Is investing into start-ups risky?

Yes! There are several major risks when investing into start-up companies. The main risk is simply that the business could fail, which means investors will not get any money back, including their invested capital. Investments like this are also illiquid for a substantial period of time (often years) and as there is no secondary market for these types of investment, investors are unlikely to be able to sell their shares. Finally, there is the risk of dilution, which can happen if the company raises more funds at a later date. When this happens, the percentage of equity that existing investors hold in the company, will decrease relative to what they originally had. There are other risks associated with investing into start-ups and you can see more details in our Risk Warning.

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