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Pre-IPO Fund – Beneficial for Investors

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Pre-IPO Fund – Beneficial for Investors

A Pre-IPO is a type of fundraising strategy for initiating new businesses. Pre-IPOs are capital funds that typically invest early in late-stage companies seeking to go public (List on the NASDAQ). These funds generally invest in new private companies with a well-developed business plan with solid fundamentals and who have already raised funds from angel investors. In order to qualify for such an investment, the company must demonstrate its business plan to be feasible and that they have the means to raise capital. Additionally, the company must also meet the requirements of listing on the Nasdaq.

What makes a company eligible for a pre IPO fund?

To list on Nasdaq, the company must meet certain standards. Prior to funding, the company must secure a letter of incorporation with the SEC. Additionally, they must submit financial statements to prove that their business has potential. Finally, companies must also receive approval from the SEC for the execution of the listing plan.

Growing Industry

The pre-IPO fund industry is growing fast. Companies in India are seeking foreign investors to fund their company and to allow them to list on the Nasdaq. Most companies are interested in raising money in the U.S., but many are interested in raising money from outside the U.S. as well. One of the most popular pre-IPO fund markets in India is the iFIS fund.

Why are so many companies interested in raising funds in the pre IPO Fund?

Investors usually want their money invested quickly, and so they look to raise funds from the international investors who can provide the capital at better than fair market prices. The investors can purchase their shares at a discount from the company’s public offering price.

The iFIS fund works by allowing the investor to buy shares at a discount and then sell them to another person within two years after the investor’s purchase date. iFIS differs from other similar funds in the way it purchases its shares. Instead of purchasing from the listed firm, investors will invest directly from iFIS. iFIS will make money by selling its shares to another firm in the same industry. So the fund does not create any new shares for itself when an investor invests.

As opposed to other funds, the iFIS fund allows investors to invest directly in the companies it funds. This makes it very different from other funds. The fund allows direct investment from third party trough the iFIS fund thus insuring its liquidity. Another benefit is that most of the shares are sold in one day and most of the times there is a huge demand for the shares. This ensures that the share price will be reduced for investors on the early stages of investing.

These kinds of funds have made life easier for small businesses in India as well as foreign investors. Some problems come with the iFIS pre IPO funding. The first is that it is not readily available to everyone. Many small businesses do not need this kind of fund as they do not generate sufficient cash flow to run the business on a day to day basis. For these kinds of firms, there are many small financial institutions which can serve as Pre-IPO Funds but they are not easily accessible. Many institutional investors in the US and Europe do not have access to the funding they require to run their businesses.

Even though the iFIS fund has made life easy for small entrepreneurs and investors across the globe but it also has its limitations. The limited number of shares that an investor can buy does not make it a wise choice for large companies who may need 100s of millions shares to run their businesses. The fund managers have realized that making the iFIS pre IPO portfolio for small businesses is not as simple as putting money into mutual funds as the iFIS fund requires a minimum investment of $1. Other then this small investment the Pre-IPO Fund has been quite successful in generating quick profits for its investors.

 

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