Retail Investors Are Investing In Pre-IPO Startups En Masse. Here's How You Can Get In On The Action

Investing in startups shouldn't be taken for granted. Before 2016, it was a privilege only institutional investors could indulge in. 

But with changes in laws governing startup investing, retail investors have gotten a chance to build startup portfolios with as little as $1,000.

People are using platforms like Kickstarter and Indiegogo to fund projects that are creating the changes they want to see in the world. With several startup crowdfunding platforms cropping up in recent years, it's easy to own a stake in a fledgling company. You can browse a selection of early-stage startups, acquire their shares with a few clicks and slowly build your startup portfolio. 

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Nonaccredited investors embraced the new opportunities — especially because of recent advancements in artificial intelligence (AI). AI is ushering in a new wave of startups likely will reach trillions in valuation, just like Alphabet Inc.'s Google, Amazon.com Inc. and Microsoft Corp. Investing in Facebook at its initial public offering (IPO) would've resulted in returns of more than 636.77%. Buying $1,000 worth of Google stock at its IPO would've grown to $1.2 million today. Doing the same with Amazon at its 1997 IPO would've turned into $1.5 million.

And that's after these companies have been listed on a stock market. Investors who acquired their shares before the IPOs saw much greater returns. During the last major technology shift, when the world was going online, you couldn't invest in pre-IPO startups. Now you can.

But startups are high-risk, high-reward investments. Make sure you are comfortable with taking on such risk before you wire any funds. One way to mitigate risk is to diversify and invest in many startups instead of one or two that have gained your trust.

You can invest in a pre-IPO startup for as little as $100, so it's easy to become a partial owner of 10 companies with $1,000. Apart from diversification, another tactic is to invest in already profitable startups like Jurny that have proven that their growth isn't fueled solely by investor capital. 

Click here to explore Benzinga's selection of pre-IPO startups.