Investing in a stock market is risky
What are the risks of investing in the early stages?
There are risks to consider when investing in a startup or early-stage company in Manhattan Street Capital. Investing in startups is very risky, speculative and should not be made by people who cannot afford to lose their entire investment.
Carefully consider the risks associated with the type of investment, security, and business before making any investment decision.Investment risks
Main risk: Investing in startups will put the entire amount of your investment at risk. There are many situations in which the company may fail completely or you may not be able to sell the stocks that you own in the company. In these situations, you could lose the entire amount of your investment. When investing in startups, a total loss of capital is a very likely outcome. Investing in startups carries a high degree of risk and you shouldn't invest any funds unless you can bear the entire loss of the investment.
Returns the risk: The amount of return on investment, if any, is very variable and not guaranteed. Some startups can be successful and generate significant returns, but many will not be successful and will generate only small, if any, returns. All returns you can receive are variable in quantity, frequency and schedule. You shouldn't invest funds where you need a regular, predictable, and / or stable rate of return.
Return delay: Each return can take several years to materialize. Most startups take five to seven years to generate any return on investment, if any. It can also take many years before you know whether a start-up investment will generate any return. You shouldn't invest funds asking for a return within a certain time frame.
Liquidity risk:It can be difficult to sell your securities. Startup investments are privately held companies and are not traded on an exchange. Also, there is currently no readily available secondary market for private buyers to buy your securities. In addition, there may be restrictions on the resale of the securities you have purchased and your transferability. You should not invest funds in which you have the option of withdrawing, redeeming or liquidating within a certain period of time.Security risks
Instrument risk: You can invest in preferred stocks, joint equity or convertible bonds. These security instruments all have different risks caused by their structure. You should take the time to understand the type of security instrument in which you are investing.
dilution: Start-up companies will have to raise additional capital in the future. When these new investors make their investment in the company, they can receive newly issued securities. These new stocks dilute the percentage of ownership you have in the business.
Minority stake: As a smaller shareholder in business, you may have fewer voting rights or the ability to influence the direction of the company than larger investors. In some cases, this may mean that your securities will be treated less favorably than larger securityholders.
Valuation risk: In contrast to listed companies, which are publicly valued using market-driven share prices, the valuation of private companies, especially startups, is difficult to assess. The issuer will set the share price for your investment and you can risk overpayment for your investment. The price you pay for your investment can have a material impact on your eventual return, if any.Business risks
Failure risk:Investing in startups is speculative and these companies often fail. Unlike investing in a mature business, where there is a track record of revenue and income, a startup's success often relies on developing a new product or service that may or may not find a market. You should be able to afford and be prepared to lose all of your investment.
Income risk:The company is still in the early stages and may just start executing its business plan. There can be no guarantee that it will ever operate profitably. The likelihood of achieving profitability should be considered, given the problems, expenses, difficulties, complications and delays that organizations typically encounter in their early stages of development. Society may not be able to achieve the goals necessary to overcome these risks and uncertainties.
Financing risk: The company may require available cash from its existing resources to fund operating expenses, develop new products, expand marketing skills, and fund general and administrative activities. Because of the market conditions at the time the company is in need of additional funding, it is possible that the company may not be able to obtain additional funding when it needs it or the terms of the funding available may be unfavorable. If the company is unable to obtain additional funding, it may not be able to repay debt when it is due or the new funding may dilute existing investors too much. If the company is unable to obtain additional funding as needed, it could be forced to delay its development, marketing and expansion efforts and if it continues to suffer losses,
Disclosure Risks: The company is in the early stages and may have limited information to provide about its business plan and operations as it does not have fully developed businesses or a long trading history. The Company is also only required to provide limited information about its business and financial affairs to investors.
Personnel risks: An investment in a startup is also an investment in the management of the company. The ability to execute the business plan is often an important factor in whether the business is feasible and successful. You should be aware that part of your investment will fund compensation for the company's employees, including management. You should carefully review any disclosure regarding the use of Company proceeds. You should also carefully consider the experience and expertise of the management team.
Fraud risks: It is possible that certain people in the company could commit fraud or mislead investors. If fraud or misleading behavior occurs, you could lose your entire investment. You should carefully review all disclosures regarding the company's management team and make your own assessment of the likelihood of possible fraud.
Lack of professional guidance: Many successful startups attribute their early success in part to advising professional investors (e.g. angel investors and venture capital firms). These investors often play an important role through their resources, contacts and experience in helping startup companies execute their business plans. A startup that is mostly funded by smaller investors may not have the benefit of such professional investors. You should consider the existing professional investors in the company and whether they or other professional investors are participating in the current round.
Growth risk: For a start to be successful, it must be expanded significantly. There is no guarantee that this expansion will be achieved. Expansion can severely affect the company's management, operational, and financial resources. To manage growth, the company must implement operational and financial systems, procedures, and controls. There will also be a need to expand the financial, administrative and operational staff. There can be no assurance that the Company's current and planned staff, systems, procedures and controls are suitable to support its future activities. The company's failure to effectively manage growth could have a material adverse effect on its business, results of operations, and financial condition.
Competitive risk: The startup may face competition from other companies, some of which may have received more funding than the startup. One or more of the company's competitors could offer similar services as the company at significantly lower prices, which would put price pressure on the prices that the company might charge for its services. If the company is unable to calculate the prices it expects, this can have a material adverse effect on the company's results of operations and financial position.
Market demand risk: The company assumes that customer demand for its products will remain. However, no assurance can be given that the company's offer will be widely accepted. There can also be no broad market acceptance of the company's offerings if its competitors offer products that are preferred by potential customers. In this case, it could have a material adverse effect on the results of operations and financial position of the company and the company may not be able to achieve its goals.
Control risks: Because the company's founders, directors, and officers are among the largest shareholders in the company, they can exercise significant control over the business and affairs of the company and have interests, actual or potential, which may differ from yours. The company's founders, directors and officers may own or control a significant percentage of the company. In addition to their board mandates, these individuals have a significant influence on corporate actions that require shareholder approval, regardless of how the company's other shareholders, including you, may vote. The right of such persons could discourage a potential acquirer from making an offer to acquire the company, which in turn could reduce the company's share price or prevent you from realizing a premium on your investment.
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