Imagine checking your brokerage account and seeing your S&P 500 index fund pop nicely this quarter.
Solid earnings growth, right? The economy’s humming along.
Not so fast.
A big chunk of those “earnings” didn’t come from selling more ads, chips, or cloud services. As it turns out, they came from something stranger: startups!
For example, in Q1 2026, the startup investments of Alphabet, Amazon, and Nvidia helped these giants book paper profits of $69.2 billion. Overall, this phenomenon inflated the quarterly earnings of the entire S&P 500 by double digits.
It’s like the market got a surprise bonus from the private startup world, without most investors realizing it.
Today we’ll look at the pros and cons of this phenomenon — and reveal a better way to profit from startups.
The Accounting Trick That’s Supercharging Public Earnings
The accounting rules for public companies are clear:
If a startup they backed raises money at a higher valuation, they get to book that “paper profit” on their income statement.
No cash changes hands. This isn’t revenue from core operations. It’s just the magic of “mark-to-market” accounting in a frothy AI investment boom.
These three giants alone saw massive windfalls from these paper profits. They represented 60% of Alphabet’s reported net income this quarter, 51% of Amazon’s, and 27% of Nvidia’s. Across the S&P 500, this juiced overall growth numbers dramatically, pushing up reported earnings growth well above the historical average.
Botton line: we’re in an era of intense capital flowing into private AI infrastructure and late-stage tech. Valuations have gone parabolic. And now, Big Tech’s portfolios are riding that wave, and the accounting rules turn those gains into instant earnings boosts.
Indirect Exposure: Better Than Nothing, But…
Here’s the silver lining for regular investors:
You can get some exposure to hot private startups by owning shares in these public giants or a broad index fund. Roughly 12% of Q1 S&P profits came from this phenomenon. It’s like owning a slice of the private market’s upside before those companies even go public or join the index.
In a world where many of the best opportunities stay private longer than ever, that’s worth something.
But the fact is, it pales in comparison to getting direct exposure.
With an index fund, you’re getting diluted ownership across hundreds of companies. Your share of those startup markups is tiny, indirect, and fully exposed to the terrifying daily volatility of the public stock market.
If private valuations cool off or a down-round hits, those paper gains can evaporate just as quickly, dragging reported earnings and stock prices with them.
Here’s a better option…
The Power of Going Direct
Go direct!
Direct investment in carefully selected startups lets you get in on the ground floor — often at valuations far below where the public markets eventually price them.
You own actual equity. So when a company grows, exits, or IPOs, the upside flows straight to you, without the noise of public market swings dictating your daily emotions. No waiting for quarterly markups or worrying about how Wall Street interprets them.
Yes, startups are risky. Most don’t succeed. But the winners can deliver asymmetric returns that crush public-market averages. Early backers of companies like those in the AI boom have seen life-changing multiples — well before any IPO pop or post-IPO reality check.
At Crowdability, that’s exactly what we help everyday investors do. For over a decade, we’ve curated access to high-potential private companies that were once reserved for venture capitalists and the ultra-wealthy.
We dig into emerging sectors, vet deals, and highlight opportunities in areas like AI, health tech, consumer innovation, and more. Our members get transparent details on the companies, the teams, the traction, and the risks — so you can invest with eyes wide open.
The result is real ownership in companies that could become the next big thing — without relying on Big Tech’s accounting footnotes for your exposure.
Happy investing.
Founder
Crowdability.com
