- Equity crowd funding is risky.
- Issuers using this facility include new or rapidly growing ventures.
- Investment in these types of businesses is very speculative and carries high risks.
- You may lose your entire investment, and must be in a position to bear this risk without undue hardship.
- New Zealand law normally requires people who offer financial products to give information to investors before they invest. This requires those offering financial products to have disclosed information that is important for investors to make an informed decision.
- The usual rules do not apply to offers by issuers using this facility. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
- Ask questions, read all information given carefully, and seek independent financial advice before committing yourself.
It is important to understand the risks involved when investing through equity crowdfunding platforms. By understanding these risks, you will be better equipped to make investment decisions. Investing in startups and early stage growth companies can be highly rewarding, financially and in many other non-financial ways, but should only be undertaken with awareness of the risks involved.The headings below represent a selection of the key investor risks. This information should be read in conjunction with our Risk Warning Statement (above),
Disclosure Document and Investor Client Agreement.
Risk of investment loss and no assurance of return
Investing in startups and early stage growth companies involves significant risk, as a high proportion of them are likely to fail causing investors to lose some or all of their investment. The future performance of any investment cannot be forecast. If a company that you invest in fails or part-fails, neither that company nor Global Mutual Funds. will pay back your investment. You should therefore only invest amounts that you are able to lose without undue hardship. Be aware that even more established mature and stable companies still have significant investment loss risk. No assurance of any investment return is given to investors. Returns to investors, if any, should not be expected in the short term or at regular intervals.
Lack of liquidity
Liquidity refers to the ease with which shares can be traded. Shares purchased through Global Mutual Funds. are highly illiquid, meaning that they are currently unable to be sold or traded on an exchange or secondary market in Australia or elsewhere. Even for successful companies, liquidity events are rare (such as a floatation offering on a securities exchange, or a purchase by new investors or another company). Additionally, certain types of share classes may be less attractive to buyers and thus more difficult to dispose of under a liquidity event. Investments should therefore be considered illiquid and long-term.
Requirement for investment diversification
Investment ‘diversification’ refers to the accepted recommendation to build a portfolio of investments within different asset classes, with different risk profiles, maturity timeframes, return expectations, etc. Investors should therefore seek diversification and only invest a small portion of their total investments through equity crowdfunding. Research has shown that the returns from early stage investing are concentrated in a small minority of companies that experience significant growth. It is impossible for anyone to know in advance which companies these will be, so it is best to spread your capital resources across a large number of promising-looking investments.
Risk of dilution and preferential terms
‘Dilution’ refers to a reduction in the ownership percentage of a company when new shares are issued, for example in order to raise additional capital in the future. Any investment made through Global Mutual Funds may be subject to future dilution. Every shareholder that does not, or may not, participate in the take up of the issue of new shares is likely to become diluted. Additionally, new shares may be issued at a cheaper price than the price that was paid by you, thereby benefiting new investors to the detriment of your investment. New shares may also have preferential terms (such as a preference to receive dividends or the return of capital on liquidation of the company), thereby benefiting new investors to the detriment of your investment.
Scarcity of dividends
‘Dividends’ refer to payments made by a company to its shareholders, usually as a distribution of profits. Companies have no obligation to pay dividends. Startup and early stage growth companies usually reinvest any profits back into the company to support their growth, development and future value creation. This means that you are unlikely to see any return from your investment in the short term.
Companies may issue different classes of shares to different investors, which in turn confer different levels of rights and obligations including more or less preferential or favored terms.
Differences in share classes materially affect aspects such as dilution, voting rights and creditor ranking in a company failure or windup situation. Offer documentation will describe the type of share class that is being offered to investors.
Macro externality risks
Investments may be adversely affected at any time by a whole spectrum of macro externalities, including but not limited to: general economic conditions, inflation, interest rates, foreign exchange rates, regulatory changes, taxation changes, market and customer trends and preferences.
Global Mutual Funds does not give financial (including taxation), investment legal or regulatory advice of any kind. You are entirely responsible for any investment decision that you make. We recommend that you research and seek independent advice before making any investment decision to ensure that you fully understand the characteristics and risks of equity crowdfunding and the details of any offer being made through Global Mutual Funds.
- Comprehensive and transparent funding solution
- Proprietary developed pitch, business and operations tools
- Detailed equity module with advanced data capture for due diligence
- Equity Placement + Equity Crowdfunding Functionality
- Detailed RFP and Resource Module for enhanced profiling
- Experienced staff and support services for easy team assistance
- Online + Offline support for your capital raising
- Competitive tailored fee structures for your business
- Strategic consulting services
- Hands on management experience with start ups