NetworkNewsBreaks – Time Article Highlights the Risks of Startup Investments

October 2, 2018 13:57:45

A recent article by Ryan Derousseau on titled, “It Could Get a Lot Easier to Invest in Startups. Here’s Why That’s Bad” highlights the risks involved when investing in startups. In September, the Securities and Exchange Commission (“SEC”) Chairman Jay Clayton stated that the agency would research reducing restrictions on those defined as “accredited investors.” The term accredited investors references investors that have a net worth of at least $1 million, or that can show income of over $200,000 for three straight years. The risks involved in startup investments impact small investors much more than large accredited investors. Per the article, the primary reason for non-accredited investors to be weary of startups is because they aren’t stable investments. Obviously, some fail. Others don’t exceed the valuation investors are buying into. They also lack transparency, as they are not public and therefore are not required to provide as much information about their financials or results.

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