Tokenizing Private Equity: Opening Startup Investing to the Retail Crowd

Tokenization, the process of representing real-world assets as digital tokens on a blockchain, is gaining attention as a potential way to open up private company investing to everyday investors. Traditionally, access to private markets has been restricted to venture capital firms and accredited investors due to high minimums, long lock-up periods, and limited secondary markets. Tokenization aims to change that by fractionalizing ownership into smaller, tradable units that could, in theory, be bought and sold like stocks on a digital marketplace. Proponents argue this could drastically reduce barriers to entry and enhance liquidity in markets that have historically been slow and opaque.

In practice, tokenized private equity would work by issuing security tokens that represent a claim on a portion of a company’s equity or returns. These tokens would be registered and compliant with securities laws, and could be traded on regulated alternative trading systems or token exchanges. Platforms are already experimenting with variants of this idea: for example, crowdfunding networks have launched “mirror tokens” for unicorn shares like SpaceX, designed to give retail investors exposure to private companies’ upside on blockchain rails.

Estimating an aggregate “market cap” for all U.S. private companies is difficult because they are not traded publicly, but research suggests the total value of private business in the U.S. was about $14.1 trillion in 2018, nearly as large as public markets, according to an academic valuation study. In addition, private markets overall (including private equity and private credit) hold over $7 trillion in North America alone as part of broader private asset pools, indicating the scale of non-public company value.

Securitize is a major regulated digital securities platform that enables companies to issue and manage tokenized equity and other assets on blockchain, with billions of dollars in tokenized assets including private equity and fund shares. Republic’s mirror token program allows retail investors to access tokenized exposure to high-profile private companies like SpaceX and Anthropic via Solana-based tokens, representing a novel form of private market participation.

However, regulatory and legal challenges loom large. Securities regulators around the world have emphasized that tokenized assets are still subject to existing laws, and that simply layering blockchain technology on financial products does not change their legal status. In the U.S., a top Securities and Exchange Commission official reiterated that tokenized securities must comply with traditional securities regulations, and similar concerns have been raised by European authorities about investor misunderstanding and the lack of shareholder rights in many tokenized products. These compliance hurdles, coupled with unclear frameworks in many jurisdictions, mean that real adoption will likely be incremental rather than revolutionary.

Beyond regulation, there are practical concerns about market structure. Tokenization aims to improve liquidity, yet many tokenized assets currently suffer from low trading volumes and fragmented secondary markets, limiting the ability of investors to buy and sell freely. Valuation is another sticking point; without regular financial disclosures and public pricing, the market value of tokens can diverge from the underlying company’s fundamentals, leading to speculative pricing that may mislead unsophisticated investors.

Despite these challenges, the idea of democratizing access to private markets continues to attract interest. Supporters see tokenization as a way to bring blockchain’s efficiency, fast settlement, fractional ownership, and automated compliance, into traditional finance, potentially reshaping investment opportunities for a broader audience. Whether this vision becomes mainstream will depend on how well legal frameworks evolve, how liquidity develops in secondary markets, and whether retail investors are protected through clear disclosure and governance standards.