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Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g. angel investors and venture capital firms). These investors often negotiate for seats on the company’s board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans. An early-stage company primarily financed through crowdfunding may not have the benefit of such professional investors.
- You cannot sell your shares at any time as you would be able to do if you held shares in a publicly traded company. In fact, you are restricted from reselling your shares during the first year post closing of the offering, unless the shares are transferred:
- to the company that issued the securities
- to an accredited investor;
- to a family member;
- in connection with your death, divorce, or other similar circumstance;
- to a trust controlled by you or a trust created for the benefit of a family member (defined as a child, sibling or parent of you or your spouse); or
- are part of a later offering registered with the SEC.
There may be no market for the shares after the initial 12 month restricted period.
It is important that you only invest capital with the expectation of holding your investment for an indefinite period of time, and with the real risk of a total loss of your investment in mind. Only invest an amount you can afford to lose without changing your lifestyle