Investing in early-stage and other growth-focused businesses can be very rewarding, but it involves several risks and challenges. The following risk factors are not intended as a substitute for professional legal, tax or financial advice. These risks factors are non-exhaustive and are intended to highlight certain risks associated with investing in securities (equity) that are not registered with the Securities and Exchange Board of India. This investment is highly speculative and should not be made by anyone who cannot afford to risk their entire capital contribution. In addition to these risks, you should carefully consider the specific information and risks disclosed by an issuer issuing the securities (referred to herein as the "Company"). We strongly advise you to consult an independent financial advisor before investing.
- Limited operating history.
The Company is still in an early phase and is just beginning to implement its business plan. There can be no assurance that it will ever operate profitably. The likelihood of its success should be considered in light of the problems, expenses, difficulties, complications and delays usually encountered by companies in their early stages of development, with low barriers to entry. The Company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.
- Loss of Capital
Investments in startups/early-stage ventures (“Companies”) bear an inherent risk of not assuring full-fledged profits or returns from the investments, since these companies may not have a business model or established concept which can be used as a reference for 100% success. It is for this reason that it is generally recommended to create a diversified portfolio of investments, which will have the potential to deliver gains and absorb capital losses in the aggregate.
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 for the shares of the business. This means you should assume that you will be unlikely to be 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 several 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.
- 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 you are unlikely to see any return of capital or profit until you can sell your shares. Even for a successful business, this is unlikely to occur for several years from the time you make your investment
- 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. The Company's founders, directors and executive officers own or control a significant percentage of the Company. Additionally, the holdings of the Company's directors and executive officers may increase in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted or if they otherwise acquire additional interest in the Company. The interests of such persons may differ from the interests of the Company's other stockholders, including purchasers of securities in the offering. As a result, in addition to their board seats and offices, such persons will have significant influence over and control all corporate actions requiring stockholder approval, irrespective of how the Company's other stockholders, including purchasers in the offering, may vote, including the following actions:
- To elect or defeat the election of the Company's directors;
- To amend or prevent amendment of the Company's Certificate of Incorporation or By-laws;
- To effect or prevent a merger, sale of assets or other corporate transaction; and
- To control the outcome of any other matter submitted to the Company's stockholders for a vote.
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, 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 work to your disadvantage. 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 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.
The Company’s forward-looking statements, containing opinions and beliefs, are based on several estimates and assumptions that are subject to significant business, economic, regulatory, and competitive uncertainties. Though these statements can be used for understanding the objectives and goals of the Companies, such statements should not be considered as undertakings from the Companies and should be considered merely being speculative and have subjective nature.
- Delay or inability to fulfil obligations
The Company may require funds over its existing cash resources to fund operating deficits, develop new products or services, establish and expand its marketing capabilities, and finance general and administrative activities. Due to market conditions at the time the Company may need additional funding, or due to its financial condition at that time, the Company may be unable to obtain additional funding as and when it needs it. If the Company is unable to obtain additional funding, it may not be able to repay debts when they are due and payable. If the Company can obtain capital it may be on unfavourable terms or terms which excessively dilute then-existing equity holders. If the Company is unable to obtain additional funding as and when needed, it could be forced to delay its development, marketing and expansion efforts and, if it continues to experience losses, potentially cease operations.
- Determination of Offer value
The offering price was not established in a competitive market but was determined by the placement agent and the Company (not Shuru-Up). The offering price bears no relationship to the Company's assets, book value, historical results of operations or any other established criterion of value. The offering price should not be considered as an indication of the Company's actual value or the value of the securities.
- Use of Investment proceeds
The Company's management may have broad discretion in how the Company uses the net proceeds of an offering. Unless the Company has agreed to a specific use of the proceeds from an offering, the Company's management will have considerable discretion over the use of proceeds from their offering. You may not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
- Inability to manage its potential growth
For the Company to succeed, it needs to experience significant expansion. There can be no assurance that it will achieve this expansion. This expansion, if accomplished, may place a significant strain on the Company's management, operational and financial resources. To manage any material growth, the Company will be required to implement operational and financial systems, procedures and controls. It also will be required to expand its finance, administrative and operations staff. There can be no assurance that the Company's current and planned personnel, systems, procedures and controls will be adequate to support its future operations at an increased level. The Company's failure to manage growth effectively could have a material adverse effect on its business, results of operations and financial condition.
The Company faces competition from other companies, some of which might have received more funding than the Company has. One or more of the Company's competitors could offer services similar to those offered by the Company at significantly lower prices, which would cause downward pressure on the prices the Company would be able to charge for its services. If the Company is not able to charge the prices it anticipates charging for its services, there may be a material adverse effect on the Company's results of operations and financial condition. In addition, while the Company believes it is well-positioned to be the market leader in its industry, the emergence of one of its existing or future competitors as a market leader may limit the Company's ability to achieve national brand recognition, which could also have a material adverse effect on the Company's results of operations and financial condition.
- Unassured market acceptance
While the Company believes that there will be significant customer demand for its products/services, there is no assurance that there will be broad market acceptance of the Company's offerings. There also may not be broad market acceptance of the Company's offerings if its competitors offer products/services which are preferred by prospective customers. In such an event, there may be a material adverse effect on the Company's results of operations and financial condition, and the Company may not be able to achieve its goals.
- 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 concerning 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.
You may be liable to pay taxes on any dividends or gains you receive from your investments in the Company and payment of such taxes is entirely your responsibility. Therefore, you should consult your tax advisor for more information on these matters.
- Important information about cohort and convertible campaign
The platform generally provides opportunities to invest in startup and growth-focussed businesses by way of three types of campaigns: equity, cohort and convertible. Information about these campaigns is available here. All the risk warnings above apply to each of the three types of campaigns but you should also be aware of the following in respect of cohorts and convertibles. As each cohort and the convertible campaign is different, please ensure you read the campaign text and accompanying documentation carefully.
Cohort campaigns allow you to invest in multiple companies that are selected by predetermined criteria and are often set up by a campaign organiser (who may run an accelerator, 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 business in return for a contractual right for shares to be issued on 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 is invested.
- Future Fund Convertibles
Future Fund convertible campaigns allow you to invest in businesses that are intending to apply to the Government-backed Future Fund. Investment in these campaigns must be on the convertible loan terms prescribed by the Government and you should be aware that these terms differ from our normal convertible campaigns. The convertible loan agreement prescribed by the Future Fund is equity-focused and favours the conversion of your investment into equity in the business as the default position. However, there are certain events where your investment does not convert into equity and instead may be repaid by the company, with a redemption premium. Before investing, you must read and accept the key terms of the campaign. In addition to the above, you also need to be aware of and accept the following risks:
⇒ There is no guarantee that the business will be successful in its application to receive the Future Fund matched funding. The campaign will specify whether your investment into the business is conditional on a successful application of the Government’s matched funding.
⇒ Any interest due will be paid at a fixed rate rather than by reference to an underlying index. Accordingly, you should note that a rise in interest rates may adversely affect the relative returns that the convertible loan offers. Inflation may reduce the real value of any returns over time.
⇒ The business may not have sufficient funds to repay the loan on maturity, pay interest when it becomes due or pay the redemption premium included in the terms. You will likely lose all of your invested capital and you should not invest more money than you can afford to lose without altering your standard of living.
⇒ Convertible loans are unsecured obligations and if the business fails, your investment will be ranked behind secured creditors of the business. This means that if the business fails, it is unlikely that you will have your initial investment or outstanding interest payments returned to you because there is no security over any remaining assets.
⇒ The convertible loan agreement is intended as bridge funding to future funding round, but there is no guarantee that the business will be able to secure further funding.
- Important information about AutoInvest
AutoInvest enables you to automatically invest in regular equity campaigns that meet certain criteria selected by you. Once you opt into auto-invest, investments will be made into campaigns that meet the criteria without you needing to select individual campaigns, but each investment will be structurally the same as if you had invested into the campaigns individually. You can activate and pause AutoInvest at any time, and you will have a period of seven days to cancel an investment made by AutoInvest.