If you invest in a business on Crowdcube you will become a direct shareholder in that company. The amount you invest, and the equity issued by the company in exchange for investment, will affect your percentage of ownership in the business. Once the legal documentation is completed you will become a shareholder in that business. You will be sent a Share Certificate and appear on the business' share register at Companies House.
Such investments are long-term and are used to help the company experience more growth than they would if funded with a traditional loan or grant. The majority of investments are classed as B Shares, which means you will not have pre-emption rights or a vote in any future business decisions. Companies can also offer A Shares with voting rights if the investment is above a certain threshold, so please check the pitch carefully. You will be emailed a copy of the adopted Articles of Association, and given seven working days to review them. During this period you can query, reduce or withdraw your investment if you choose.
Investing in start-up and early stage businesses is high risk. The majority of start-ups fail or do not deliver shareholders a return on their investment. Liquidity, or the ability to cash in your investment, is limited as it often relies on the company being sold. Dividend payments are rare and the likelihood of an investor's percentage shareholding being diluted by future fundraising is high.
Investors should therefore implement a diversification strategy when building an investment portfolio. Diversification involves spreading your money across multiple investments and will give you, as an investor, greater peace of mind that your investments will be sustained in adverse market conditions, and losses will be cushioned. However, it will not lessen all types of risk.