The Silent Majority: Why Private Dominate—and Why Investors Should Care

The narrative of a “shrinking stock market” isn’t just about real estate—it’s a systemic shift reshaping the entire economy. Today, 87% of U.S. companies with over $100 million in revenue are privately held, spanning industries like tech, healthcare, manufacturing, and retail. These firms employ 75% of the workforce, drive 55% of capital expenditures, and generate trillions in revenue—yet they’re invisible to investors fixated on Wall Street.

For high-net-worth individuals, this creates a dual opportunity: capitalizing on the growth of private companies and pairing those investments with private real estate to build a truly diversified, economy-wide portfolio.

The Private Company Boom: Your Portfolio’s Blind Spot

Wall Street’s universe of ~4,000 public companies is dwarfed by the 35,000+ U.S. private firms with $100 million+ in revenue.

These businesses aren’t startups; they’re mature, profitable enterprises shaping industries:

• Tech: SpaceX ($180B valuation), Stripe ($65B), and Open AI ($86B) operate entirely in private markets.

• Healthcare: Private equity-owned hospital chains and biotech firms drive innovation.

• Consumer Goods: Brands like Trader Joe’s, LEGO, and Mars Inc. thrive without shareholder pressure.

Yet most investors have zero exposure to these companies, relying solely on public stocks that represent a shrinking slice of the economy. By the time firms like Airbnb or Snowflake IPO, their early hyper-growth phases—and biggest returns—are often already captured by private backers.

The Real Estate Parallel: Both Are Escaping Wall Street

Just as private companies avoid the quarterly earnings circus, private real estate sidesteps the volatility of public REITs.

Consider the synergies:

• Cash Flow Stability: Private companies reinvest profits into growth; private real estate delivers steady rental income. Together, they balance growth and stability.

• Control & Customization: Private equity owners optimize operations without activist investors; real estate operators renovate properties or pivot leases without public scrutiny.

• Long-Term Horizons: Both asset classes prioritize decade-long value creation over quarterly metrics.

For example, a private manufacturing firm might partner with a private real estate fund to build a state-of-the-art factory—a collaboration invisible to public markets but lucrative for investors in both ventures.

The FOMO Math: Missing Trillions in Value

Private markets now eclipse public markets in key areas:

• Job Creation: 85% of large employers (>500 workers) are private.

• Revenue Scale: There are more private U.S. companies with $1B+ revenue than public ones.

• Innovation Spend: Private firms out invest public peers in R&D and infrastructure.

Yet the average investor allocates <5% to private markets.

This mismatch is starkest in sectors like:

• AI & Robotics: Private funding for AI startups hit $50B in 2023—double 2022’s total.

• Healthcare: 80% of clinical-stage biotech’s are private.

• Supply Chain Tech: Private firms dominate logistics automation and inventory software.

Meanwhile, private real estate compounds these opportunities. Industrial warehouses (critical for e-commerce) and data centers (powering AI) are often owned by private funds that also invest in the tech firms leasing them—a circular economy Wall Street can’t replicate.

The Real Estate Advantage: Anchor Your Private Portfolio

For investors wary of private equity’s complexity or venture capital’s risk, private real estate offers a tangible entry point into the private economy with unique benefits:

• Collateralized Value: Unlike equity in a SaaS startup, real estate is backed by physical assets.

• Inflation Hedge: Rents and property values rise with CPI; tech valuations don’t.

• Predictable Cash Flow: A biotech startup may burn cash for years, but a multifamily property generates rent on Day 1.

Pairing private equity with private real estate creates balance.

The Institutional Blueprint—and Why Individuals Lag

Pension funds and endowments allocate 25–30% to private markets (with real estate as the largest share).

Why?

Because over 20-year periods, private equity and real estate have outperformed public equities by 3–4% annually (Cambridge Associates). Individuals, however, remain overexposed to a narrowing pool of public stocks—a risk magnified by the S&P 500’s top-heavy concentration in tech giants.

Escape the Wall Street Bubble

The economy’s growth has moved beyond Wall Street. Private companies drive innovation, hiring, and revenue, while private real estate houses the infrastructure enabling their growth. By ignoring these markets, investors not only miss diversification—they miss the majority of the economy’s value creation.

For high-income earners, the path forward is clear:

• Allocate 20–30% to private markets, blending private equity, venture capital, and real estate.

• Use real estate as a stabilizer—its cash flow and tangibility offset early-stage private equity risk.

• Capitalize on synergies (e.g., tech startups needing data centers, manufacturers needing warehouses).

The age of “public markets only” investing is over. The future belongs to those who invest where the economy truly lives: in private boardrooms, factories, and apartment complexes—not on Wall Street’s shrinking exchange floors.

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Michael Foley

Michael Foley, president and CEO of Humabilt Capital, oversees the entitlement process, funding, and operations for Humabuilt Capital. Mr. Foley has been a full-time real estate investor since 1995 during which time he has developed hundreds of single-family homes, townhomes, condominiums, and apartments. Mr. Foley started his investment ventures in Long Beach, California, and has expanded to Apex and Durham North Carolina. Mr. Foley is a graduate of the University of California at San Diego.