Pre-IPO funds are funds that invest in late-stage companies looking to go public (list on the public stock exchange) in the near future. These funds typically invest in private companies that have already raised capital from private investors and have a proven business model with strong fundamentals. On average, the time period from the time of investment to the initial public offering (IPO) is between three to five years. 

 

Pre-IPO funds allow HNIs and family offices to invest in a pool of privately-held and fast-growing companies that are looking to go public in the next three to five years. 

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They also have a distinct advantage over individual investors wherein they are not subject to mandatory lock-in of sale of shares. The lock-in, mandated by the Securities and Exchange Board of India (SEBI), restricts existing investors to liquidate their holdings for six months from the date of the public offering, which is not the case for a Pre-IPO fund. These investors can liquidate their holdings as soon as the company goes public, thereby reducing the time to realize their capital gains.

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