Investing in startups or privately-held companies involves several risks and should be done only as part of a diversified portfolio. Investments should only be made by investors who understand these risks. Globevestor allows only accredited investors to invest. We do not provide any investment recommendations to investors, nor any legal, financial or tax advice. No communication from Globevestor, through its website or any other medium, should be construed as an investment recommendation. Further, nothing on this website shall be considered an offer to sell, or a solicitation of an offer to buy, any security to any person in any jurisdiction to whom or in which such offer, solicitation or sale is prohibited.
Please read the key risks below before investing. These are by no means fully exhaustive, but do represent some key risks.
Investments in privately-held startups and small companies carry a high risk profile by nature. A company's management may be inexperienced and investors may not be able to evaluate the company's operating history accurately. Small businesses may also depend heavily upon a single customer, supplier, or employee whose departure would seriously damage a company's profitability. The demand for a company's product may be seasonal or be impacted by the overall economy, or a company could face other risks that are specific to its industry or type of business. A company may also have a hard time competing against larger companies who can negotiate for better prices from suppliers, produce goods and services on a large scale more economically, or take advantage of bigger marketing budgets. Furthermore, a small business could face risks from lawsuits, governmental regulations, and other potential impediments to growth.
There is no public trading market for a startup's securities, and none may develop. The securities acquired while investing in startups are restricted and not freely transferable. There is, therefore, no assurance that the securities can be resold at all, or near the offering price. Further, there can be no assurance that the company will ever consummate a public offering of any of the company's securities. Accordingly, investors must bear the economic risk of an investment in the securities for an indefinite period of time. Investors must be prepared to hold the securities acquired in such offerings indefinitely and cannot expect to be able to liquidate any or all of their investment even in case of an emergency. In addition, any proposed transfer must comply with restrictions on transfer imposed by the company and by federal and state securities laws.
Dependence on Future Capital Availability
A startup may require funds in excess of its existing cash resources to fund operating deficits, develop new products or services, establish and expand its marketing capabilities, and finance general and administrative activities. Due to market conditions at the time the company may need additional funding, or due to its financial condition at that time, it is possible that the company will be unable to obtain additional funding as and when it needs it. If the company is unable to obtain additional funding, it may not be able to repay debts when they are due and payable. If the company is able to obtain capital it may be on unfavorable terms or terms which excessively dilute then-existing equity holders. If the company is unable to obtain additional funding as and when needed, it could be forced to delay its development, marketing and expansion efforts and, if it continues to experience losses, potentially cease operations.
Price Discovery Risk
The offering price of the securities offered on the Site has been arbitrarily determined and may not be indicative of its actual value or future market prices. The offering price was not established in a competitive market and bears no relationship to a company's assets, book value, historical results of operations or any other established criterion of value. The offering price should not be considered as an indication of a company's actual value or the value of the securities.
Limited Information and History
A startup is usually in a very early phase, and is just beginning to implement its business plan. There can be no assurance that it will ever operate profitably. The likelihood of its success should be considered in light of the problems, expenses, difficulties, complications and delays usually encountered by companies in their early stages of development, with low barriers to entry. A company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.
Market Environment and Competition
The growth of a startup depends heavily on the external market environment, which may or may not turn out to be as favorable as the company's management expected. There is no assurance that there will be broad market acceptance of a company's offerings or a continued acceptance in future. In such event, there may be a material adverse effect on a company's results of operations and financial condition, and A company may not be able to achieve its goals. Startups also face high competition from other companies, some of which might have received more funding relatively. One or more of a company's competitors could offer services similar to those offered by a company at significantly lower prices, which would cause downward pressure on the prices a company would be able to charge for its services. If a company is not able to charge the prices it anticipates charging for its services, there may be a material adverse effect on a company's results of operations and financial condition. In addition, while a company believes it is well-positioned to be the market leader in its industry, the emergence of one of its existing or future competitors as a market leader may limit a company's ability to achieve national brand recognition, which could also have a material adverse effect on a company's results of operations and financial condition.
Management Control and Ability
A startup's management will have broad discretion in how the company uses the net proceeds of an offering. In most cases, a company's management will have considerable discretion over the use of proceeds from their offering. Investors may not have the opportunity to assess whether the proceeds are being used appropriately or in the startegically wise way. Moreover, a company may not be able to manage its potential growth. There can be no assurance that it will achieve business expansion. This expansion, if accomplished, may place a significant strain on a company's management, operational and financial resources. To manage any material growth, a company will be required to implement operational and financial systems, procedures and controls. It also will be required to expand its finance, administrative and operations staff. There can be no assurance that a company's current and planned personnel, systems, procedures and controls will be adequate to support its future operations at any increased level. A company's failure to manage growth effectively could have a material adverse effect on its business, results of operations and financial condition.
Please consult a professional adviser before investing.