What exactly are the risks of investing in unlisted companies?

Loss of Capital

Loss of capital is a potential risk when investing, it is important to take this into account when deciding on how much to invest. Please scroll to the bottom of the page to see our Risk Warning for more information.

Illiquidity

Any investment you make through the platform will be highly illiquid, which means you will be unable to sell your shares until the business has driven towards a successful exit. Even for a successful business, a flotation or purchase is unlikely to happen for a number of years, and investors must be of the time frame between investing in a business and seeing a return.

Dividends

Start-up and early stage businesses very rarely pay dividends because its highly likely that any profits that are made are re-invested into the business to build the shareholder value. Even for a successful business, dividends are unlikely to occur for a number of years until the company is in a position where they do not have to continue to re-invest. Businesses have no obligation to pay dividends.

Dilution

Any investment you make through the GrowthFunders platform is likely to be subject to dilution. This means that if the business goes for additional funding at a later stage, more shareholders will come on board, reducing your percentage of the investee company. Another reason for dilution in a business would be due to the grant of options available to employees of the investee company or to other service providers closely linked to the business. It is therefore important to continue to reinvest in the business, increasing your shareholder percentage.

Diversification

Investing in start-ups and early stage businesses is always going to be high risk. Therefore it would be in the investors’ best interest to diversify their investment portfolio by investing smaller amounts in different companies in a range of sectors, rather than investing large amounts in one small company.

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