The following information is intended to inform prospective investors of the risks
Every investor should be aware that investing in Regulation Crowdfunding offerings on FanVestor CF’s platform involves a high degree of risk, regardless of any assurance(s) provided by the issuer. The following considerations, among others, should be carefully evaluated before making a Regulation Crowdfunding investment in a securities offering posted on this website.
There can be no assurance that:
- Any information or projection by the company has been validated or is reliable.
- As a startup the issuer will achieve its business plan.
- An investor will not lose its entire investment.
- An investor will receive any return on its investment.
- Any investment purchased through the platform will be able to be resold.
Examples of Specific Risks
Inherent risks common to all startup investments. Investments in startups involve a high degree of risk:
- Financial and operating challenges confronting startups are significant. While targeted returns should reflect the perceived level of risk in any investment situation, such returns may never be realized and/or may not be adequate to compensate an investor for risks taken.
- Loss of an investor’s entire investment is possible and frequently occurs.
- Investments are illiquid and without any ready market.
- The timing of any return on investment is highly uncertain.
Investment in new concepts and technologies. The value of an investment in a startup may be susceptible to factors affecting the relevant industry and/or to greater risk than investment in a broader range of securities. Some of the many specific risks faced by startups include:
- Rapidly changing technologies–products or technologies that may quickly become obsolete.
- Scarcity of management, technical, scientific, research and marketing personnel with appropriate training.
- Over-reliance on one technology, supplier or customer.
- More experienced or larger competitors.
- The possibility of lawsuits related to intellectual property.
- Rapidly changing investor sentiments and preferences with regard to technology sector investments (which are generally perceived as risky).
- Exposure to government regulation, making these companies susceptible to changes in government policy and delays or failures in securing regulatory approvals.
Changing economic conditions: The success of any investment activity is determined to some degree by general economic and financial markets conditions.
- The availability, unavailability, or hindered operation of external credit markets, equity markets and other economic systems which an individual startup may depend on to achieve its objectives may have a significant negative impact on a startup’s operations and profitability.
- Over-reliance on one source of financing.
- The stability and sustainability of growth in global economies (and as it relates to crypto-currencies, new and emerging decentralized economies) may be impacted by terrorism, acts of war, epidemics or pandemics, such as Covid-19, legislative and regulatory changes and/or fragmentation are among the variety of unpredictable events startups are exposed to.
- There can be no assurance that such markets and economic systems will be available or will be available as anticipated or needed for an investment in a startup to be successful.
Future and past performance:
- The past performance of a startup or its management does not predict its future results.
- There can be no assurance that targeted results will be achieved.
- Loss of principal is possible, and even likely, on any given investment.
Difficulty in valuing startup investments. It is enormously difficult to determine values for any startup. The challenges include:
- It is difficult to determine the magnitude of the risks applicable to a given startup and the likelihood that a given startup’s business will be a success.
- There may not be a ready market ready for a startup’s securities or other source(s) of price information on arm’s length transactions.
- There is likely to be little–if any–public information about the operating or financial history for startups. Given this difficulty in valuation, these investments are often not available to use as collateral like other financial instruments.
Limited operating history of startups.
- A startup may be a newly formed entity.
- A startup may have little or no operating history.
- Each offering should be evaluated on the basis that the startup’s business plan and projections may not prove accurate and that the startup may not achieve its objective.
Minority investment and limited rights. All or a significant portion of an investor’s investment in a start-up will represent a minority stake(s) in privately held companies or the right to assets not yet created by the startup.
- An investor’s interest in a startup may be non-voting shares or may represent a debt interest.
- Many investments will never provide the investor the right or ability to vote or influence company leadership in any way.
- Even with voting shares, minority stakes will have neither the control characteristics of majority stakes nor the valuation premiums accorded majority or controlling stakes.
- Later capital raises may reduce or dilute percentage ownership of an investor.
- Later capital raises may reduce other investor rights such as voting rights.
Lack of investor control.
- Investors in a startup will not participate in decisions with respect to the startup’s business and affairs.
- Investors will be reliant on the existing management and board of directors of such companies, which may include representatives of other financial investors with whom the investor is not affiliated and whose interests may conflict with the interests of the investor.
- Decisions made by the startup’s management may be more beneficial for some investors than for others.
- Startup management may tend to consider the investment and tax objectives of its shareholders as a whole when making decisions on investment structure or timing of a sale, and not the individual circumstances of any investor, nor do they have any legal duty to do so.
No assurance of additional capital for startups. After an investor has invested in a startup, continued development and marketing, administrative, legal, regulatory or other expenses, may require that it obtain additional financing.
- Startups generally have substantial capital needs that are typically funded over several stages of investment.
- Such additional financing may not be available on favorable terms, or at all.
Lack of information for monitoring and valuing startups
- The investor may not be able to obtain all information it wants regarding a particular startup.
- 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.
Legal and regulatory risks associated with crowdfunding
- There is no assurance that a particular startup will comply with all requirements of federal law and Regulation Crowdfunding whether before, during or after an offering.
- Once an offering is completed, FanVestor CF does not have a continuing obligation to monitor the timeliness and accuracy of the issuer’s Form C, its shareholder records or its financial statements.
- Investors should consult their own professional advisors with respect to the tax consequences of an investment in a startup under federal, state and local law.
- The structure of any investment in a startup may not be tax efficient for any particular investor.
Forward-looking statements: The information a startup makes available to investors may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
- These statements can be identified by the fact that they do not relate strictly to historical or current facts.
- Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance.
- Any forward-looking statement made by a startup speak only as of the date on which it is made. Startups are under no obligation to, and generally they expressly disclaim any obligation to, update or alter their forward-looking statements, whether as a result of new information, subsequent events or otherwise.
The foregoing risks do not purport to be a complete explanation of all the risks involved in acquiring equity or debt securities in a startup under the JOBS Act and Regulation Crowdfunding. Each investor is urged to seek their own independent legal and tax advice, to read all the investment offering documents, ask questions and review community comments and take ample time to evaluate each opportunity before deciding to invest in a startup on FanVestor CF, or elsewhere.