Investing in early-stage ventures and token economies can be rewarding, but carries risks and potential loss of your investment. Prior to considering any investment please note the following key factors.
Security Offers Made Under Exempt Rules
Any information memorandum, briefing paper or other opportunity overview document (“IM”) that seeks funding for securities is intended to be issued only to “Sophisticated Investors” and does not provide any guarantees nor take any responsibility as to the contents of any IM.
Whitepaper is Not a Registered Offer Document
A Whitepaper is an offer to purchase tokens or a cryptocurrency offered for the first time (“Tokens”), the Whitepaper is not an offer to acquire securities and does not provide any guarantees any future financial performance nor provide any rights with respect to the operation of the issuer of the Tokens.
General Nature of Information
The information contained within any IM or Whitepaper is general information only and does not take into account your individual objectives, financial situation or needs. Any forward looking statements have been provided as an indication of potential performance of the venture however these statements are subject to a number of assumptions and market factors which may not be realised. You should assess whether the information is appropriate for you and should seek independent financial and legal advice before making an investment decision.
Investor Must Undertake Own Due Diligence
To the extent permitted by the Law, no representation or warranty (expressly or implied) is made that the information contained in any IM or Whitepaper associated with any venture is complete, true and correct and not misleading or likely to be misleading. You should make your own enquiries to ascertain the accuracy of any information upon which you intend to rely; or is responsible or in any circumstances liable for any statements made in any IM or Whitepaper.
Potential investors or participants in a token economy should beware of the following key risks:
1. Loss of Capital
Most early-stage businesses and many other businesses fail, and if you invest in early-stage ventures or token economies it is significantly more likely that you will lose all of your invested capital than you will see any return of capital or a profit. You should not invest more money than you can afford to lose without altering your standard of living.
Equity investments in early-stage private ventures are likely to be illiquid and 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 a number of years from the time you make your investment. For businesses for which secondary market opportunities are available, such as for token economies, it may 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.
3. Rarity of Dividends or Returns
Early-stage businesses rarely pay dividends or share of profits. This means that if you invest in a business even if it is successful you are unlikely to see any return of capital or share of profits until you are able to sell your investment. Even for a successful business, this is unlikely to occur for a number of years from the time you make your investment.
Early-stage ventures typically will need to raise capital several times, this means that if the business raises additional capital at a later date, it may issue new shares or new tokens to new incoming shareholders or token holders. Additionally the venture may issue new shares or tokens to the management team to incentivise performance.
If you choose to invest in early-stage ventures whether via equity, debt or token offerings 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 investible capital in such businesses. It also means that you should spread your investment between multiple businesses rather than investing a larger amount in just a few.
6. Cryptocurrency Volatility
Buyers of tokens should be aware that the ICO or cryptocurrency markets are generally unregulated and not offered as securities. This may mean that buyers of tokens may not have the same legal rights that a traditional equity investment may provide. Tokens and cryptocurrencies may be volatile, illiquid and subject to speculative trading which may result in rapid and unpredictable price fluctuations.