Risk of loss of invested capital
The regulation of the Equity Crowdfunding allows you to subscribe only equity instruments of equity of startups and SMEs, it is therefore risky investments because when you buy "equity securities" you become a partner of the offering companies and you participate in the economic risk associated with the conduct of business, this implies the possibility for investors to lose the entire invested capital.
It is therefore advisable to invest only the sums for which it is believed that it can bear the full loss.
In addition, with reference to the investor's entire portfolio, diversification is always a wise rule: in view of its high riskiness, investing in Equity Crowdfunding should represent a limited percentage of the overall portfolio.
The financial instrument of participation in the capital of a startup or an SME is not traded on regulated markets where a large part of the supply and demand for securities is channelled.
These instruments therefore have a higher degree of illiquidity as they may encounter various difficulties when sold:
- Difficulty to find a counterparty interested in the purchase;
- Difficulty to negotiate a transfer price that represents the actual value.
Liquidity facilitated by Doorway's "Private Deals" section
The risk of illiquidity is linked to the prohibition to exchange equity instruments in venture capital of startups and SMEs on regulated markets and to the fact that there is no so-called "secondary market" organized in which it is possible to make the purchase and sale once the instruments have been subscribed through the direct heading.
The offer of Equity Crowdfunding portals can in fact be a 'subscription only' offer, i.e. newly issued financial instruments.
Remains the possibility of buying and selling between private individuals, in compliance with the rules established for individual cases.
On October 10, 2019, the Commission Resolution on the Amendment of Consob Regulation no. 18592 of June 26, 2012 on the raising of capital through online portals to comply with the changes introduced by the 2019 Budget Law was published. In particular, Art. 25-bis "Electronic bulletin board", in order to facilitate the demobilization of the investment made through crowdfunding platforms, on the model of what has already been implemented in other EU Member States and in coordination with the proposals under discussion at European level, introduces a provision aimed at enabling portal operators to set up - as part of their main activity - an electronic bulletin board for the publication of expressions of interest in the purchase and sale of financial instruments, which have been the subject of bids successfully concluded as part of a crowdfunding campaign carried out on their portal.
Doorway in this regard, we provide a section called "Private Deals" where the registered investor can inform other investors of his intention to sell all or part of his shareholding in one or more companies in which he has invested through the Platform. It is not possible for an investor to give notice through this section of his or her intention to dispose of holdings other than those of companies that have campaigned on the Platform, nor to give any other type of information.
This section is only visible to investors registered on the Platform who have made at least one investment on the Platform, or to those users registered on the portal who have not participated in a campaign but have nevertheless completed the MiFID appropriateness questionnaire, and is a mere "bulletin board" that can only be used by such persons and is simply made available on the Doorway portal, without Doorway having any further operations other than making it available to the aforementioned persons.
To learn more about: Resolution no. 21110, Amendments to Consob Regulation no. 18592 of 26 June 2013 on raising risk capital through online portals and subsequent amendments and additions (Crowdfunding Regulation) to adapt to the changes introduced by the 2019 Financial Statements Law.