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Testing the secondary market
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Testing the secondary market

Fishing for bigger companies that aren't public yet? Then consider secondary markets.

Secondary markets are private company exchanges that let you buy shares before they go public. These shares may be sold by the company founder or another investor. Online platforms such as SharesPost or SecondMarket match investors with companies. Some offerings are even hot tickets such as Facebook, Groupon or Twitter.

At SecondMarket, a substantial number of shares are available for Facebook, according to the company. However, the competition for shares is intense. You can sign up at the SecondMarket website for free and follow the progress of a company or share investment ideas. You also can choose to invest; it's an investment platform as well.

Also, to be an actual investor, you must have earned more than $200,000 annually for the past two consecutive years or have a net worth of at least $1 million. You'll need to certify to SecondMarket that you meet these criteria, which are set by the Securities and Exchange Commission.

That's not all. Shares bought and sold on secondary markets have limited volume and lack transparency. And investment minimums are high. At SecondMarket, they average $1 million.

For a less-risky alternative investment, buy shares in a publicly traded company that invests in private companies, says the Center for Venture Research's Sohl. One example is the Blackstone Group, one of the world's largest private equity investors.


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