt; Could you discuss why the lack of restrictions on these subjects would make hedge funds more attractive to wealthy investors as opposed to mutual funds?  Well just think about it this way.   You have two soccer players. They both know the game extremely well, they both have similar styles of plan, and similar strategies. They're *very* good players.   Now, you change the rules for one of the players. He has to wear a 20 pound weight vest on him at all times, and can only kick the ball with his right foot when shooting, but his left when passing.   Who do you think would win in a one v. one?  ________________________________________________  Mutual funds are offered to the *general public* (most of them, anyways), which works under certain assumptions about possible investors. While investments with these funds are still considered risky, the restrictions placed on mutual funds are designed to promote safety of principle. For instance, mutual funds are restricted in short selling and trading on margin. Mutual funds must also clearly state what securities they're going to get into, what strategy they'll follow, etc., and deviations from this can get them into trouble.  Hedge funds have no such restrictions. Therefore, they can pursue any type of investment they want. Hedge funds have invested or tried to invest in everything from stocks to private equity to bitcoin to art to rare violins to property to contracts to get boats to and from the statue of liberty to water rights to lawsuit settlements to....   This relative freedom gives them MUCH more flexibility, and thus they can earn above-average returns. These lack of restrictions also makes them MUCH riskier, and additionally the way they're legally set up means only a specific type of investor, called an *accredited investor* in the U.S., can invest.   What does it take to be an accredited investor? Basically, either be rich in income $200k a year if single, $300k if married), or be rich in wealth (net worth of $1MM, not counting primary house). The ROI percentage becomes a meaningless figure at that point and would either be infinite or a very large number if you assume an equity investment of $1 or $0.01.   At that point it's obviously a lucrative deal *as long as it works out* so the bigger question is what are the risks of it not working out and what's the ROIC. A cautionary tale:  About 25 years ago I decided that I should try my hand at investing in some technology companies.   I was in the computer biz but decided that I might suffer from myopia there, so I researched some medical startups.  And I did some reasonably good research, given the available resources (the Internet was quite primitive).  I narrowed things down to 4-5 companies, studying their technology plans, then researched their business plans and their personnel. In the end I picked a drug company.  Not only did it have a promising business plan, but it had as it's CEO a hotshot from some other company, and the BOD was populated buy big names from tech companies and the like.  AND the company had like $2 of cash for every $1 of outstanding share value, following their recent IPO. So I sold a bit of stock I had in my employer and bought like $3000 worth of this company. Then, taking the advice I'd seen several places, I forgot about it for about 6 months. When I went back to look their stock value had dropped a little, and the cash reserves were down about 20%.  I wasn't too worried.  6 months later the cash was down 50%.  Worrying a little.  After I'd had the stock for about 2 years the stock price was about 10% of what I'd paid.  Hardly worth selling, so I hung on for awhile longer. The company was eventually sold to some other company and I got maybe $50 in stock in the new company. Two methods:  1: Become really close friend with Marky. Probably have to take a bullet for him or something.   2: Become a major client of the investment bank that will launch the IPO (most likely Goldman), and the bank will offer you some shares before the IPO. In order to become a major client you probably have to spend several millions per year in transaction fee. If you hold at least $2,000 of a company's shares for at least a year you can submit a proxy filing -- a stockholder proposal at the  shareholders' meeting.   Then you can use the media to agitate around that proposal.  (See Hugh Fearnley-Whittingstall, mentioned here as well). Companies have been known to bow to media pressure around minority shareholder proposals.  The guidelines for proxy filings are here: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&amp;sid=47b43cbb88844faad586861c05c81595&amp;rgn=div5&amp;view=text&amp;node=17:3.0.1.1.1&amp;idno=17#17:3.0.1.1.1.2.82.201  Buying enough shares to assume control of a major money center bank is not possible, regardless of the amount of money you can raise (remember: there are poison pill provisions, not to mention the fact that the more shares you want to buy, the higher the price will be).   tl;dr: The way to do what you're trying to do is not by accumulating shares but by using the media. You need $2,000.