A growing number of private companies are using tokenized securities to let accredited investors buy pre-IPO shares — a move that aims to solve two longstanding problems in private markets: lack of liquidity and limited access.
Tokenizing pre-IPO shares
Tokenized securities are digital representations of ownership in a company, recorded on a blockchain. When a private company issues its shares in token form, those tokens can be bought and sold more easily than traditional paper certificates or restricted stock units. This process is opening up pre-IPO rounds — once the preserve of venture capital firms and ultra-wealthy individuals — to a broader set of accredited investors.
Accredited investors, typically those with a net worth over $1 million or annual income above $200,000, can now participate in tokenized offerings through specialized platforms. These platforms handle the legal and technical work of turning equity into tokens, often using smart contracts to automate dividend payments and voting rights.
Liquidity in private markets
Private company shares have traditionally been illiquid. Investors often had to hold until an IPO, acquisition, or a rare secondary sale. Tokenized securities change that by enabling trading on alternative trading systems or decentralized exchanges, as long as the tokens are structured to comply with securities laws.
That liquidity is a major draw. Investors who get in early can sell their tokens to other accredited buyers before the company goes public, rather than waiting years for an exit event. For companies, tokenization can also speed up capital raising — issuing new tokens can be faster and cheaper than running a traditional preferred stock round.
Access for accredited investors
Access is the other side of the equation. Pre-IPO allocations have historically been tough to get. By tokenizing shares, companies can offer smaller minimum investments — sometimes as low as a few thousand dollars — while still staying within exemptions like Regulation D or Regulation A+ that limit participation to accredited investors.
This broadens the pool of capital available to startups and growth companies. It also gives accredited investors a chance to diversify into private markets with smaller individual checks. Tokenization platforms often vet companies, handle compliance, and provide custody for the digital assets, reducing some of the friction that has kept smaller investors out.
What remains unresolved
The shift is still early. Regulatory clarity around tokenized securities continues to evolve, especially concerning secondary trading and cross-border sales. Most offerings today are restricted to U.S. accredited investors, and platforms require know-your-customer checks before allowing trades.
Whether tokenized pre-IPO shares will deliver on the promise of liquidity depends on how many buyers and sellers actually show up. For now, the infrastructure is being built — one token at a time.
