Investing in early-stage and other growth-focused businesses can be very rewarding, but it involves risks and challenges. If you choose to invest in businesses displayed on StartupSpider, you need to be aware of and accept the following important considerations:
1. Portal technology
StartupSpider acts only as a “portal”, which connects various Crowdfunding platforms. If you decide to invest in businesses displayed on StartupSpider the investment does not take place on StartupSpider, but on the corresponding Crowdfunding platform (from where the business opportunity is sourced).
• As SpartupSpider is not the Crowdfunding platform where the investment takes place, StartupSpider cannot take responsibility for any issues related to the investment or issues which you may face with the respective Crowdfunding platform.
• Also, this means for you to be aware of and accept the Risk and guideline of that platform.
2. Loss of Capital
Most early-stage businesses and many other growth-focused businesses fail, and if you invest in a business displayed on the platform, it is significantly more likely that you might lose all of your invested capital than you will see any return of capital or a profit. You should not invest more money in the types of businesses displayed on the platform than you can afford to lose without altering your standard of living.
Almost all investments you make in businesses displayed on the platform will be highly illiquid. It is very unlikely that there will be a liquid secondary market (on an exchange) for the shares of the business. This means you should assume that you will be not 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. For businesses for which secondary market opportunities are available (including any available on the platform), it can be difficult to find a buyer or seller, and investors should not assume that an early exit will be available just because a secondary market exists.
4. Rarity of Dividends
Businesses of the type displayed on the platform rarely pay dividends. This means that if you invest in a business through the platform, even if it is successful it is most unlikely that you 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 when you make your investment.
Any investment you make in a business displayed on the platform is likely to be subject to dilution. This means that if the business raises additional capital at a later date / stage, it will issue new shares to the new investors, and the percentage of the business that you own will decline. These new shares may also have certain preferential rights to dividends, sale proceeds and other matters, and the exercise of these rights may turn out to your disadvantage. Your investment may also be subject to dilution due to a result of the grant of options (or similar rights to acquire shares) to employees of the service provider or to certain other contacts of the business.
If you choose to invest in businesses of the type displayed on the platform, such investments should only be made as part of a well-diversified portfolio. 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 assets. It also means that you should spread your investment between multiple businesses rather than investing a larger amount in just a few.
7. Important information about fund and convertible campaigns
The portal connects you with platforms which provide opportunities to invest in startups and growth-focused businesses by the way of the following types of campaigns:
- Debt (Bonds)
- Reward based crowdfunding
Information about these campaigns is available here
. All the risk warnings above apply to each of those types of campaigns but you should also be aware of the following in respect of funds and convertibles. As each fund and convertible campaign is different, please ensure you read the campaign text and accompanying documentation carefully.
Fund campaigns allow you to invest in multiple companies that are selected by predetermined criteria, and are often set up by a fund organizer (who may run an accelerator or venture capital fund, for example). Whilst each investment in a company will be structurally the same as a regular equity campaign, your money will be invested company-by-company over a longer period, meaning that your shares in each company will be issued at different times.
Convertible campaigns allow you to invest in a company in return for a contractual right for shares to be issued at the occurrence of a trigger event (generally another round of funding or a longstop date). In return for investing early, you will receive a discount on the price of the shares issued and sometimes the benefit of a valuation cap. Whilst the investment in the company will be structurally the same as a regular equity campaign, your shares will be issued later than your money has been invested. There are also other types of convertables.