#1 Problem with External Investments: Liquidity

By | September 1, 2017

1 Problem with External Investments: Liquidity

My top issue with angel investing platforms is that virtually every company raising capital doesn’t provide a specific way in which your investment will be paid in the event the company doesn’t sell itself. Many investors don’t like to talk about this but I think it’s important for prospective investors to acknowledge this significant risk.

The company can easily decide to never issue dividends and just keep floating around, even if they do millions in monthly sales.

If you invest in a private company and there are not clear terms regarding how liquidity is repaid in cash, you’re taking excessive risk. It’s important to create some sort of condition for repayment in a reasonable time period.

The goal is to create a mutually beneficial deal that both supports the entrepreneur’s goals while not exposing the investor to excessive risk.

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