Investing in early-stage startups can be very rewarding, but it involves a number of risks and challenges. If you choose to invest in businesses displayed on Beedoo, you need to be aware of and accept five important considerations1.
1.Loss of Capital
If you invest in a startup displayed on the platform, you may lose all or part of your invested capital. The startups development prospects are uncertain.
2.Risk of Illiquidity
Almost all investments you make in businesses displayed on the platform will be highly illiquid. This means it can be difficult to sell or exchange your shares. The sale is only possible in case of increase of capital or purchase of shares by others shareholders,…
3.Rarity of Dividends
Businesses of the type displayed on the platform rarely pay dividends. The funds are re-invested in the Businesses. The shares or participations are not suitable for investors looking for recurring income coming from its investments as the income can change or be inexistent.
4.Risk of Dilution
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 stage, it will issue new shares to the new investors, and the percentage of the business that you own will decline.
Diversification is an efficient way to reduce risks. If you hold a well-diversified portfolio which comprises various types of investments, the probability that all your investments get low or no return at the same time is small. The profits you will make out of some investments will compensate for the losses of some other investments.
Before you decide to make any investment, measure their risks in relation to their presented expected returns keeping in mind your objectives and time horizon and this for any investment you consider for the short, mid and long term.
And in any case, the allocation to such types of investments shouldn’t represent an important part of your total investments.