Investing in startups, particularly early-stage startups, is rewarding. However, there are risks involved. Unlike bonds and other investment opportunities, investing in shares (also known as equity) on TrendScout does not include a regular or fixed return on your investment.
Please read this Capital at Risk Warning policy to understand the risks before connecting and subsequently investing in the startups featured on TrendScout’s website and Investor Portal to diversify your investment portfolio.
Most startups fail. If you invest in a startup featured on TrendScout’s website and Investor Portal, you understand that it is likely that you will lose all of your invested capital than you will see any return of capital or investment.
You also understand that any tax relief resulting from investing in any of the startups featured on TrendScout’s website and Investor Portal may be lost due to your personal circumstances and/or the activities of the startup.
You should not invest more money in the startups featured on TrendScout’s website and Investor Portal than you can afford to lose without altering your standard of living.
You accept, understand, and agree that if the startup you invested in fails, neither the startup nor TrendScout will pay back your investment.
Liquidity is the ease with which you can sell your shares after purchasing them. Buying shares in startups pitching through TrendScout cannot be sold quickly, and they are unlikely to be listed on a second trading market including, but not limited to the London Stock Exchange, Plus, or AIM until and unless the startup floats on a stock exchange or is bought by another company; and even if the startup is purchased by another company or floats, your investment may continue not to be liquid.
Even for successful startups and businesses, a floatation or purchase is unlikely to occur for many years from the time you make your investment. For companies for which secondary market opportunities are available (including any available on TrendScout’s website and Investor Portal), it can be challenging to find a buyer or seller, and investors should not assume that an early exit will be available just because a secondary market exists.
Dividends are payments made by a business to its shareholders from the company’s profits. Most companies pitching for equity on the TrendScout website and Investor Portal are startups or early-stage companies, and these companies will rarely pay dividends to their investors. This means you are unlikely to see a return on your investment until you can sell your shares since profits are typically re-invested into the business to fuel growth and build shareholder value. Even for a successful business, this is unlikely to occur for many years from the time you make your investment. Companies have no obligation to pay shareholder dividends.
Any equity investment made through successful connections on TrendScout may be subject to dilution in the future. Dilution occurs when a company issues more shares, and dilution affects every existing shareholder who does not buy any of the new equity being offered. As a result, an existing shareholder’s proportionate shareholding of the company is reduced or “diluted” – this affects many things, including voting, dividends, and value.
Some startups pitch for equity investment through TrendScout offer A-Ordinary Shares, which may include pre-emption rights protecting an investor from dilution. In this situation, the startup must give shareholders with A-Ordinary Shares the opportunity to buy additional equity during a subsequent fundraising round to maintain or preserve their shareholding. Please check a pitch and the Articles of the startup to see if the equity you are buying will have these pre-emption rights. Most startups do not offer pre-emption rights for B Investment Shares
If you choose to invest in startups displayed on TrendScout’s website and Investor Portal, 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 investable capital in such startups, and most of your investable capital should be invested in safer, more liquid assets. It also means that you should spread your investment between multiple startups rather than investing a more significant amount in just a few.
A convertible is an investment for equity in a startup where shares will be issued at a future date. Often, these shares will be issued when the startup completes a larger investment round.
A convertible allows a startup to raise equity finance without setting a valuation. Instead, the valuation will be set by the subsequent investment round or at an agreed valuation on a longstop date.
It is important to remember that investing in a convertible has the same risk level as investing directly for equity in a startup, and your capital remains at risk.
It is also important to remember that the terms of convertibles can vary from deal to deal, and it is vital that you read the summary of terms and the convertible document provided to you by TrendScout.
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