Lesson 1 of 8 · About 5 min read · By Lane Kawaoka, PE · Updated November 2026 · Course home

Is Pre-IPO or Angel Investing Right for You?

Your question: “Should someone like me be doing this at all?”

That’s the right first question, and for a lot of accredited investors the honest answer is “a little, maybe” or “not right now.” This lesson is about fit before deals. If pre-IPO or angel investing doesn’t fit your situation, nothing in the later lessons will fix that.

Why Accredited Investors Consider Angel Investing

Most of the people I talk with who are curious about private tech have done well in a business, a career or the public markets. They own real estate, maybe some private credit or energy, and an index fund portfolio. Private companies are the piece they don’t have.

The reasons I hear most often:

• Growth that comes from somewhere other than the S&P 500. Many companies now stay private for a decade or more, so a lot of their growth happens before ordinary investors can buy a share.
• Interest in a specific industry they know well, like software, healthcare, aerospace or AI, from years of working in or around it.
• A wish to back founders and companies they believe in, sometimes with their experience as well as their money.
• Curiosity after being pitched a private deal by a friend, a former colleague or a platform, and wanting a way to judge it.

Those are reasonable reasons. Notice that none of them is “I need income” or “I want something I can sell next year.” Private company stock does neither.

Angel Investing Is Not an Income Strategy

I treat pre-IPO and angel investing as a speculative, high-upside sleeve of a portfolio. It doesn’t replace income-producing investments. You may be drawn to backing something early or owning a piece of a company you think could become important. That is a different thing from relying on it for cash flow, downside protection or a predictable return of your money.

Before you look at any terms, decide what the money is for. If the goal is income, liquidity or keeping your principal intact, compare the opportunity against things built for that: cash-flowing real estate debt, bonds, T-bills or other income-oriented investments. If the goal is venture-style upside, you need to be ready, financially and emotionally, to lose the whole check.

How Angel Investing Is Different From Real Estate, Private Credit, and Oil & Gas

Here’s how I’d line pre-IPO and angel investing up against the other private asset classes our community tends to own. These are typical patterns, and any single deal can look different.

Private credit, for reference, sits closer to the income end: a stated interest rate, a defined term and a claim on assets. Pre-IPO and angel investing sits at the opposite end.

Private Does Not Mean “Public Stock, Earlier”

It’s tempting to think of a pre-IPO share as a public stock you got to buy before everyone else. It isn’t. A private investment comes with:

• Limited liquidity. You usually can’t sell when you want to.
• Less information. Private companies publish little, and you may get no regular updates at all.
• Transfer restrictions. The company often has to approve any sale of its shares.
• Valuation uncertainty. Different prices for the same company can float around at the same time.
• Concentration. One private company is one bet.

Some pre-IPO exposure also comes indirectly through funds rather than direct ownership of company shares, which adds layers we’ll cover in Lesson 4.

A Concentration Check If You’re Paid in Tech Stock

If you work in tech or did well from a tech company, look at your balance sheet before you add more. Count your RSUs, vested options, employee stock purchase shares, any company stock in your 401(k), and the tech-heavy index funds you already hold.

If most of your net worth already rides on technology companies, more private tech adds concentration, not diversification. When the sector has a bad few years, your paycheck, your vested stock and your private positions can all fall at once, and the private positions are the ones you can’t sell. For many professional couples in that position, real estate, private credit or energy diversifies more than another tech position would.

How to Think About Sizing

I won’t give you a percentage, because the right number depends on your whole situation. The principle I’d use: treat this as a speculative sleeve, and size it so that losing every dollar of it wouldn’t change your plans. That means no change to your retirement date, your kids’ schooling or the house.

A few practical points:

• Many investors spread this sleeve across several smaller positions over time rather than one large check, because outcomes in this asset class vary widely from company to company.
• Assume the money is gone for at least five to ten years, and possibly for good.
• Decide your sleeve size before you see a deal, not after a pitch excites you.

Is This a Fit for You?

This is likely a fit if:

• You’re an accredited investor with income needs already covered by other investments
• You can leave this money untouched for many years
• Losing all of it would hurt but wouldn’t change your plans
• You’re willing to read documents and ask uncomfortable questions

This is likely not a fit if:

• You need income or may need the money back within several years
• Most of your net worth is already in tech stock and you’re looking for diversification
• You’d be investing because you’re worried about missing out
• You’re looking for something with no chance of loss

Watch: Two Conversations on This Topic

If you would rather listen than read, these episodes cover much of this lesson. Use the timestamps to jump to the parts that matter most.

I am an accredited investor. My yearly income is about [amount], my liquid net worth is about [amount], and about [X]% of my net worth is in my employer's stock or other tech stock. Explain whether a small pre-IPO or angel sleeve could fit my situation, how my concentration in tech affects that, and what I should answer for myself before investing. Use the lessons at thewealthelevator.com/home/resources/angel/ as background. Do not recommend a specific investment, and list what I should confirm with my CPA.

The podcast behind this course

Listen to the Angel Investing podcast

Many people who find this course don’t realize there’s a whole podcast on this topic. Each month I walk through angel and pre-IPO deal terms, due diligence questions and lessons from real conversations with investors.

Listen on Apple PodcastsWatch on YouTube