What does it mean to invest?
Shares are the unit of ownership in a company. Ownership of each company is divided into units (shares) and the people that own those shares are called shareholders. What the shares are worth is based on the value of the company and number of shares. For example, if a company has 100 shares and is worth $100,000 each share is worth $1,000.
Investing means you are purchasing shares and buying a piece of a company, which makes you a part-owner. As an owner, there is the potential to make money off your investment. Some of the ways you might make a return are as follows:
if the company is profitable, you could receive an annual payment based on the company’s profits, if the company chooses to share them (a dividend),
if someone is interested in buying shares in the company, you could sell them, or
if the company’s business is sold, you would receive part of the sale price based on the amount of the company you own and rights attached to your shares.
Investing in an early-stage company is risky. It can be hard to judge the likelihood of success with startups and growing businesses. Losing your whole investment is possible. This means you need to think carefully before you invest, and make sure you’re not investing more than you can afford to lose.
The companies which use PledgeMe are not listing their shares on a public stock exchange. This means they do not need to disclose the same level of information to investors as a listed company would. This also means the shares you invest in via PledgeMe may lack liquidity, as they are not traded on a stock exchange. Because of this, it is important to recognise that selling your shares may be difficult. Make sure not to invest money you might need back at short notice.
Typically early-stage and growing companies do not pay dividends, instead they may reinvest any profits they make into growing the business. They may also do future rounds of investment, meaning your ownership of the company percentage-wise could be diluted by the new shares that would be issued.