Startup companies often times operate in fragmented markets and these companies do not have public reporting requirements. Privately-held companies are not as transparent with their performance as publicly-traded companies and the illiquid nature of their securities makes determining a fair price for their investment challenging.
Investors do not know as much about the company as people within the company, which makes it challenging to determine a fair price for the investment. Adding to the security pricing risk is the chance that an investor’s equity position becomes diluted as more rounds of funding occur. Typically the terms of investing in startups do not provide for anti-dilution provisions. However, to counteract this risk, Florida Funders performs an extensive due diligence in order to find a fair price for an investment and to mitigate the likelihood of any unforeseen events.