Investing into early-stage businesses and startups can ultimately be very rewarding, but involves risks and challenges that must be properly understood. If you choose to invest in businesses displayed on Kaiku, previously AGORA, you should be aware of and accept these important considerations:
1. Loss of Capital
The majority of early-stage businesses, and other growth-focussed businesses and start-ups fail. If you invest into a business displayed on the Kaiku platform, it is much more likely that any of your invested capital will be more last than seeing any return of capital and/or profit. You should not look to invest more money into these types of companies, as displayed on the platform than you can afford to lose without altering your standard of living.
Almost all investments made into companies shown on the Kaiku platform will be highly illiquid. It is therefore very unlikely that there will be a liquid secondary market for the shares of the business. As such, you should assume that you will not be able to sell your shares until and unless the company floats on a stock exchange or is bought by another company; and, even if the company is bought by another company or floats, your investment may continue to be illiquid. A flotation on a stock exchange or purchase is unlikely to occur for several years from the time you make your investment. Investors using the Kaiku platform should not assume that an early exit will be available just because a secondary market exists.
3. Rarity of Dividends
Businesses of the type displayed on the platform rarely pay dividends. This means that if you invest in a business through the platform, even if it is successful you are unlikely to see any return of capital or profit until you are able to sell your shares. Even for a successful business, this is unlikely to occur for a number of years from the time you make your investment.
Any investment you make in a business displayed on the platform is likely to be subject to dilution. This means that if the business raises additional capital at a later date, it will issue new shares to the new investors, and the percentage of the business that you own will decline. These new shares may also have certain preferential rights to dividends, sale proceeds and other matters, and the exercise of these rights may work to your disadvantage. Your investment may also be subject to dilution as a result of the grant of options (or similar rights to acquire shares) to employees of, service providers to or certain other contacts of, the business.
If you choose to invest in businesses of the type displayed on the platform, 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 businesses, and the majority of your investable capital should be invested in safer, more liquid assets. It also means that you should spread your investment between multiple businesses rather than investing a larger amount in just a few.