Risk Disclosure

The purpose of this overview is to make you aware of the basic risks that are related to investing in small and medium-sized not publicly listed companies.

This overview does not contain a comprehensive list and description of all the risks which you may be exposed to. You shall take account of this circumstance and make your own analysis and assessment of both the risks mentioned herein and any other risks when making any decision.

Early-stage investing in small and medium-sized companies (whether directly or indirectly) exposes an investor to a significant risk of losing all or part of the money invested. Before you invest, you should carefully review all information available, both in relation to the target asset and more generally, regarding investment options and assess all risks. If you are in any doubt about investing your money in an early-stage or small medium company via this solution, YOU SHOULD CONSULT A PERSON WHO SPECIALISES IN ADVISING INVESTORS IN INVESTMENTS OF THIS TYPE, BOTH IN THE SIZE AND TYPE OF COMPANY AND THE NATURE AND FORM OF THE INVESTMENT.

When assessing the risks, you should take account of your own experience on investing in startups, the purposes of investment, current and possible financial capacities, as well as the other circumstances.

You shall thoroughly assess the acceptability of the consequences and risks that may arise. It is recommended to avoid making transactions at the expense of funds, losing which would significantly reduce your ability to perform your payment liabilities. Above all, you are not advised to invest at the expense of borrowed funds.

No information received by you from us, our employees, other members on Uniborn platform, and/or the authorized representatives, is not and can not be considered as a recommendation for making the investment.

We are not responsible for the results of investment decisions made by you based on analytic materials, recommendations and other information received by you from us or third parties.

Risk Definition

A risk is the possibility of occurrence of events that will cause losses for the person who invested in small and medium size companies.

1. Investment Risks

Capital risk

Investing in small and medium size companies will put the entire amount of your investment at risk. There are many situations in which the company may fail. In these situations, you may lose the entire amount of your investment. 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. For investments in startups, total loss of capital is a highly likely outcome. Investing in startups involves a high level of risk, and you should not invest any funds unless you can bear the entire investment loss.

Returns risk

The amount of return on investment, if any, is highly variable and not guaranteed. Some companies may be successful and generate significant returns, but many will not be successful and will only generate small returns if any at all. Any returns that you may receive will vary in amount, frequency, and timing. You should not invest any funds in which you require a regular, predictable, and/or stable return.

Returns delay

Any returns may take several years to materialize, and most startups take up to ten years to generate any investment return, if any at all. It may also take many years before you know if a startup investment will generate any return. You should not invest any funds in which you require a return within a specific timeframe.

Liquidity risk

Investing on private markets is different from investing on public markets (i.e. buying traded stocks, bonds, ETF, etc). You should be ready for having no ability to sell your assets over the period of 7-10 years.

2. Business Risks

Bankruptcy risk

Investments in startups are speculative and these companies fail in more than 80% of cases. Unlike an investment in a mature business where there is a history of income and expenses, the success of a startup is often based on the development of a new product or service that may or may not find a place in the market. Therefore, you must be prepared to lose all your investment.

Revenue risk

The company is still in an early phase and maybe just beginning to implement its business plan. There can be no assurance that it will ever operate profitably. The likelihood of achieving profitability should be considered in light of the problems, expenses, difficulties, complications, and delays usually encountered by companies in their early stages of development. The company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.

Funding risk

The company may require funds in excess of its existing cash resources to fund operating expenses, develop new products, expand its marketing capabilities, and finance general and administrative activities. Due to market conditions at the time the company needs additional funding, it is possible that the company will be unable to obtain additional funding when it needs it, or the terms of any available funding may be unfavorable. If the company is unable to obtain additional funding, it may not be able to repay debts when they are due or the new funding may excessively dilute existing investors. If the company is unable to obtain additional funding as and when needed, it could be forced to delay its development, marketing, and expansion efforts and, if it continues to experience losses, potentially cease operations.

3. Disclosure Risks

Early stage companies may only be able to provide limited information about their business and operations. Such companies are only obligated to provide limited information regarding their business and financial affairs to investors.

4. Personnel Risks

An investment in a startup is also an investment in the management of the company (founder and founding team). Being able to execute the business plan is often an important factor in whether the business is viable and successful. You should 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. You should also carefully consider the experience and expertise of the management team.

Growth risk

In most cases, startups must grow rapidly in order to succeed. Rapid growth may place a significant strain on the company’s management, operational and financial resources. To manage growth, the company will be required to implement operational and financial systems, procedures, and controls. It also will be required to expand its finance, administrative and operations staff. There can be no assurance that the company’s current and planned personnel, systems, procedures, and controls will be adequate to support its future operations. The company’s failure to manage growth effectively could have a material adverse effect on its business, results of operations, and financial condition.

Competition risk

The startup may (and almost always will) face competition from other companies, some of which might have received more funding. One or more of the company’s competitors could offer services similar to those offered by the company at significantly lower prices, which would cause downward pressure on the prices the company would be able to charge for its services. If the company is not able to charge the prices it anticipates charging for its services, there may be a material adverse effect on the company’s results of operations and financial condition.

Market demand risk

While the company believes that there will be customer demand for its products, there is no assurance that there will be broad market acceptance of the company’s offerings. There also may not be broad market acceptance of the company’s offerings if its competitors offer products that are preferred by prospective customers. In such an event, there may be a material adverse effect on the company’s results of operations and financial condition, and the company may not be able to achieve its goals.

5. Other Risks

Tax risk

A possibility that amendments to normative legal regulations and application of normative legal regulations by persons who are responsible for charging tax on the income (withholding agent), will cause deduction of some income earned by you from the investments, and a possibility that you will not be able to use the privileges arising out of contracts for avoidance of double taxation between your country of residence and the country where income was received.

You shall invest at your own risk e.g. you have examined the investment risks, and assessed your risk tolerance and, if necessary in your opinion, consulted professional tax and investment advisors to evaluate, inter alia, i) the content of the agreement; ii) the effect of the respective applicable legislation of your country of residence on their investments; iii) any legal, tax, financial and other consequences stemming from the granting of the Loan or concluding agreement.

Uniborn is a community-led platform for sourcing, sharing, syndicating, and amplifying startups.

Uniborn is a trade name of Uniborn OÜ, registry code 16515953, Rotermanni 6, Tallinn, 10111, Estonia.

We are not intended to be a substitute for legal, tax or financial advice.

Uniborn OÜ is licensed by the Estonian FIU as Trust and Company Service provider, operating license FIU000420.

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