You may be investing in entrepreneur members that have recently started or are in very early stages of their development. You will be able to benefit from the rewards that come with success of these businesses, but there is also a risk that things may not turn out as you hope. We have set out what we consider to be the most important areas of risk which you should fully understand and accept before you make an investment.
Loss of Capital
Most new businesses fail and if you invest in a start-up business it is more likely than not that you will lose the capital that you have invested. If the entrepreneur member fails then neither it nor we will pay back what you have lost. There are also risks in investing in established businesses that wish to grow rapidly. If they succeed then there will be profits but if they fail you will lose what you have invested. It is important that you take these matters into account when deciding what to invest in, how much to invest, and how to spread your investments.
Once you have made your investment through the site you will not find it easy to sell any shares to which you are beneficially entitled, as the shares are unlikely to be listed on a public market and even successful companies do not always list their shares. Your money is likely to be tied to your investment and will not easily be liquidated because the shares to which you are beneficially entitled will not be sold easily. Your investment in an entrepreneur member will probably remain illiquid until the entrepreneur member floats on a recognised exchange or is sold.
Do Not Expect Dividends
The entrepreneur member in which you can invest on the site will almost never pay dividends. A company can only pay dividends to its shareholders out of profits but most entrepreneur members seeking investment on the site will wish to re-invest profits into the business to help it grow and make it more valuable. You should not invest in entrepreneur members on the site expecting a regular income.
Change of Management and Small Company Risks
The entrepreneur members in which you can invest will often be relatively small and highly dependent on the skills of a small group of key executives. Such companies are run by their boards of directors who are accountable to the shareholders and who can be changed at the behest of the shareholders who have voting shares. Most entrepreneur members on our platform offer non-voting shares and therefore you will not have a right to change the management of the entrepreneur member if you feel that a change is needed. Investments and the companies in which you can invest may often be especially vulnerable to changes in technology, government actions, changes in statute and competitive pressures.
When you invest in an entrepreneur member on the site you will in fact be acquiring a beneficial interest in a specific percentage of the entrepreneur member. However, as the entrepreneur member continues to raise money, new shares will be issued and your percentage will be diluted. If the entrepreneur member decides to raise more money, it may issue new categories of shares which have different rights from your shares and this may dilute the value of your beneficial shareholding in the entrepreneur member.
Most investment advisers would recommend that you would only invest in businesses such as those that appear on the site as part of a diversified investment strategy. This would mean investing in small amounts spread over many businesses rather than putting all your eggs in one basket. It is also important that only a small proportion of the total capital that you have to invest is invested in businesses such as those that appear on the site. To do otherwise would substantially increase your risk.
Different businesses have different risks. It is not possible for us to list all special risks that might apply to investments in entrepreneur members on the site. You should consider the risks that apply to the category of business in which they are thinking of investing.
We carry out some preliminary due diligence in respect of the entrepreneur members on the site seeking investment. However, it is your responsibility to conduct your own due diligence and investing without conducting due diligence significantly increases your risks. If you require any kind of financial investment advice you should consult your own financial adviser.
The value of shares in any entrepreneur member may go down as well as up and you may not get back the full amount you invested. You should not consider investing unless you can afford a total loss of your investment. Investments in unquoted shares carry higher risks than investments in quoted shares and involve a degree of risk as well as the opportunity of reward. Past performance is not a reliable indicator of future results.
Any projections of future performance are based on the internal calculations and opinions of the entrepreneur member and are subject to change at any time. Forecasts are not a reliable indicator of future results.
The impact of tax on successful and unsuccessful investments can be significant. We do not give or offer any advice on your tax affairs or the entrepreneur members seeking investment. You will need to consult your own accountant or financial adviser to obtain such advice. Any tax reliefs referred to are those currently applying or expected to apply. However, you should be aware that tax reliefs can change. Their applicability and value will depend upon your individual circumstances, and you should seek you own independent professional advice on any particular tax situation and the application of such tax reliefs prior to making any investment. Whilst many of the investments set out on the Site may qualify for EIS and other tax advantageous breaks, there is no guarantee that EIS status or other tax efficient status can be maintained throughout the life of the investment.
Crowdsourcing activities are not regulated by the Financial Conduct Authority.