Investment Risks

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Investors should be aware that an investment in a startup involves a high degree of risk, regardless of whether such investment is direct or through a syndicated vehicle (“Angel Fund or VC Fund”).

 

Bornbrio does not assure that

 

  1. A Fund’s investment objectives will be achieved,

  2. A Startup will achieve its business plan,

  3. Anchor Investor (Lead Investor) has experience in investing

  4. Investor will receive a return of any part of its investment whether principal or otherwise.

 

There may be occasions when an Anchor Investor, and/or their respective affiliates may encounter potential conflicts of interest in connection with a Fund or an investment, such that the said party may avoid a loss, or even realize a gain, when other Investors in the Fund are suffering losses. Investment in equity securities of startups is accompanied by certain risks. Therefore, prior to investing in a startup, you need to be aware of and evaluate risks. The following considerations, among others, should be carefully made before making an investment in a Startup or a Fund.

 

  1. Loss of Capital including Principal

    1. Investments in Startups involve a high degree of Financial and operating risks. Business Plans reflect a set of assumptions that may not hold true and an investor can lose its entire investment made in a startup. Returns on the business plans or campaigns are only indicative and should not be considered as absolute. It is highly likely that you may not be able to recover even the principal invested by you.

    2. The value of an Investor’s or a Fund’s investment in Startups may be susceptible to success of a technology and its evolution. Some of the many specific risks faced by such Technology Startups include:

  • Rapidly changing technologies;

  • Products or technologies that may quickly become obsolete;

  • Scarcity of management, technical, scientific, research and marketing personnel with appropriate training;

  • The possibility of lawsuits related to patents and intellectual property;

  • Rapidly changing investor sentiments and preferences with regard to technology sector investments (which are generally perceived as risky); and

  • Exposure to government regulation, making these companies susceptible to changes in government policy and delays or failures in securing regulatory approvals.

    1. More than 50% of startups wind up their operations within 12 months of start of the business.


  1. Rarity of Dividend and Illiquidity of Investments: 

    1. Startups may not have the capital/ tolerance to pay dividends applicable on preferred shares. This means that if you invest in a business, even if it is successful, you are unlikely to see any return on capital or profit until you are able to sell your shares. Even for a successful business, dividend pay-outs may be unlikely for a number of years from the time you make your investment.

    2. An Investor’s investments will generally be private, illiquid holdings. As such, there will be no public markets for the securities held by the Investor, directly or through a Fund, and no readily available liquidity mechanism at any particular time for any of the investments.

  2. Changing Economic Conditions: 

  1. The success of any investment activity is determined to a certain extent on general economic conditions like, the availability of external credit markets, equity markets, stability in global economies often referred to as systematic risk. There can be no assurance that such economic systems will be available or will be available as anticipated or needed for an investment in a Startup. Changing economic conditions could potentially adversely impact the valuation of your investments..

  1. Forward Looking Statements and Future & Past Performance: 

  1. The information available to Funds and Investors may contain "forward-looking statements". Forward-looking statements often include words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance in connection with discussions of future operating or financial performance. Such forward-looking statements include, but are not limited to, statements regarding: (i) the adequacy of a Startup’s funding to meet its future needs, (ii) the revenue and expenses expected over the life of the Startup, (iii) the market for a Startup’s goods or services, or (iv)other similar maters. Such statements are assuptions made which may never materialize during operations of a business.

  2. Each Startup’s forward-looking statements are based on management's current expectations and assumptions regarding the Startup’s business and performance, the economy and other future conditions and forecasts of future events, circumstances and results. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. The Startup’s actual results may vary materially from those expressed or implied in its forward-looking statements. Important factors that could cause the Startup’s actual results to differ materially from those in its forward-looking statements include government regulation, economic, strategic, political and social conditions.

  3. Any forward-looking statement made by a Startup speaks only as of the date on which it is made. Startups are under no obligation to, and generally expressly disclaim any obligation to, update or alter their forward-looking statements, whether as a result of new information, subsequent events or otherwise.

  4. The past performance of a Startup or its management, or an Anchor Investor is not predictive of its future. There can be no assurance that targeted results will be achieved. Loss of principal is possible, and even likely, on any given investment.

 

  1. Difficulty in valuing startup Investments: 

    1. It is difficult to determine net present value for any Startup. Likelihood that a given Startup’s business will be a success is dependent upon factors completely unrelated to the set of assumptions presented by a startup.

  1. Lack of Information for Monitoring and Valuing startups: 

    1. The Investor or the Fund may not be able to obtain all information it would want regarding a particular Startup, on a timely basis or at all. It is possible that the Investor or the Fund may not be aware on a timely basis of material adverse changes that have occurred with respect to certain of its investments. As a result of these difficulties, as well as other uncertainties, an Investor may not have accurate information about a Startup’s current value or the value of the securities held by a Fund.

    2. After an Investor has invested in a Startup, either directly or through a Fund, continued development and marketing of the Startup’s products or services, or administrative, legal, regulatory or other needs, may require that it obtain additional financing. Such additional financing may not be available on favorable terms, or at all.

 

  1. Tax Risks: 

  1. There are many tax risks relating to investments in Startups are difficult to address and complicated. You should consult your tax advisor for information about the tax consequences of purchasing equity securities of a Startup or an Interest in a Fund.

  2. The structure of any investment in a Startup or in or by a Fund may not be tax efficient for any particular Investor, and no Startup or Fund guarantees that any particular tax result will be achieved. Investors should consult their own professional advisors with respect to the tax consequences to them of an investment in a Startup or a Fund under the laws of the jurisdictions in which the Investors and/or the Startup or Fund are liable for taxation.

 

  1. Regulatory Risks: 

  1. The investment may be subject to the certain applicable laws of the investor’s country of residence as well as the country where the relevant start up is registered. The investors are advised to seek adequate legal advice in this relation, prior to making the investment.

 

  1. Minority Investments & Conflict of Interests

 

  1. Instances may arise in which the interest of an Anchor Investor (or its members or affiliates) may potentially or actually conflict with the interests of a Fund and/or its Investors

  2. Investors in a Fund may have conflicting investment, tax, and other interests with respect to Startup investments, which may arise from the structuring of a Startup investment or the timing of a sale of a Startup investment or other factors.

  3. A significant portion of an Investor’s investments (either directly or through Funds) will represent minority stakes in privately held startups. As is the case with minority holdings in general, such minority stakes will have neither the control characteristics of majority stakes nor the valuation premiums accorded majority or controlling stakes.

 

  1. Risks related to Syndicate funds

 

  1. Fund in a particular geography may be exempted from registration or may be required to register as per local governmental regulations. Exemptions if any may be temporary.

  2. Each Fund is or will be a newly formed entity and has no operating history. Each Fund’s investment program should be evaluated on the basis that the Anchor Investor, or where appropriate, an Anchor Investor’s assessment of the prospects of investments may not prove accurate.

  3. Investors in a Fund will not make decisions with respect to the management, disposition or other realization of any investment made by the relevant Fund, or other decisions regarding such Fund’s business and affairs.

  4. Certain information regarding the Startups will be highly confidential. Competitors may benefit from such information if it is ever made public, and that could result in adverse economic consequences to the Investors.

 

The foregoing risks are only indicative in nature. It is recommended that you seek independent legal and tax advice and read the relevant investment documents carefully before investing in a startup.