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Mr. Crowd University

Course 2:Risk of Investing in Crowdfunding


Illiquidity

Equity crowdfunding involves investment in private companies. Since there is no readily available secondary market or public stock exchange for the sale of shares purchased through equity crowdfunding, it may be difficult or even impossible to sell your securities purchased from equity crowdfunding. Furthermore, investments made in a Title III crowdfunding transaction can't be resold for a period of one year and there may be some other restrictions on the resale of the securities. You may not always be able to cash-in the shares you own in a private company quickly or for equal value of what you invested.

Risk of losing all of your money

Investments in early-stage and growth-focused businesses could result in a 100% loss of capital as, according to statistics, most of these businesses failed. You could also end up losing your entire investment if you have invested in fraudulent companies.

Risk of dilution and limited voting rights

Purchasers of the securities offered may be entitled no voting rights and therefore they are not entitled to exert influence in the affairs of the company or the composition of its board of directors. Purchasers of the securities offered may also be entitled no anti-dilution rights (other than proportionate adjustments for stock splits and similar events) and therefore future equity financings may dilute their ownership percentage in the issuer. As a result, the value of your investment may be diluted if more shares are issued and many start-up businesses undergo multiple rounds of funding.

You may not receive any dividends

If you invest in shares in a business, there will be no guarantee that income in the form of dividends will be paid.

Returns may take years to (or never) materialize

Return on equity crowdfunded business may take many years to materialize. In many cases, equity may not ever accrue to the investor. Management may deviate from the business plan, or could be out of its depth when trying to scale up the company. Over time, this may lead to capital erosion rather than wealth creation.



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REGULATION CROWDFUNDING - GENERAL RULES AND REGULATIONS

IMPORTANT LEGAL NOTICE: Ksdaq Inc. owns and operates Mr. Crowd (www.MrCrowd.com), a funding portal (the "Funding Portal") registered with the Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA) [FINRA Funding Portal Members]. By accessing the Funding Portal and any pages on the Funding Portal, you agree to be bound by the Terms of Use and Privacy Policy, as may be amended from time to time without notice or liability. Securities offerings posted on the Funding Portal are limited to Regulation Crowdfunding offerings.

Investors must acknowledge and accept the high risks associated with investing in private securities offerings. These risks include holding your investment for periods of many years with limited ability to resell, limited access to periodic reporting, and losing your entire investment. You must have the ability to bear a total loss of your investment without a change in your lifestyle. Funding Portal is only required to conduct limited due diligence on each Issuer and does not in any way give investment advice, provide analysis or recommendations regarding any offering posted on the Funding Portal. Past performance is not indicative of future performance. All investors should make their own determination of whether or not to make any investment in an offering, based on their own independent evaluation and analysis and after consulting with their financial, tax and investment advisors. Prior to making any investment, you will be required to demonstrate your understanding of the speculative nature of investing in such private securities. The securities offered on this Funding Portal can only be marketed in jurisdictions where public solicitation of offerings are permitted; it is solely your responsibility to comply with the laws and regulations of your country of residence. You are strongly advised to consult your legal, tax and financial advisor before investing.

You can learn more about investing in crowdfunding from the SEC, FINRA or NASAA.




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