An individual can get startup exposure three ways: buying shares in a SPAC, which offers liquidity but only at the end of a company's private life; writing angel checks, which gets the earliest price but locks money up for a decade and mostly requires accreditation; or using pre-IPO funds and secondaries, which sit in between on stage, fees and liquidity.
These routes are often compared as if they were rival products. They are really different points on a company's life: SPACs at the moment a company goes public, pre-IPO vehicles in the years just before, and angel checks at the very start. Which one fits depends less on which is "best" than on what you need: liquidity, early pricing, access, or simply exposure to a sector.
How does a SPAC give you startup exposure?
A special purpose acquisition company is a listed shell. It raises money in an IPO, usually in $10 units, and holds the cash in a trust account while its sponsor looks for a private company to merge with, typically within 18 to 24 months. When a deal is announced, shareholders vote and can redeem their shares for their share of the trust instead of staying in. If the merger closes, the private company becomes public in place of the shell.
For an individual, the appeal is plain: anyone with a brokerage account can buy SPAC shares, and they trade daily. Before a merger, the trust gives the shares something close to a floor, because holders can redeem for cash.
The drawbacks are about what happens after the merger:
Built-in dilution. Sponsors usually receive founder shares, commonly around a fifth of the post-IPO shares, and early investors receive warrants. Michael Klausner, Michael Ohlrogge and Emily Ruan's paper "A Sober Look at SPACs" found that for the 47 SPACs that merged between January 2019 and June 2020, median net cash per share was $5.70 against the $10 share price. The published version of the paper (Yale Journal on Regulation, 2022) found net cash per share still far below $10 for SPACs that merged through November 2021.
Late-stage exposure. By the time a company merges with a SPAC, the early growth has already been priced in by private investors.
A boom-and-bust record. SPACInsider counted 248 US SPAC IPOs in 2020 and 613 in 2021, followed by a sharp fall. The roundup of SPAC trends for 2026 looks at where the market stands now.
Regulation has also tightened. In January 2024 the SEC adopted rules, effective July 1, 2024, that make the target company a co-registrant with liability for the merger disclosures and remove the litigation safe harbor for projections in these deals. That brings SPAC disclosure closer to a traditional IPO.
What does angel investing offer that a SPAC can't?
Angel investing is the opposite end of the timeline. You buy into a company at pre-seed or seed, when it may be a few people and a product, at a price that reflects how little is proven.
The earliest price. If the company becomes very large, an early check captures growth that later investors pay for.
Extreme skew. In Robert Wiltbank and Warren Boeker's 2007 study of angel group returns, 52% of exits returned less than the money invested and 7% returned more than ten times; the top 10% of exits produced 75% of the total returned. The overview of angel investing returns explains why that demands a portfolio rather than a few bets.
No liquidity. Shares in a private company usually cannot be sold without approval, and the winners can take a decade or more to exit.
Accreditation, mostly. Most private deals are open only to accredited investors: in the US, income above $200,000 a year ($300,000 with a spouse or spousal equivalent) in each of the last two years, or net worth above $1 million excluding your home, or holding certain securities licenses. Non-accredited investors can invest through Regulation Crowdfunding portals, within annual limits tied to income and net worth.
Influence and work. Angels can help founders, and published data links involvement with better outcomes. That is time a SPAC shareholder never spends.
I'm an angel investor with 234 investments, so my bias is toward the earliest stage. Read this comparison with that in mind; the right route depends on your money and time, not mine.
What about pre-IPO funds and secondaries?
Between the two sits a growing set of ways to own shares in late-stage private companies:
Secondary marketplaces match buyers with employees or early investors who want to sell. They are usually limited to accredited investors, carry fees, and deals need the company's consent, which can be refused.
Funds and SPVs that hold late-stage stock pool money into one or several private companies. Watch the fee layers: management fees and carried interest at the fund level, and sometimes more inside.
Listed funds that hold private companies trade on an exchange like any stock, so they are open to anyone. Their price can sit well above or below the value of what they hold, which adds a risk that has nothing to do with the companies.
The common thread is information. Private companies share little with secondary buyers, so you often price an investment on less data than a public shareholder would have. The guide on investing in pre-IPO companies as an angel covers the mechanics in more detail.
Which route fits which investor?
A few questions sort it out quickly:
Do you need to be able to sell? If yes, only listed vehicles work: SPAC shares or listed funds. Angel checks and most pre-IPO deals are locked up.
Are you accredited? If not, your options are listed vehicles and Regulation Crowdfunding. If you are, the full range is open.
Do you want the earliest price or the most information? Angel checks give the first; late-stage and public vehicles give the second.
Can you spend time on it? Angel investing rewards diligence and involvement. SPAC shares and funds are passive.
How much are you investing? Small amounts spread across many angel deals usually means syndicates or platforms. The rundown of angel investing platforms and syndicates compares the main options.
Many investors end up using more than one route. For more on building an early-stage portfolio, see the angel investing section. None of this is individual investment advice; talk to a licensed adviser about your own situation.
Frequently Asked Questions
Q:Are SPACs a good way to invest in startups?
They give access to companies at the point they go public, not as startups in the usual sense. Research on SPAC mergers from 2019 onward found weak average returns after the merger, largely because of the dilution built into the structure. Judge each one like any other public stock, with attention to the sponsor's share and the warrants.
Q:Can non-accredited investors angel invest?
Yes, within limits. In the US, Regulation Crowdfunding lets anyone invest in startups through registered portals, with annual caps based on income and net worth. Most other private deals, including most syndicates, require accreditation.
Q:What is the minimum to start angel investing?
It depends on the route. Crowdfunding portals and some syndicates accept small amounts, while direct checks into a round are often several thousand dollars or more. A portfolio approach matters more than the size of any single check.
Q:Is it safer to buy pre-IPO shares than to angel invest?
Late-stage companies fail less often than seed-stage ones, but pre-IPO shares carry their own risks: high prices, little information, fees and restrictions on selling. The upside is also smaller because much of the growth has already happened. Safer is relative, and losses are still possible.
Q:How long is money tied up in each route?
SPAC shares and listed funds can be sold any trading day. Pre-IPO investments usually last until an IPO or acquisition, often a few years. Angel investments commonly take seven years or longer to return money, if they return it at all.