Please read carefully before investing through crowdfunding!
Investing in early-stage businesses can be very rewarding, but it involves a number of risks and challenges!
RISK WARNINGInvesting in early-stage companies has one major advantage, that being the prospect for huge potential gains (mainly through surplus values) in the event that the company succeeds in its business. However, this comes at the cost of considerable financial risks, including potential loss of invested capital, illiquidity, lack of dividends and dilution.
If you choose to invest in a Project via WinnersFund, you confirm your awareness and acceptance of the following considerations:
Potential loss of invested capitalIt is statistically confirmed that most early-stage businesses fail. Therefore, the statistical probability (risk) of losing the capital invested in startup companies is much higher than the potential for high future returns (i.e. profits through dividends or surplus values based on future valuations). It is recommended that you do not invest via Crowdfunding Platforms more money than you can afford to lose without harming your living standards.
IlliquidityThe Crowdfunding industry is still at its infancy. Therefore, there are currently no primary or secondary markets, like a Stock Exchange, where you might easily trade shares you receive from the crowdfunded Companies you invest in. As such, any investment you make via Crowdfunding Platforms, like WinnersFund, will probably be illiquid for a long period of time. This period ranges from two to five years following the day of the investment, independently of the success of the business you invested in. Therefore, funding a Company via Crowdfunding must be considered as a long-term investment.
Rarity of dividendsThe high startup costs, which every newly established business is incurred with, make income in the form of dividends highly unlikely in the first years following the date of investment. You should thus be prepared to wait for a long time before receiving a return on your investment through dividents, as even successful start-up businesses tend to take time to generate distributable profits.
Any investment you make to a startup company is potentially subjected to dilution. Dilution is the lowering of your shareholding percentage while keeping the number of shares you initially acquired. It results from future issue(s) of additional shares by the company you invest in. It is usually the result of the company's efforts to acquire more capital (e.g. through direct investment of third parties in Capital Increase(s), Initial Public Offering, conversion of convertible bonds etc.), or stock options exercised by employees. All Crowdfunded via WinnersFund companies are required to adopt a preference clause in favour of the Crowdfunding Investors, that being an article in their bylaws which shall gives to Crowdfunding investors preference over future investors in any future call for a Capital Increase. However, in case you may not participate in such a call, dilution may shift positions of the stock. If you feel unfamiliar with the above terminology and have trouble understanding the meaning of dilution, it is advised to refrain from investing through Crowdfunding without professional advice.
According to the Financial Conduct Authority's (FCA) recommendations, investing in early-stage businesses should only be pursued as part of a diversified portfolio. Diversification is one of two major strategies aiming at reducing investment risk (the other is hedging). The notion of diversification is included in the proverb "Don't put all your eggs in one basket" (all your money in one company), since "dropping the basket" (a single business failure) may break all the eggs. It is obvious that placing each "egg", that being part of the invested money, in a different "basket", that being a different startup, is more diversified. In principle, there is more risk of losing one "egg" but less risk of losing all of them, especially when advanced diversification strategies are employed.