Any kind of investing involves a level of risk, and early-stage companies are no exception. A very high proportion of early-stage businesses fail. We have therefore described below, in more detail, some of the potential risks in investing in early-stage businesses. You should note that the risks described below are not intended to be exhaustive. We ask you to take time to carefully familiarise yourself with each of the risks and to properly assess whether investing in such early-stage companies is appropriate in your particular circumstances.
Capitalised terms used herein have the meaning set out in the Platform Terms and Conditions and the Marketplace Rules (the “Marketplace Rules”), unless the context requires otherwise.
Date: 30 June 2021
You should seek independent professional advice if you do not fully understand the risks of or services related to investing through the Fundy Markets platform (the “Platform”), which comprises funding platforms (the “Funding Platform”) operated by different authorised service provides within the Fundy Group and a trading platform (the “Marketplace”) operated by Fundy Markets Pte. Ltd. in Singapore.
Generally, investments made through the Platform are not made in or accompanied by a prospectus that is lodged with or registered by a regulatory authority, and therefore statutory liability in relation to the content of prospectuses would not apply. Although information is provided over the Platform, you should also note that there is no strict statutory obligation for Issuers or offerors to provide you with information that one may reasonably require to make informed assessments of such offers.
Most of the companies raising funds through, or listed on, the Platform are early-stage, small- or medium-size companies. Investing in early-stage companies comes with a number of significant risks as there is no certainty whether an early-stage company you invest in will succeed to the point where your investment is returned, or you receive any return on your investment. The reality is, most early-stage companies fail and even those that achieve success will frequently not be in a position to provide returns to investors. Small and medium-sized companies also face a range of business risks. Therefore, investing in these companies may involve a number of significant risks and challenges mainly due to both the low probability of such companies eventually succeeding and/or being able to return any value to investors, and the general low liquidity of the investments in these companies.
You should NOT invest in the securities offered on the Platform unless you fully understand the risks and potential consequences, including the potential of losing all of your principal investment, and you are prepared to take such risks and able to bear such consequences. You should carefully consider whether investment is suitable for you in light of your knowledge and experience in financial and business matters, investment objectives, financial means and the risks that you are prepared to take and the losses you are able to absorb. You should also only invest in these types of securities as part of a well-diversified portfolio and ensure that your investable capital is spread across a number of assets and businesses, and not too highly-concentrated in a small number of companies or businesses.
We have listed below some of the risks that you should consider and be aware of before making any investment through the Platform. However, this list is not intended to be an exhaustive or comprehensive description of all relevant risks. You should regularly review information on the Issuer, the investment made and the market developments that is available on our Platform and other public sites, and, as required, seek professional advice, to ensure that any investments made and held through the Platform remain suitable for you in your particular circumstances.
The biggest financial risk to an investor is losing the entire investment. Investments available through the Platform include securities of early-stage companies or companies without a proven track record (or any track record at all). The risk of business failure is high. Most of the early-stage businesses are also at the risk of barely surviving with no profits or growth in the immediate years following your investment. In such cases, it is highly likely that you may lose your principal investment completely. Even if a company does become profitable, it is not guaranteed that your initial investment will be returned or you will receive a return on your investment as such returns are highly variable. You should be aware that any returns you could potentially receive might not cover your initial investment and may also be inconsistent in amount and frequency.
Loss of investment may stem from general risks as well as business-related risks. General risks can include (but are not limited to) geographical risks, political risks, legislative risk, and economic risk. Business risks include: risks arising from fluctuations in market demand for the products or services offered by the early-stage company; industry risk (meaning, risks inherent to the business area in which the company operates); competition risk (including, for example, the risk that a competitor is not only in the same area but better able to service customers or suppliers in that area); growth risk (for example, that the company grows too quickly versus business demand for its products or services, or that it is unable to grow to a level required in order to be successful) ; employee risk (for example, that key employees required for the business cannot be recruited or retained); fraud risk; and revenue risk (such risks vary from company to company, but include risks that may prevent revenue being realised such as the costs of new product launches or research and development costs, which cannot always be accurately budgeted).
Early-stage companies usually have more than one funding round, meaning they are likely to raise more capital in subsequent funding rounds. During those rounds, depending on the type of investment opportunity, new investors may be entitled to a share of the company’s equity. This may have a diluting effect on the percentage of ownership held by current investors because new shares are issued.
The new shares may also entitle the new investors to certain advantages such as preferential rights to dividends, special voting rights, pre-emption rights or rights in relation to other company matters. This could be disadvantageous to investors from the previous funding rounds, who may have invested into the early-stage company on different, less favourable terms.
Start-ups or small-medium companies will rarely pay dividends to their investors, mainly because the profits are typically re-invested into the business to fuel growth and build shareholder value. This means that it is unlikely that you will be able to see regular returns from your investment unless you decide to liquidate your investments by selling the securities through the Platform, which even then may be at a loss to your principal investment sum.
If securities are offered by an Issuer in a foreign jurisdiction, or the security is structured through a foreign special-purpose-vehicle, or you purchase securities that are issued by foreign Issuers, your investment and continued holding of securities may be subject to the laws and regulations of that jurisdiction. The investment or you yourself may be subject to additional tax liabilities, transaction costs or capital controls under the foreign laws. Any claims or action may need to be raised before foreign courts or authorities. You should be aware that overseas markets may be subject to rules which may offer different or diminished investor protection as compared to Singapore, the United Kingdom or any other jurisdiction in which you reside or are domiciled.
In addition, countries and markets where foreign Issuers are registered and operate may not be familiar to you and it may be difficult to make a full assessment of the risks involved. Political, legal, economic, financial or other developments in these countries or markets may significantly affect the financial condition or results of operations of companies. These developments may sometimes come unexpectedly not only to investors but also to companies operating in these markets.
Before making an investment in securities offered by a foreign Issuer, you should be fully aware of the types of redress available to you in Singapore, England or other home nation and the jurisdiction of the foreign Issuer, as any claims or action may need to be raised before foreign courts or authorities and even if any judgments are obtained, there may be difficulties in attempting to enforce these in Singapore, England or the other state in which you reside.
You should remain mindful that in some countries, legal concepts which are practiced in mature legal systems may not be in place or may have yet to be tested in courts. This would make it more difficult to predict with a degree of certainty the outcome of judicial proceedings or even the quantum of damages which may be awarded following a successful claim.
Each purchase of securities issued by foreign Issuers, may be subject to additional tax liabilities, transaction costs, duties, charges or capital controls under the foreign laws. Before each purchase of securities issued by foreign Issuers, you should be clear on all fees and other charges for which you may be liable as such charges may affect your net profit (if any) or increase your loss on the investment made.
You should be aware that the securities may be denominated in currencies different than the currency of your home country. Also, although investments made through, and tradable on, the Platform are displayed in currencies which we as a service provider support, sometimes investee companies are able to accept capital only in a currency we are not able to support. Consequently, the investment made and the asset received by an investor may be denominated in different currencies. Respective amounts must be converted which often results in changes in the investment amount due to rounding and conversion costs.
In all these cases, your investment return will be affected by exchange rate fluctuations and you will therefore be exposed to foreign currency risk. Currencies depreciate or appreciate value against each other and this may correspondingly reduce or increase the value of your investment in foreign currency terms. Further, currencies may be devalued or revalued, or countries may establish capital movement restrictions. Any of these events or restrictions may adversely affect the value of your investment or your ability to invest or hold assets in foreign currencies.
Your payment service provider may also charge fees for converting funds into foreign currency or for making payments in foreign currencies.
We may hold securities and money for you or otherwise in connection with investments (e.g. through a Loan SPV) which means that securities are registered in our or our affiliate’s name via a nominee or trust arrangement. We provide such services under laws and regulations applicable for holding client assets and money. Whilst nominee and trust arrangements are well-established and frequently utilised under English and Singapore law, and in other common law jurisdictions, and recognised as effective under a number of other jurisdictions, foreign laws or courts do not always recognise nominee or trust relationships.
Accordingly, holding shares in our or affiliate’s name, and collectively for investors, may adversely affect the way we are able to exercise rights attaching to the relevant securities or respective accounts, and securities or money may become subject to proceedings that limit our ability to get access to, or dispose of, them. Whilst we take all reasonable steps to guard against, there is also a risk that we do mistakes or become subject to a fraud which may result in a loss of assets held by us.
The financial statements of the companies in which you invest may not be subject to a statutory audit. As such, the financial information presented to you may not have been ascertained or reviewed by a qualified auditor. An unaudited financial statement may not accurately reflect the financial health of an Issuer. The financial statements of the companies also may not be made accessible to you in the absence of requirements in their home country for them to do so. In addition, the information made public by an Issuer may also be general in nature and may not have been verified by any independent parties.
Although certain investments can be traded on the Marketplace, there is no assurance that active trading will occur, form or be sustained, or that any market for the investments will develop. There may be difficulty in trading an investment caused by a number of factors, including, but not limited to, lack of demand or supply, and volatile and unpredictable price movements in investments on the Platform. In these circumstances, you may not be able to sell your investments in a timely manner or at the expected price level. Investments may also be subject to resale restrictions, such as resale restrictions for investors in Singapore, as described in the “Additional Disclosures for Investors in Singapore” below.
In addition, trading can be halted or suspended due to several reasons, including technical problems, regulatory intervention and unclear or delayed disclosure by Issuers.
Hence, it may be difficult or even impossible for you to cash in on or exit such investments.
All Trades concluded pursuant to the matching of investors’ orders on the Marketplace will be governed by Singapore law. As our aim is to operate the Platform globally so as to provide liquidity to investors from all around the world, investors from outside Singapore may directly or indirectly, through the relevant Fundy entity of whom they are clients, access and use the Platform services. While we have sought to regulate the trading process through the Marketplace Rules to ensure fair and orderly trade-making, you should be aware that we cannot anticipate all situations which may arise in the course of trading and some of these aspects may not covered by the Marketplace Rules and many of these aspects may be directly subject to provisions of Singapore law. If you are unfamiliar with Singapore law generally (and more specifically, as it applies to, and governs, the Marketplace and the Marketplace Rules), there may therefore be legal consequences which may be unanticipated by or unexpected to you.
You will trade directly with other investors on the Marketplace. No Fundy entity will be a party to any trade entered into by you nor will Fundy guarantee any trades you or any other investor undertakes. There is also no guarantee fund established or other arrangement in place to cover or compensate you for any pecuniary loss suffered by you as a result of any defaults by or the insolvency of any investors or any participants on the Marketplace. With a view to ensuring orderly trading and to minimise the counterparty risk for investors, we require that you have sufficient number of investments or amount of cash in your Wallet before initiating a trade. Therefore, when posting or matching an order you may have some assurance that your counterparty has the assets to perform its obligations under the resulting Trade, to the extent that such investments or cash should be held in its Wallet. However, the risk still remains that the other party’s assets may be frozen due to that party, or such assets’, financial or regulatory circumstances which may result in a delay or default or a potential loss to you as the counterparty to the trade.
Fundy does not interfere in the trade making by matching orders with similar details. Orders you have placed on the Marketplace will remain outstanding until matched by another investor, cancelled by Fundy, the expiry date of the order passes or you amend or cancel your order pursuant to the Marketplace Rules. Significant company disclosures or the release of other material market information may significantly affect the price of your investment and consequently have an adverse effect on the outcome of your order (e.g. you can lose out when compared to the prevailing market price, or your order remains outstanding due to its unattractive terms). You should therefore ensure that you carefully follow the market developments and amend or cancel your order accordingly. You may also set an expiry date to your order to limit your risk.
As Fundy does not intervene in the trade making, and the Marketplace has no rules under which opposite orders would match automatically, the price of investments is based on investors’ actions in placing and matching orders. Investors’ interests are often driven by their own circumstances and may not reflect the Issuer’s financial position or performance. In addition, valuation of early-stage and growth companies is complicated and often cannot simply be based on traditional valuation methods. Therefore, a price agreed in any trade on the Marketplace may not necessarily reflect a fair value of an Issuer and the prices in the Marketplace may also fluctuate significantly – you may see a substantial and unexplained drop or increase in the price.
It is nevertheless important to ensure that the trading is carried out and the price is determined fairly. Fundy has systems and controls in place to detect and prevent prohibited conduct on the Marketplace which mitigates the risk of manipulative or otherwise deceitful behaviour on the Marketplace. You should nonetheless be aware that such systems and controls cannot fully negate the risks arising from volatility in trading.
Most of the investment opportunities made available through the Platform and traded on the Marketplace are arranged through an SPV or held for you and other investors by a Fundy entity. It means you will not become a direct shareholder or investor in an Issuer and investors will receive instruments that mirror the return profile of, or provide you with a right to, underlying shares or convertible notes.
Investments in one Issuer are arranged collectively for all participating investors, i.e. syndicated. Such syndicated and structured securities made available on the Platform are considered as complex. Complexity is a relative term and depends on the risk-reward profile and other characteristics of the product. Due to the complexity, understanding the nature of the securities and the attendant risks may not be straightforward. This is why we recommend that you carefully read through and consider all the materials that are made available on the specific campaign page, whilst making your own assessment of the risks involved.
Different types of collective investment schemes carry varying levels of risk depending on the geographical region, industry sector and stage of companies in which they invest. Therefore, before investing in investment funds, you should ensure that you understand the nature, risks and the investment policy of the particular fund, and you determine whether the product is suitable for your investment profile by making sure you read all the key information documents of the particular fund that are made available by the fund manager.
Bonds are considered as loans to a company and are therefore a type of debt investment. They are generally considered to be more stable than share or equity-based investments, but they may still involve significant risks. For example, there is a possibility that a company that issues bonds will be unable to make interest or principal payments when they are due. Further, there might be a risk that the company will undertake a debt restructuring, merger or recapitalization that increases its debt load, causing its bonds’ values to fall, or interferes with its ability to make timely payments of interest and principal. If you are uncomfortable with any of the risks involved, you should not invest in bonds.
We have taken measures to mitigate the risks that may arise from the use of the Platform. However, we cannot make any assurances that the risks described and detailed or any other risks will not materialise. You should seek independent professional advice if you do not fully understand the risks of investing through the Platform.
The securities made available through the Platform are offered to you in reliance on the exemptions under sections 274 and 275 of the Securities and Futures Act (Cap. 289 of Singapore) (the “Act”). These offers are not made in or accompanied by a prospectus that is registered by the Monetary Authority of Singapore (“MAS“).
Neither this Risk Disclosure Statement nor any other document related to the securities made available through the Platform has been lodged and registered as a prospectus with the MAS under the Act. The MAS assumes no responsibility for the contents of this Risk Disclosure Statement or any such document. Accordingly, statutory liability under the Act in relation to the content of prospectuses would not apply. You should consider carefully whether the investment is suitable for you in light of your own personal circumstances.
No securities made available through the Platform may be offered or sold, or made the subject of an invitation for subscription or purchase, nor may any prospectus or any other document or material in connection with the offer or sale or invitation for subscription or purchase of any securities be circulated or distributed, whether directly or indirectly, to persons in Singapore other than to (i) an institutional investor as defined in section 4A(1)(c) of the Act (an “Institutional Investor”); (ii) an accredited investor as defined in section 4A(1)(a) of the Act (an “Accredited Investor”); (iii) a relevant person as defined in section 275(2) of the Act (a “Relevant Person”); or (iv) a person pursuant to section 275(1A) of the Act in accordance with the conditions specified in section 275 of the Act.
No securities acquired by (i) an Institutional Investor; (ii) an Accredited Investor; (iii) a Relevant Person; or (iv) a person pursuant to section 275(1A) of the Act in accordance with the conditions specified in section 275 of the Act may be offered or sold, made the subject of an invitation for subscription or purchase, or otherwise transferred, whether directly or indirectly, to persons in Singapore, other than to (i) an Institutional Investor; (ii) an Accredited Investor; (iii) a Relevant Person; or (iv) a person pursuant to section 275(1A) of the Act in accordance with the conditions specified in section 275 of the Act.
Unless otherwise permitted under the Act, where the securities are subscribed or purchased pursuant to section 275 of the Act by a Relevant Person as defined in section 275(2) of the Act which is:
securities (as defined in section 239(1) of the Act) of that corporation or the beneficiaries’ rights and interests (howsoever defined) in that trust shall not be transferable for six months after that corporation or that trust has acquired the securities under section 275 of the Act except:
Where we deal with you as an Accredited Investor or Institutional Investor, we would be exempt from complying with certain requirements under the Act and certain regulations and notices issued thereunder. Please note that the regulatory requirements which we are exempted from when dealing with you as an Accredited Investor or Institutional Investor may be amended and updated from time to time due to regulatory changes or otherwise. Any such amendments and updates would be set out on our Platform.