Risk Discosure | BDA Investor

Risk Disclosure

BDA Investor offers investors an opportunity to participate in an early-stage ventures and infrastructure projects. You should be aware that early-stage investments may involve very high risks and you should research thoroughly any offering before making an investment decision. You should read and fully understand the information about the company and the risks that are disclosed to you before making any investment. BDA Investor incorporates an investor protection for non-accredited investors so as to not expose a non-accredited investor to risk that may unforeseen.

The following are some risks to consider before making a BDA Investor investment:

Speculative. Investments in startups and early-stage ventures are speculative and these enterprises often fail. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup or early-stage venture often relies on the development of a new product or service that may or may not find a market. You should be able to afford and be prepared to lose your entire investment.

Illiquidity. You will be limited in your ability to resell your investment for the first year and may need to hold your investment for an indefinite period of time. Unlike investing in companies listed on a stock exchange where you can quickly and easily trade securities on a market, you may have to locate an interested buyer when you do seek to resell your investment.

Cancellation restrictions. Once you make an investment commitment for a Regulation Crowdfunding offering, you will be committed to make that investment (unless you cancel your commitment within a specified period of time). As detailed in the box below for Changing your mind, the ability to cancel your commitment is limited.

Valuation and capitalization. Your Regulation Crowdfunding investment may purchase an equity stake in a startup. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult and you may risk overpaying for the equity stake you receive. In addition, there may be additional classes of equity with rights that are superior to the class of equity being sold through Regulation Crowdfunding offering.
Limited disclosure. The company must disclose information about the company, its business plan, the offering, and its anticipated use of proceeds, among other things. An early-stage company may be able to provide only limited information about its business plan and operations because it does not have fully developed operations or a long history to provide more disclosure. The company is also only obligated to file information annually regarding its business, including financial statements. A publicly listed company, in contrast, is required to file annual and quarterly reports and promptly disclose certain events—continuing disclosure that you can use to evaluate the status of your investment. In contrast, you may have only limited continuing disclosure about your Regulation Crowdfunding investment.
Investment in personnel. An early-stage investment is also an investment in the entrepreneur or management of the company. Being able to execute on the business plan is often an important factor in whether the business is viable and successful. You should also be aware that a portion of your investment may fund the compensation of the company’s employees, including its management. You should carefully review any disclosure regarding the company’s use of proceeds.
Possibility of fraud. In light of the relative ease with which early-stage companies can raise funds through crowdfunding, it may be the case that certain opportunities turn out to be money-losing fraudulent schemes. As with other investments, there is no guarantee that Regulation Crowdfunding investments will be immune from fraud.
Lack of professional guidance. Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms). These investors often negotiate for seats on the company’s board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans. An early-stage company primarily financed through Regulation Crowdfunding may not have the benefit of such professional investors.