Only invest what you can afford to lose
Investors should only invest a small proportion of their available investment funds and should balance this with safer, more liquid investments. The majority of early-stage businesses fail or do not scale as planned. Therefore, investing in these businesses may involve significant risk. It is likely that you may lose all, or part of your investment. The investor is strongly advised to invest in these opportunities no more that you can afford to lose and if a business you invest in fails, neither the company, nor AngelEQT, nor Angel Corporate Finance, will pay you back your investment.
Dependence on the directors
It is highly likely that the success of many investee companies will depend in part upon the ability of their directors to develop and maintain a strategy that achieves the company's investment objectives. Should the directors leave the business for any reason, then performance in the investee company may deteriorate.
Lack of operating history
Some companies are relatively early stage and, as such, may lack substantive operating history or accounts upon which prospective investors can evaluate likely performance. The success of the business will depend upon the ability of the investee to develop and deliver on a strategy to achieve the company’s objective.
The Information Memorandum and supporting documents may contain certain statements, estimates, projections, forecasts and data provided by the investee company with respect to the anticipated future performance of the company. Such statements, estimates projections, forecasts and data reflect various assumptions by the company’s management concerning anticipated results, which assumptions may or may not prove to be correct. Past performance, projections and forecasts are not reliable indicators of future performance. You should not rely on any past performance, projections or forecasts as a guarantee of future investment performance.
Forecasts are not a reliable indicator of future performance.
Look to spread your risk by diversifying
The investor is strongly advised to invest in investment opportunities no more that you can afford to lose. If you choose to invest in business of the type displayed on the platform, such investments should only be made as part of a well-diversified. In other words, you can reduce your risk by spreading your investment across multiple deals, rather than investing all available funds into one deal. A sensible threshold is not more than 10% of your net liquid assets. Many investment professionals suggest you invest in a minimum of 5 (ideally 10) deals.
Lack of liquidity
Liquidity is the ease with which you can sell your shares after you have purchased them. Equity investments cannot be sold easily and they are unlikely to be listed on a secondary trading market, such as AIM, Plus or the London Stock Exchange. Even successful companies rarely list shares on such an exchange. 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. Always bear in mind that, even if the business s bought by another company or floats, your investment may continue illiquid.
Dividends are payments made by a business to its shareholders from the company’s profits. Many of the companies featured on the Platform will rarely pay dividends to their investors. This means that you are unlikely to see a return on your investment until you are able to sell your shares.
Equity investment in shares may be subject to dilution, if the investee company issues more shares. If there are “pre-emption rights” in the investor agreement, it means you will be offered a chance to buy more shares, if there is a further fundraising, which will enable you to maintain your percentage shareholding in the company. Dilution affects every existing shareholder who does not buy any of the new shares being issued. As a result, an existing shareholder's proportionate shareholding of the company is reduced, or ‘diluted’ - this has an effect on a number of things, including voting, dividends, sale proceeds and value. The original investment may also be subject to dilution as a result of warrants or options to employees, service providers or certain other parties connected to the company.
Financial services compensation scheme.
Investors using this Platform are treated as customers of the Regulated Entity and, therefore, have the potential to be compensated out of the Financial Services Compensation Scheme established and operated by the Financial Conduct Authority in the event that the Regulated Entity should fail in the conduct of its FCA regulated activities. However, investors will not be able to claim under the Financial Services Compensation Scheme merely because an investee company displayed on the Platform fails. For further information in regard to the Financial Services Compensation Scheme please refer to www.fscs.org.uk