Investing in startups, early-stage and/or other growth-focussed businesses can be extremely rewarding, however there are a number of inherent risks and challenges that one should be aware of. If you choose to invest in any businesses displayed on TheStartupCrowd.com, or any of its affiliate companies, one needs to be aware of and accept several important considerations. To help you understand the risks involved when investing in companies on Spark CrowdFunding, please read the following risk summary carefully. It is prudent for any type of investor to diversify their investments. As a general guide, it is prudent that investors should not commit more than 10% of their available assets for investment into any one company.
- Loss of entire investment and/or tax relief
It is common amongst early-stage businesses and growth-focussed businesses fail, and if you invest in a business displayed on the platform, it is significantly more likely that you will lose all of your invested capital than you will see any return of capital or a profit. You should never invest more capital in the types of businesses displayed on the platform, than you can afford to lose without altering your standard of living. Should a business opportunity that you choose to invest in fails, neither the company – nor TheStartupCrowd, or its affiliates – will repay you any part of your investment.
Tax relief may also be forfeited due to personal circumstances and/or due to the activities of a company and/or individual. It is recommended that one should consider this carefully before investing.
- Illiquid Investment Opportunity
Almost all investments you make in businesses displayed on the platform will be highly illiquid. Liquidity is the ease with which you can sell your shares after you have purchased them. Buying shares in businesses pitching through TheStartupCrowd cannot be sold easily and they are unlikely to be listed on a secondary or primary trading market. This means that one should assume that one will be unlikely to be able to sell your shares until and unless the business floats on a stock exchange or is bought by another company; and, even if the business is bought by another company or floats, your investment may continue to be illiquid. Even for a successful business, a flotation or purchase is unlikely to occur for a number of years from the time you make your investment.
- Dividend opportunities or lack thereof
Businesses that are in the early stages of development, and the type of companies displayed on the platform rarely pay dividends. This means that if you invest in a business through TheStartupCrowd, even if it is successful, you are still unlikely to see any return of capital or profit until you are able to sell your shares. Even for a successful business, this is unlikely to occur for a number of years from the time you make your investment. Profits are typically re-invested into the business to fuel growth and build shareholder value. Businesses have no obligation to pay shareholder dividends.
Any investment you make in a business displayed on TheStartupCrowd is likely to be subject to dilution in the future. This means that should a business receive additional capital at a later date, it will issue new shares to new investors, and the percentage of the business that you own will decline. Dilution affects every existing shareholder who does not buy any of the new shares being issued. Thus, existing shareholder’s proportionate shareholding of the company would be reduced, or ‘diluted’.
These new shares may also have certain preferential rights to dividends, sale proceeds and other matters, and the exercise of these rights may work to your disadvantage. Your investment may also be subject to dilution as a result of the grant of options (or similar rights to acquire shares) to employees of, service providers to or certain other contacts of, the business.
Should you decided to commit funds to any investment it is prudent to diversify your investment. Portfolio diversification requires one to spread your capital across a variety of different types of investments with varying types of risks, to reduce your overall loss exposure. This means that you should invest only a relatively small portion of your investable capital in such businesses, and the majority of your investable capital should be invested in safer, more liquid investment opportunities. It also means that you should spread your investment between multiple businesses and investment opportunities, rather than investing a larger amount in a smaller number opportunities.
TheStartupCrowd is aimed solely at investors who are sufficiently sophisticated and have sufficient understanding to assess these risks and make their own, autonomous investment decisions and have been categorised as such on this platform. Should an investor use this Platform in any capacity, they acknowledge and agree that they have both read and understood the following risks and warnings. If an Investor does not fully comprehend any of the risks or warnings set out below they should take advice from an Independent Financial Advisor, solicitor or similar qualified professional before using the Platform – or refrain from using the Platform whatsoever. The following list of risk factors is not intended to be exhaustive, nor a complete explanation of the risks involved. Any decision to make an investment through this platform is made entirely at the investor’s own risk, and TheStartupCrowd will not be liable for any investment decisions made and/or their consequences.
- Investee projections and forecasts
For any investment opportunity, the Campaign Listing, Business Summary or Information Memorandum may contain certain assumptions, assertions, statements, estimates, projections, forecasts and data provided by the Investee with respect to the anticipated future performance of the Company’s business and/or its industry. Such assumptions, assertions, statements, estimates, projections, forecasts and data are only a reflection of a variety assumptions by the Company’s directors, managers and/or employees concerning anticipated results, such assumptions which may or may not prove to be realistic and/or correct. Realised results may vary significantly from such statements, estimates, projections, forecasts and data, and such variations may be material. TheStartupCrowd accepts no liability for the accuracy of any purported information by investees.
- Investee operating history
The vast majority of investment opportunity displayed on TheStartupCrowd platform are recently established, early-stage companies and may lack any trading or other operating history and/or accounts. The success of the Company will depend upon a variety of factors, including the ability of the company raising capital to develop and/or further develop their current offerings to deliver on a strategy to achieve that Company’s objectives and goals. Neither TheStartup, nor any of it representatives or representatives, accept any responsibility for the execution of the Company’s strategy after the equity crowdfunding campaign completes.