Investing in a Start-Up: Risk Analysis
Some investors have done very well investing in start-up businesses in the private placement market. This is because these investors have done their homework and learned that the company has a good business plan, excellent management and a product that produces profit.
Nevertheless, start-up companies can be risky investments because they are new to the market or sector, have limited disclosure obligations, and investors can have difficulty selling their shares in the business.
The failure rate of start-up businesses is also high in comparison to established businesses with a history of successful operations. Business failure may be the result of a poor business plan or economic factors beyond the business owners’ control. Whatever the cause, a failed business is unlikely to return your capital, let alone give you a return.
Before investing in a start-up or any higher-risk venture, you will want to understand your risk profile and if the investment fits into your financial goals.
Start by asking yourself questions like:
- How much money do I have to invest now?
- How much money am I willing to put at risk?
- Does this investment fit into my overall investment plan?
Our website can help you to assess your risk tolerance and determine your investment plan. Furthermore, the website has information on what to consider before taking the plunge and investing in a start-up. Check out our Guide and video on the private placement market.
If you have concerns regarding investing in a start-up, please contact BCSC inquiries at 1-800-373-6393 or [email protected].