Risks
Investments offered on ukiyo Ventures carry a high degree of risk and are speculative. Prior to making an investment decision, it is important that you conduct your own due diligence and thoroughly assess the disclosed risk factors.
Speculative Nature
Startups, early-stage ventures, and digital asset projects, which are often the types of investments found on ukiyo Ventures, are considered to be speculative and have a high likelihood of failure. Unlike established businesses with a proven track record of revenue and earnings, the success of these ventures is typically tied to the development of a new product or service that may or may not find a market. As such, you should be prepared to lose your entire investment.
Illiquidity
Investments made through ukiyo Ventures may be illiquid and you may be unable to resell your investment for an indefinite period of time. Unlike publicly traded stocks, where securities can be bought and sold easily, reselling a private investment often requires you to locate an interested buyer.
No voting rights
In most cases, investment instruments offered through ukiyo Ventures do not provide voting rights to investors. Although investors may be granted voting rights if the instrument is converted to stock, the number of votes a Ventures user has may be diluted when the company raises additional funds. Additionally, crypto-assets typically do not grant voting rights, and owning a token will not give you any influence over the token issuer unless explicitly stated (as in DAO protocols). While stock purchase agreements and membership interest agreements may provide voting rights, they may also require you to proxy your voting rights to third parties.
Cancellations restrictions
Once you make an investment commitment, you can cancel it at any time prior to the campaign deadline. However, some campaigns may have multiple deadlines and certain regulations may make your investment commitment binding. Make sure to carefully review all notices and terms before committing your assets on the Ventures DApp.
Limited disclosure
The issuer is required to provide some information about itself, its business plan, and its anticipated use of proceeds. However, early-stage companies may have limited information to disclose due to their ongoing development. Depending on how securities were offered and sold, the company may also not be required to file annual information, including financial statements.
Investment in personnel
Investing in a startup or early-stage company is also an investment in the founding entrepreneur(s) and/or the company's management team. The ability to execute on the business plan is a critical factor in determining the company's success. A portion of your investment may also be used to fund salaries. It is important to carefully review the disclosure regarding the company's use of funds.
Possibility of fraud
There is always a risk of fraud when investing in a company. Once an offering ends, there is no way to control the actions of the company.
Lack of professional guidance
Lack of professSuccessful issuers often attribute their success to the guidance of professional early-stage investors, such as angel investors and venture capital firms. These investors can bring resources, contacts, and experience to assist early-stage companies in executing their business plans. Early-stage companies that rely solely on the ukiyo Protocol for funding may not have the benefit of such professional investors.
Other notes
Potential investors should be aware that investing in companies on the ukiyo Protocol carries a significant amount of risk, even if the project provides assurances. It is not guaranteed that any information or projection provided by the project has been validated or is reliable.
Furthermore, it is uncertain whether a startup will achieve its business plan or if an investor will receive any return on their investment.
Additionally, there is no assurance that any investment deployed through the Ventures DApp will be resold. Therefore, anyone considering investing in a project through its offering should carefully evaluate these and other relevant factors.
The risks associated with the demands of startups and mature projects; it is common for investors to lose their entire investment.
Investing in startups and equity financing, including early-stage ventures and emerging technology companies, carries a high degree of risk. These ventures face significant financial and operational risks, which often result in a loss of investment or inadequate returns, even when the perceived level of risk reflects the expected returns. Additionally, the timing of investment returns is highly uncertain.
The startup market is highly competitive, and the number of companies that survive and prosper is small. Startups frequently face unexpected challenges in product development, manufacturing, marketing, financing, general management, and other areas. These challenges are difficult to overcome and can lead to losses. To make matters worse, startups typically require substantial financing, which may not be available through institutional private placements, the public markets, or other financing options.
Before making an investment, investors should carefully evaluate the inherent risks associated with startups and project demands. It is crucial to note that investors frequently lose their entire investment, so caution and due diligence are necessary.
Investing in new idead, technologies, or expanding a business plan can be a risky proposition.
Investing in a startup project can expose investors to risks, such as the impact of industry-specific factors or higher risk compared to investing in a broader range of securities. Startups face various risks, including:
Rapidly changing technologies that may affect the viability of their business;
Products or technologies that may become outdated quickly;
Difficulty in attracting and retaining management, technical, scientific, research, and marketing personnel with the appropriate skills;
The risk of lawsuits related to patents and intellectual property;
Rapid changes in investor sentiments and preferences regarding technology sector investments, which are generally considered to be risky; and
Exposure to government regulation, which may cause delays or failures in obtaining regulatory approvals and make these companies susceptible to changes in government policy.
Changing economic conditions
The success of any investment activity is influenced to some extent by general economic conditions. The unavailability, availability, or limited operation of external credit markets, equity markets, and other economic systems, which a particular project may rely on to accomplish its objectives, may have a significant negative impact on the project's operations and profitability.
The stability and sustainability of growth in global economies (including emerging decentralized economies in the realm of crypto-currencies) may be affected by unpredictable events such as terrorism, acts of war, increased regulatory scrutiny and fragmentation, among others. There can be no guarantee that such markets and economic systems will be available, or will be available as expected or needed for a successful investment in a startup.
Future and past performance
The performance of a project or its management in the past does not guarantee future success. It is impossible to guarantee that targeted results will be achieved. Loss of principal is possible and even probable with any investment.
Difficulty in valuing projects
Valuing a project is an incredibly challenging task. In addition to assessing the risks and potential success of a startup, there may be a lack of market-ready information available to determine prices of securities or other sources of pricing information on arm's length transactions. Moreover, there may be limited public information about a project's financial or operational history, making it even more difficult to determine its value. As a result, investments made in projects through the ukiyo Protocol may be challenging to evaluate.
Minority investments / limited rights
Investors who use ukiyo to invest in projects should be aware that a significant portion of their investment may represent minority stakes in privately held companies or the right to assets that are not yet created by a startup or established company. The investor's interest may take the form of non-voting shares or a debt interest, and even with voting shares, minority stakes do not provide the control characteristics of majority stakes or the valuation premiums given to controlling stakes. As with any minority holding, the investor will depend on the existing management and board of directors of such companies, who may include representatives of other financial investors with whom the investor is not affiliated, and whose interests may conflict with the investor's interests.
No voting rights
In the event that you receive voting shares in a project, it is possible that your voting rights may be diluted when the project raises additional funds. However, in many cases, investments made through ukiyo may not provide investors with any right or ability to vote at all.
Lack of information for monitoring and valuing startups
Due to various factors, investors may not be able to access all the information they require about a particular startup. There is a possibility that an investor may not become aware in a timely manner of significant adverse changes that have taken place with respect to some of their investments. This lack of information, combined with other uncertainties, may result in an investor not having an accurate assessment of the current value of a startup.
No assurance of additional capital for startups
Once an investor has put their money into a startup, the continued growth and promotion of the startup's products or services may require additional financing. These needs are typically fulfilled over several rounds of investment. However, it is uncertain whether this additional funding will be readily available or offered on favorable terms. In some cases, additional financing may not be available at all, putting the future of the startup at risk.
Absence of liquidity and public markets
Investors in startups on the ukiyo Protocol should be aware that their investments will likely be private, illiquid holdings. As a result, there will be no public markets for the securities they hold, and there may be no readily available mechanism for obtaining liquidity for their investments at any given time. This lack of liquidity can create significant challenges for investors, particularly in the event that they need to liquidate their holdings for personal or financial reasons.
Legal and regulatory risks associated with crowdfunding
There can be no guarantee that a project will fully comply with the requirements of federal laws that allow private companies to raise funds from retail investors using a platform such as the ukiyo Protocol, whether prior to, during, or following the offering on the ukiyo Protocol.
Tax risks
Investing in projects through ukiyo may entail various tax risks that are complex and difficult to address. It is highly recommended that investors seek the advice of a tax advisor to obtain information about the potential tax consequences of acquiring:
Equity or equity securities of a startup or mature company;
Debt securities of a startup or mature company;
Crypto-assets or the right to crypto-assets of a project; and
Other unique investment instruments that may be hosted on ukiyo.
Withholding and other taxes
The tax implications of investing in a project may not be efficient for a particular investor, and no project can guarantee any specific tax outcome. Investors may also be subject to tax reporting requirements under the laws of the jurisdictions in which they are taxed. It is advisable for investors to consult their own professional advisors to obtain information on the tax consequences of investing in a startup, taking into account the laws of the jurisdictions in which the investors and/or the startup are subject to taxation.
Limited operating history of “startups”
Investors should be aware that startups, including those offered through ukiyo, may have little or no operating history. As a result, each investment opportunity should be evaluated with the understanding that the startup's business plan and projections may not be accurate and that the startup may not achieve its objective. Past performance of the startup or its team should not be relied upon to predict future results.
Diverse investors
Investors and employees involved in a project may have different and conflicting interests regarding project ownership, which may arise from the way the project is structured, the timing of the sale of the startup, or other factors. As a result, the project's management may make decisions that favor some investors over others. Investors should understand that the project's management typically considers the investment and tax objectives of all shareholders as a group, rather than the interests of individual investors, when making decisions about investment structure or timing of the sale.
Lack of investor control
Unless otherwise stated, investors in a project will not have decision-making authority with respect to the project's business and affairs.
Need to protect crypto-assets
Investors who receive crypto-assets through ukiyo as part of their investment will need to store them securely in a wallet with secure key(s). There is a risk that investors could lose their crypto-assets due to factors such as a breach of security, loss of the wallet (whether physically or control over it), irrecoverable loss of the private key(s), or other factors.
Confidential information
Confidentiality is a critical concern for startups, and certain information about a project may be highly confidential. If such information is ever made public, competitors may benefit from it, which could lead to adverse economic consequences for investors.
Forward-looking statements
Investors should be aware that the information provided by projects may include "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995. These statements refer to future events or expectations rather than historical or current facts and may use terms such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes," or similar language.
Examples of forward-looking statements may include projections of a project's future funding needs, revenue and expenses, market demand for its products or services, and other similar matters. It is important to note that forward-looking statements are inherently uncertain and subject to risks and uncertainties, and actual results may differ from those projected in these statements.
Management’s forward-looking statements for each project are based on current expectations and assumptions regarding the project's business, economic conditions, and future events. However, forward-looking statements are inherently subject to error, uncertainty, and changes in circumstances. Actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors such as government regulation, economic, strategic, political, and social conditions. Other important factors that could affect actual results include:
Errors in estimates, such as the expected market size, cost of bringing products to market, timelines, and required resources for projects, and other financial and operational estimates.
Recent and future changes in technology, services, and standards.
Changes in consumer behavior and acceptance of a project's plans, initiatives, and strategies.
Changes in the plans, initiatives, and strategies of third parties necessary or critical to a project's success.
Competitive pressures, including as a result of technological advancements.
A project's ability to manage economic slowdowns or other economic or market difficulties, including limitations on its access to capital markets, refinancing, or obtaining debt, equity or bank financing on acceptable terms.
Failure to meet earnings expectations.
Failure to comply with federal, state, and foreign regulations related to securities offerings and exchanges.
Adequacy of a startup's risk management framework.
Changes in accounting policies such as US GAAP or European IFRS or other applicable accounting policies.
Impact of terrorist acts, hostilities, natural disasters (including extreme weather), and pandemic viruses.
Disruption or failure of a project's or its vendors' network, information systems or other technologies on which its businesses rely.
Changes in tax, federal communication, and other laws and regulations.
Digital systems being compromised by hacking, forking, and hostile take-over.
Changes in foreign exchange rates and the stability and existence of foreign currencies.
Other risks and uncertainties that may or may not be specifically discussed in materials provided to investors.
The date of a forward-looking statement made by a project is crucial as the project is not obligated to update or change its statements in the future, even if new information or events come to light. The above-mentioned risks are not exhaustive and other risks and uncertainties may exist in investing in a startup's equity or debt securities. Thus, it is recommended that each user of ukiyo Ventures seek independent legal and tax advice and carefully read the relevant investment documents before making an investment decision in a startup through the ukiyo Protocol.
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