Gen Z investors are facing a significant challenge as the private markets boom, leaving them locked out of the most lucrative investment opportunities.
Private Markets Boom As Gen Z Faces IPO Drought
The private markets are experiencing a surge, with companies like OpenAI and SpaceX thriving without the need for public market exposure, Business Insider reported. These companies keep securing new funding from venture capital firms, sidestepping the scrutiny of public markets and the pressures of quarterly earnings reports.
In the last decade, global startup funding has surged to more than three times its previous level, with venture capital investments projected to hit $400 billion this year. This boom has fueled a rising wave of investors — especially Gen Z — inspired by success stories and enabled by digital trading platforms and investment tips on apps like TikTok.
However, Gen Z investors, who usually start trading around age 19, feel they've missed past market booms. The public markets are offering fewer stocks at higher prices, with companies now taking an average of 14 years to go public. This trend has pushed more investors toward secondary markets, where buying shares of private companies is restricted to traders accredited by the U.S. Securities and Exchange Commission. Since only 13% of Americans meet this criterion, many Gen Z investors feel shut out.
Secondary Platforms Offer Expensive Options
OpenAI, a privately held company, reached a $300 billion valuation in March — a 900% surge over two years. Major winners included Microsoft (NASDAQ:MSFT), venture capital giant Sequoia Capital, and tech billionaire Peter Thiel, fueling criticism that public markets fail to generate sufficient value for everyday investors.
Secondary investment platforms such as EquityZen, Forge Global, and Hiive — which facilitate buying shares in pre-IPO companies — are growing in popularity as part of efforts to democratize access to private equity. However, participation is typically more expensive than standard trading, often requiring investments ranging from $5,000 to over $100,000.
Gen Z Expands Investing Beyond Traditional Markets
Gen Z’s shift towards private markets can be attributed to a combination of factors. They are expanding the definition of investing to include prediction markets, fractional real estate, and collectibles like sports cards and sneakers.
As per a report, only 38% of Gen Z are financially literate, leading to a lack of confidence in navigating public markets. Furthermore, a growing number of Gen Z are ditching college to build startups, further fueling their inclination towards private markets.
However, as Rashaun Williams, a ‘Shark Tank’ investor, suggests, Gen Z can still retire as millionaires by avoiding doom spending and focusing on building an emergency fund, maxing out retirement account contributions, and keeping investments straightforward.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
