How to Invest in Pre-IPO SpaceX, OpenAI, and Anthropic in One Fell Swoop

Key Points

• Ark Venture Fund offers retail investors rare access to high-profile private companies at a $500 minimum investment.

• Despite impressive 18.51% annualized growth, the fund's fee structure significantly impacts long-term returns.

• Appropriate for diversified portfolios where a small, high-risk allocation can satisfy curiosity without jeopardizing core investment goals.

• 10 stocks we like better than ARK Venture Fund ›

Everything and a bag of chips. That's what you get when you invest in Cathie Wood's Ark Venture Fund (NASDAQMUTFUND: ARKVX), a mixed basket of 60-plus private and publicly traded stocks. It's a rare opportunity to buy shares of some of the most promising private companies in the market. Among them are SpaceX, OpenAI, and Anthropic.

As of this writing, these privately owned behemoths are valued at an estimated $712 billion, when combined. It's an indication of the confidence private investors have in the future of these fast-growing businesses.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

You can own a piece of all three, even if you're not an accredited investor. Here's how.

Image source: Getty Images.

Invest through Public, SoFi, or Titan investing apps

Public, SoFi, and Titan are the only places you can buy Ark Venture without an advisor, so you'll need to download one of these apps first, if you haven't already.

From there, it's as easy as opening an investment account and plugging at least $500 into the fund. Why $500? It's the minimum amount you need to purchase shares.

Voila! You're a proud owner of three of the top 10 biggest private and hottest companies on the market.

Data source: Crunchbase, Anthropic.

As of this writing, 12% of the Ark Venture Fund is SpaceX, the company that pioneered reusable rockets. The case for SpaceX: It has launched over 8,000 Starlink satellites into space that connect you to the internet for a monthly subscription.

The medium-term total addressable market for satellite connectivity is $100 billion, according to Ark. Starlink's 2024 revenue is estimated at $8.4 billion, up from $4.2 billion in 2023. The company's internet service is growing fast, with room to run.

The magic of Ark Venture is it gives you a little bit of everything that could shape the future. And an annualized 18.51% growth is nothing to sneeze at.

But there are big caveats.

It's a venture-interval fund, riskier than your typical ETF basket

This isn't your typical ETF. It's a venture-interval fund, which means it's got special restrictions and costs you don't see in the public market. It's less liquid, fees are high, and it includes private companies that aren't upheld to the same regulatory standards as public companies.

Liquidity is low. You can only sell your investments once per quarter, at specific dates. Furthermore, the fund limits total withdrawals to 5% of the fund. So, if the fund tanks and everyone tries to sell, your sale might not go through.

Fees are much higher than your typical basket of public stocks. An actively managed fund, Ark Venture charges a 2.9% fee, whereas the average fee of actively traded ETFs lands around 0.51%. That's a hefty haircut.

Say you invest $10,000 into two funds with average returns of 18%. With an annual fee of 0.51%, your investment would grow to $50,120 in 10 years. Fees of 2.9% would only leave you with $40,809. That's almost $10,000 lost to fees! Over long periods, every percentage point matters.

The fund's high fees may seem partly justified by its growth, as its holdings have returned 79% in shareholder value since March 2023. But over the same period, the market has returned 89%.

Like most Ark funds, this one seems to be underperforming the broader market. It remains to be seen whether the it can continue to return high multiples during a bear market.

A couple of perks set the fund apart. First, it's public-private, giving individual investors a unique opportunity to invest in private funds -- and hold them when they go public. Another perk is access. Ark Venture holds a staggering amount of high-profile companies. You get toeholds in many coveted companies, before they become available to everyone else.

Note, private companies are tough-to-access for a reason. These aren't as regulated as public companies, they don't need to report company metrics, and they aren't held to the same standards as companies like Tesla and Palantir. If anything goes wrong, it might be individual investors who shoulder the burden.

It's a growth play and a hedge against FOMO -- fear of missing out on stocks like OpenAI

Despite the risks, Ark Venture is a unique investment opportunity, and I think it's worth a small piece of your portfolio.

The promise is growth. Companies in the fund continue to grow at a blistering pace, driven by massive demand in sectors like space and artificial intelligence (AI). If Ark analyst forecasts are correct, then the fund's fees are probably justified.

But the real benefit of owning Ark Venture Fund might not be growth, but mindset. Why I own shares: An investment in the fund is a hedge against FOMO -- "fear of missing out" on profits made by fast-growing, next-generation companies. Taking a small stake gives me the peace of mind I need to focus on other, less speculative bets.

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Cole Tretheway has positions in Ark Venture and Tesla. The Motley Fool has positions in and recommends Palantir Technologies and Tesla. The Motley Fool has a disclosure policy.