This risk analysis will help you understand the hazards of investing in our shares and some concepts that will provide context within the investment sphere. Invest with caution and diversify your investments.
Startups: A startup is a newly established or emerging company characterized by its focus on innovation and the pursuit of creative solutions to specific problems or the creation of disruptive products and services in the market. Generally, these companies start with limited resources, often in the technology sector, and seek rapid growth and scalability. Their culture is often agile and flexible, allowing them to adapt quickly to market changes and adopt accelerated development strategies. Startups often seek funding from external investors, such as venture capital, to drive their growth and expansion.
Participations vs. Shares: In Spain, “participations” are commonly used to refer to ownership in limited liability companies (S.L.), while “shares” are used for public limited companies (S.A.). In the case of Muse Scene Lab, we will refer to what is commonly called “shares” in other jurisdictions as “participations.”
It is important to allocate money among different types of investments with different risk levels. This reduces overall risk. However, diversification does not eliminate all risks. Therefore, it is crucial to diversify when investing. You should only invest a portion of your available capital, balancing it with more conservative and liquid options.
Investing in startup participations does not guarantee regular profits. Investing in different startups can help diversify and spread the risk but does not eliminate it since these are investments in startups. Specific risks are detailed on the project page.
Most startups fail or do not grow as expected, making investing in them very risky. You are likely to lose part or all of your investment. Only invest money you can afford to lose and diversify to spread the risk and improve your chances of overall returns. If a startup fails, the company will not refund your money.
Liquidity refers to the ease of selling your shares or participations after buying them. Startup participations cannot be easily sold, and they are unlikely to trade on secondary markets like the MAB in the short term. Even successful startups rarely go public. Additionally, participations do not carry voting rights, making it challenging to find buyers.
Dividends are payments from a company to its shareholders from profits. Most startups rarely pay dividends to investors. This means that you are unlikely to earn returns on your investment until you can sell your shares or participations. Profits are usually reinvested in the company to fuel growth and create value for shareholders. Companies are not obligated to pay dividends to partners.
Any investment in shares or participations can be diluted. Dilution occurs when a company issues more shares, affecting shareholders who do not purchase the new shares. As a result, the shareholder’s percentage stake in the company decreases or becomes “diluted.” This affects voting rights, dividends, and value.
As an investment through a participation account agreement in a startup, it is important to note that there is inherent risk associated with the early stages of such businesses. Although we have confidence in the management that will be carried out, every investment carries the possibility of not recovering the invested capital or not achieving expected benefits. As an account participant, you will have limited oversight and control over the management. In any case, it is important that you carefully consider these factors before signing the participation account agreement.
A convertible is an equity investment in a company where shares will be issued in the future, usually when the company completes a larger investment round. A convertible allows a company to obtain equity financing without setting a valuation; the valuation will be determined in the next round or at an agreed-upon deadline.
It is important to remember that investing in a convertible carries the same level of risk as investing directly in a startup. Your capital remains exposed.
Investing in early-stage startups and businesses involves risks, including lack of liquidity, lack of dividends, loss of investment, and dilution, and should only be done as part of a diversified portfolio. Muse Scene Lab is exclusively for investors who are sophisticated enough to understand these risks and make their investment decisions. Investment opportunities are not offered to the public, and investments can only be made by authorized Muse Scene Lab users based on the information provided in the Muse Scene Lab proposal.