Please read this warning carefully before using this Website.
Investing in start-up and growth companies involves a high degree of risk. You should be prepared to lose some or all of the money that you invest – it is significantly more likely that you will lose the money you invest than make a profit. In choosing to invest through VentureFounders you should be aware of the factors set out below.
Loss of your investment
The majority of start-up businesses fail or do not grow as planned and therefore investing in these businesses may involve significant risk. It is likely that you may lose all, or part, of your investment. You should only invest an amount that you are willing to lose. If a business you invest in fails, none of the money you invested will be repaid.
You must diversify your investment portfolio
By spreading your money across multiple investments you reduce overall risk. Diversification is an essential part of investing. You should invest relatively small amounts in a range of investment opportunities rather than concentrating your investment in a small number of companies. By building a diversified portfolio you spread risk and increase the chance of an overall return on your investments.
You should invest only a limited proportion of your available investment funds in start-up and growth stage companies and you should balance these investments with safer, more liquid investments with a more predictable and secure return.
Risks when buying shares
Investing in shares does not give a regular return on your investment. Most of the investment opportunities VentureFounders will bring to you are start-ups or early stage companies, and these companies will very rarely pay dividends to their shareholders (if at all).
Even if a company you invest in is very successful you are unlikely to see any return on your investment until you are able to sell your shares as part of a sale of all of the shares in the relevant company. This is unlikely to be for a number of years after the date of your investment regardless of how profitable or successful the company in question is.
Lack of liquidity
Any investment you make through VentureFounders will be extremely illiquid. Shares in the companies VentureFounders is seeking investment for cannot be sold easily and they are unlikely to be listed on any investment exchange. It is very unlikely that you will be able to sell your shares until such time as the relevant company is sold in its entirety or lists its shares on an investment exchange. Such an event is unlikely to occur for a number of years after the date of your investment regardless of how profitable or successful the company in question is.
Any investment in shares made through VentureFounders is likely to be subject to dilution in the future as the company in question raises additional capital. It is very likely that all companies you invest in through VentureFounders will require additional financing in the future. Dilution occurs when a company issues more shares. Dilution affects every existing shareholder who does not buy any of the new shares being issued. As a result, an existing shareholder's proportionate shareholding of the company is reduced or diluted and your proportionate share of the economic and voting rights in the company will be reduced accordingly.
In addition, 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 and significantly reduce your returns. 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 parties connected with, the investee company.
You will only acquire a minority interest in companies you invest in and, in most cases, VentureFounders investors as a group will only have a minority interest. Buying a minority interest entails certain risks. You will have little or no control over the company and its business.
Limited Operating Histories
The companies you invest in through the Website are unlikely to have established any revenues or operations that will provide financial stability in the long term. There can be no assurance that companies will realise their plans on the projected timetable in order to reach sustainable or profitable operations. It is very likely that companies will require additional capital funding. There can be no assurance that such capital shall be available at reasonable cost, or that it would not materially dilute the investment of existing shareholders if it is obtained.
Availability of tax reliefs
A number of the investment opportunities available to UK investors on the Website are expected to qualify for relief under the Enterprise Investment Scheme (“EIS”) and/or the Seed Enterprise Investment Scheme (“SEIS”). Investors should be aware that the availability of such reliefs is dependent on investors’ own personal circumstances, as well as those of the company in question, and are subject to change. There can be no guarantee that any particular tax relief will be available at any relevant time or that the company in question will continue to be a qualifying investment.
Whilst may of the investment opportunities on the Website may qualify for EIS/SEIS relief and other advantageous tax breaks, there is no guarantee that EIS/SEIS or other relevant status can be maintained throughout the life of your investment. Non-compliance may result in the loss or partial clawback of any tax reliefs claimed together with potential interest penalties.
Investors should seek their own independent professional advice on their particular tax situation and the application of such tax reliefs prior to making any investment.