What Are Private Markets? A Beginner's Guide

Private markets represent one of the largest and fastest-growing segments of the global economy — yet most individual investors know very little about them. If you've ever wondered what private markets are, how they differ from the stock market, and whether they're relevant to your investing journey, this guide is for you.

Defining Private Markets

Private markets refer to the buying and selling of securities — primarily equity (ownership stakes) and debt — in companies that are not listed on a public stock exchange like the NYSE or Nasdaq. When you invest in a private market, you're investing in companies that haven't gone through an initial public offering (IPO) and whose shares don't trade on a public exchange.

These companies range from early-stage startups seeking their first round of funding to mature, billion-dollar enterprises that have simply chosen to remain private. In fact, some of the most well-known companies in the world — including SpaceX, Stripe, and many others — have operated as private companies for years, building enormous value before (or instead of) going public.

The Scale of Private Markets

Many people assume that the stock market represents the entirety of the investment universe. In reality, private markets are enormous. As of recent estimates, there are roughly 4,000 publicly traded companies in the United States, but there are over 6 million private companies. The number of public companies has actually declined significantly since the late 1990s, as companies stay private longer and new regulations have made going public more burdensome.

Private equity and venture capital funds alone manage trillions of dollars in assets globally. When you add in private credit, real estate, and infrastructure, private markets rival or exceed public markets in total capital deployed.

How Private Markets Work

Unlike public markets, where you can buy shares through a brokerage app in seconds, private markets operate differently:

Raising Capital

Private companies raise money through private offerings. These can take many forms — venture capital rounds, angel investments, private equity transactions, or offerings made through equity crowdfunding platforms like StartEngine. Each type of offering is governed by specific regulations that determine who can invest and under what terms.

Holding Periods

When you invest in a private company, you typically can't sell your shares the next day. Private investments are considered illiquid, meaning there's no readily available marketplace to trade them. You may hold your investment for years — until the company goes public, gets acquired, or until a secondary market transaction becomes available.

Valuation

Private companies don't have a stock ticker updating every second. Instead, their value is typically determined during funding rounds, through independent appraisals, or through periodic valuations. This means the price of your investment doesn't fluctuate daily the way a public stock does — but it also means you may have less visibility into the current value of your holdings.

Regulation

Private securities offerings are regulated by the U.S. Securities and Exchange Commission (SEC), but they operate under different exemptions than public offerings. The most common frameworks include Regulation D (for accredited investors), Regulation A+ (mini-IPOs open to all investors), and Regulation Crowdfunding (Reg CF), which allows companies to raise capital from everyday investors through registered platforms.

Who Participates in Private Markets?

Historically, private market investing was the exclusive domain of institutional investors — pension funds, endowments, family offices — and high-net-worth individuals known as accredited investors. These investors had the capital, connections, and risk tolerance to access private deals.

That landscape has changed dramatically. Thanks to regulatory reforms like the JOBS Act of 2012, equity crowdfunding platforms now enable non-accredited investors to participate in private offerings. Platforms like StartEngine have opened the door for everyday investors to access opportunities that were previously available only to the wealthy and well-connected.

Today, private market participants include:

• Venture capital and private equity firms — Professional investors who raise funds to invest in private companies
• Angel investors — Individuals who invest their own money in early-stage companies
• Institutional investors — Pension funds, endowments, sovereign wealth funds, and insurance companies
• Retail investors — Everyday individuals investing through crowdfunding platforms and other accessible channels

Why Private Markets Matter

Growth Happens Before the IPO

Some of the most significant value creation in a company's life occurs while it's still private. By the time a company goes public, early investors and employees may have already seen substantial returns. Gaining access to companies during their private phase means potentially participating in that earlier growth.

Diversification

Public stocks and bonds don't represent the entire investable universe. Adding private market investments to a portfolio can provide diversification benefits, since private company returns don't always correlate directly with public market movements.

Innovation

Many of the most innovative companies in technology, healthcare, clean energy, and other sectors are private. Investing in private markets gives you exposure to the cutting edge of innovation — companies building the products and services that may define the next decade.

Longer Time Horizons

Because private companies aren't subject to the quarterly earnings pressure that public companies face, they can often make longer-term strategic decisions. This can lead to more sustainable growth and value creation over time.

Common Misconceptions

"Private markets are only for the rich." While certain private investments do require accredited investor status, regulations like Reg CF and Reg A+ have made it possible for anyone to invest in private companies, sometimes with minimums as low as $100.

"Private investments are too risky." All investments carry risk, and private investments do come with unique risks like illiquidity and limited information. However, risk can be managed through diversification, due diligence, and investing amounts you can afford to hold for the long term.

"You can't sell private shares." While private shares are less liquid than public stocks, secondary markets for private shares do exist and are growing. Platforms are emerging that help connect buyers and sellers of private company shares, creating more liquidity options than ever before.

Getting Started with Private Market Investing

If you're interested in exploring private markets, here are some practical steps:

1. Educate yourself. You're already doing this. Understanding the landscape, the risks, and the regulations is the most important first step.
2. Determine your investor status. Know whether you qualify as an accredited investor, as this affects which opportunities are available to you.
3. Start small. You don't need to invest a fortune. Many offerings on platforms like StartEngine have low minimums, allowing you to get started and learn as you go.
4. Diversify. Don't put all your private market allocation into a single company. Spread your investments across multiple opportunities and sectors.
5. Think long-term. Private investments typically require patience. Be prepared to hold your investment for several years.

Conclusion

Private markets represent a vast and dynamic part of the global economy that is increasingly accessible to individual investors. While they come with unique characteristics — including illiquidity, different regulatory frameworks, and longer time horizons — they also offer the potential for portfolio diversification, early-stage growth participation, and exposure to innovative companies.

As platforms continue to lower barriers to entry and secondary markets expand liquidity options, private markets are likely to play an increasingly important role in how everyday investors build wealth. The key is to approach them with education, patience, and a clear understanding of the risks and rewards involved.