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A Rare Look Inside a Private Tech Stock Loan

The business of helping shareholders in private tech companies turn their stock into cash is not without risk. But for those investors willing to lend money against stock in companies before they go public, the returns can be generous.

One such investor, 137 Ventures, appears to have made at least a 50 percent return in 17 months on a loan it made in 2011 against stock in SolarCity, a year before the solar energy firm went public, according to public filings. 137 Ventures wouldn’t comment and SolarCity did not respond.

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This type of investment deal isn’t bulletproof. Many of the same risks of venture capital apply—the collateral doesn’t protect 137 Ventures if the stock went to zero, say. In that case, the firm wouldn’t get its money back.