Investing in early-stage businesses can be very rewarding, but it involves a number of risks and challenges. If you choose to invest through KarenCrowd.com, you need to be aware of and accept following important considerations:
1. Loss of Capital
Most early-stage businesses fail, and if you invest in a business through the platform, it is significantly more likely that you will lose all of your invested capital than that you will see a return of capital or a profit. You should not invest more money through the platform than you can afford to lose without altering your standard of living.
Any investment you make through the platform will be highly illiquid. It is very unlikely that there will be a secondary market for the shares of the investee company. This means that you are unlikely to be able to sell your shares until and unless the investee company floats on a securities exchange or is bought by another company. 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. Early-stage businesses rarely pay dividends. This means that if you invest in a business through the platform, even if it is successful you are unlikely to see any return of capital or profit until you are able to sell your shares in the investee company.
Any investment you make through the KarenCrowd.com platform is likely to be subject to dilution. This means that if the business raises additional capital at a later date, it will issue new shares to the new investors, and the percentage of the investee company 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 work to your disadvantage.
Investing in early-stage businesses should only be done as part of a diversified portfolio. This means that you should invest relatively small amounts in multiple businesses rather than a lot in one or two businesses. It also means that you should invest only a small proportion of your investable capital in early-stage businesses as an asset class, with the majority of your investable capital invested in safer, more liquid assets.
5. Lack of Information for Monitoring and Valuing Companies
The Investor may not be able to obtain all information it would want regarding a particular company on a timely basis or at all. It is possible that the Investor may not be aware on a timely basis of material adverse changes that have occurred with respect to certain of its investments. As a result of these difficulties, as well as other uncertainties, an investor may not have accurate information about a company's current value.
8. Lack of Control
Because the company's founders, directors and executive officers may be among the company's largest stockholders, they can exert significant control over the company's business and affairs and have actual or potential interests that may depart from those of subscribers in the offering.
If you have questions about the Risk Warning or would like to suggest improvements, please contact us at info@KarenCrowd.com.