Investing in unlisted companies – opportunities, risks and key considerations

t is easy to be drawn to the idea of investing in unlisted companies. They often include businesses with big visions, rapid growth, and the opportunity to be involved from the very beginning. But as with anything that shines, it is important to look behind the facade. When a company is not listed on a stock exchange, different rules apply, and as an investor you need to be both more thorough and more critical.

In this post, we go through some of the most important things you should consider before investing in unlisted shares. We look at the differences compared to listed companies, which risks are often underestimated, and how you as an investor can review both the company, the transaction, and the people behind it. The purpose is not to discourage you – but to give you better conditions to make a well-informed decision.

1. No marketplace. What happens if you want to sell?

The biggest difference between listed and unlisted shares is liquidity. In a listed company, you can usually buy and sell shares whenever you want, during market opening hours. In an unlisted company, however, there is no natural marketplace. This means you may end up in a situation where you cannot sell your shares, even if you want to.

If you do find a buyer, the process can take time, require legal assistance, and become costly. In addition, the price is often unclear and may end up being lower than you expect when you actually need to exit the investment. In short: view unlisted investments as long term. Your capital may be tied up for several years – sometimes without a clear exit.

2. Truly understand the company’s business

Many investment cases sound great in a pitch. But a pitch is not the same as a functioning company with paying customers and proven profitability. As an investor, you should be able to answer questions such as:

• What does the company sell, to whom, and why do customers buy it?
• How does the company make money today – not just “in the future”?
• What are the biggest risks in the business? Dependencies, regulations, competition?
• Which assumptions must hold true for the business model to work?

If you cannot explain the company’s business in a simple way, that is a clear warning sign.

3. The company’s history. What does it tell you?

A company’s history is not everything, but it often says a lot. A newly formed company can be entirely legitimate, but it also has less traceability. A company that has existed for a long time without showing development may signal weak demand or an inability to deliver.

Many changes in the board, ownership, or strategic direction can be normal. But if they occur frequently and without clarity, this can be a red flag. Look for stability, transparency, and reasonable explanations.

4. Financial figures – more than just a story

In unlisted companies, you rarely receive the same ongoing information as in listed ones. That means you must actively request documentation and actually read it. Here are some things to examine particularly closely:

• The most recent annual report(s)
• Cash flow and burn rate – how long will the money last?
• Debts, payment defaults, or disputes
• Customer concentration – is the company dependent on one or two customers?
• Ownership structure and any preference terms – who gets paid first in an exit?

If you do not understand the numbers, seek help. “Taking a chance” in unlisted investments is rarely a good idea.

5. Who is behind the company?

This is a point many underestimate, but one that is often decisive. What experience do the founders and management have in building companies? Is there relevant expertise on the board? Is the ownership structure reasonable and transparent? Are there clear points of contact and clear corporate governance?

A serious company can withstand scrutiny. If you are met with evasive answers, pressure (“you have to decide today”), or unclear information about who actually controls the company, you should step back.

6. Lack of knowledge increases the risk of fraud

When you invest in something you do not know, a company you do not understand, people you cannot verify, and figures you have not reviewed, the risk increases dramatically that you will be exposed to investment fraud.

Fraud often follows the same patterns:

• Strong sales pressure
• “Unique opportunities”
• Lack of documentation
• Difficult questions answered with fluff or new promises
• Focus on a future story, not on facts here and now
• Unclear whether newly issued shares or existing shares sold by a current owner are being offered

The basic rule is simple: if you cannot verify it, you should not invest.

What to consider before investing

Unlisted shares can be part of a long-term investment strategy, but they place greater demands on you as an investor. Limited liquidity, restricted information, and higher risk mean that decisions must be made with greater care than in listed investments.

Investing with open eyes means understanding what you are investing in, accepting that capital may be tied up for a long time, and being aware of the risks you are actually taking. It is about reviewing the company, the numbers, and the people behind it – and being willing to walk away if something feels unclear or rushed.

And most importantly: Never invest money you cannot afford to tie up or lose.