RISK WARNING

 

This is CrowdedHero’s Risk Warning (“Risk Warning”) applicable to the Services, as defined below. This Risk Warning forms an integral part of CrowdedHero’s Terms and Conditions.

The Risk Warning may be made available in several languages; all versions are legally binding, but in the event of inconsistency between the English version and a translated version, the English version prevails.

The version of this Risk Warning is effective as of 16th of May, 2022.

1    DEFINITIONS

 

“Client”

a Prospective Investor, Investor or Project Owner.

“CrowdedHero”, “we”, “us” or “our”

SIA “CrowdedHero Latvia”, registration number: 50203309441, registered address: 58A – 8 Bauskas Street, Riga, LV-1004, Latvia.

“ECSPR”

Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 (Text with EEA relevance), PE/37/2020/INIT, OJ L 347, 20.10.2020, p. 1–49.

“Investor Classification Policy”

our Investor Classification Policy concerning the Services available on the Platform as may be amended from time to time.

“Investor”

a natural or legal person who acts as an investor, meets all the eligibility requirements set in CrowdedHero’s Terms and Conditions, opens and holds a Payments Account, thereby agreeing with Lemonway’s Terms and Conditions, and through the Platform makes investments.

“Knowledge Test”

a test intended to assess the knowledge, skills and experience of an Investor classified as the Non-Sophisticated Investor by assessing:

[a] whether the Investor has the necessary experience and knowledge required to understand the risks involved in investing in general; and

[b] whether the Investor has the necessary experience and knowledge to understand the risks involved in the types of investments offered on the Platform.

“Non-Sophisticated Investor”

an Investor who is not a Sophisticated Investor and is classified as the Non-Sophisticated Investor according to Investor Classification Policy.

“Platform”

a publicly accessible internet-based information system that is branded as ‘CrowdedHero’, available via the Website and operated or managed by CrowdedHero.

“Project Owner”

a legal person who seeks funding through the Platform by way of the Offer and is directly responsible for the information to be included in the key investment information sheet.

“Project”

a business activity or activities for which the Project Owner seeks funding through the Platform.

“Prospective Investor”

an Investor who is willing to express his/her/its interest to invest in an Offer.

“Risk Warning”

CrowdedHero’s Risk Warning concerning the Services available on the Platform, as may be amended from time to time.

“Services”

the matching of business funding interests of Investors and Project Owners through the use of the Platform by CrowdedHero providing the services that enable:

[a] Offers to raise funds;

[b] Investors to invest in the Offers;

[c] advertising interest in buying and selling shares/stocks of a Project Owner’s company that had a successful Offer on the Platform.

“Simulation”

a tool available on the Platform intended to assess the financial situation of the Investors classified as the Non-Sophisticated Investors and enabling such Investors to simulate their ability to bear the loss.

“Sophisticated Investor”

an Investor who is classified as the Sophisticated Investor according to our Investor Classification Policy.

“Website”

the website branded as ‘CrowdedHero’ and referring to the domain https://www.crowdedhero.com/.

2    GENERAL INFORMATION

2.1      We, without taking on its own risk, operate and manage the Platform. At the date of the Policy the ECSPR is in force, and we are in licencing process, but have not yet regulated under crowdfunding service provider licence. The Services are provided in a professional, fair and transparent way, we apply the requirements of the ECSPR when rendering the Services and to our internal operations.

2.2      We recommend to download or print a copy of this Risk Warning and store it for your records and future reference. If you want a copy of this Policy, please e-mail to [email protected] with the words ‘Risk Warning’ in the subject line of your e-mail message.

3    PURPOSE

3.1      The purpose of this Risk Warning is to provide information about some of the potential risks associated with the participating in the Offers and investing in the Projects published on the Platform and using our Services and to ensure that the Prospective Investors and Investors are aware and clearly understand such potential risks.

3.2      You should note that the risks described herein are not intended to be an exhaustive or comprehensive description of all relevant risks. We ask you to take time to carefully familiarise yourself with each of the risks and to properly assess whether investing in an Offer is appropriate for you. You should also regularly review information on the Project Owner, the investment made and the market developments that are available on the Platform and other public sites, and, as required, seek independent and professional advice, to ensure that any investments made and held through the Platform remain suitable for you in your particular circumstances.

4    INTRODUCTIONS

4.1      When providing the Services, we are acting honestly, decently and professionally and we are providing honest, clear and correct communication, taking into account the specific situation of an Investor. We have undertaken to do our best to ensure an appropriate protection level for every Investor according to its classification while providing the Services. According to our Investor Classification Policy, an Investor may be classified as the Non-Sophisticated Investor or the Sophisticated Investor. Please see our Investor Classification Policy for more information about the classification of the Investors undertaken by us.

4.2      Before giving you a full access to participate in the Offers and make investments in the Projects, we will assess whether you have a sufficient knowledge, skills and experience by requiring you to take the Knowledge Test and use the Simulation Tool on the Platform. We will be doing so to ascertain your understanding of the potential risk associated with a participation in the Offers and investing in the Projects published on our Platform. We may, in our discretion, ask further questions or apply other tests in respect of a particular Offer or Project.

4.3      Please note that we do not prevent those Prospective Investors and Investors that are classified as the Non-Sophisticated Investors from participating in the Offers and investing in the Projects that are available on the Platform if they have not taken the Knowledge Test. However if the Non-Sophisticated Investor has failed the Knowledge Test or has not taken the Knowledge Test and/or has not shared Simulation results with us, an amount that exceeds the higher of either EUR 1 000 or 5 % will apply to that Non-Sophisticated Investor. Any and all participation in the Offers and investments made in the Projects published on our Platform are made by the Investor's discretion and responsibility. But if we are not able to assess whether and which Services offered are appropriate for Non-Sophisticated investor, we may limit the access to the Platform for such Non-Sophisticated Investor.

4.4      The priority risk warning level protection is applied to the Prospective Investors and Investors classified as the Non-Sophisticated Investors. To ensure a professional, fair, and transparent way of provision of the Services, we will be collecting an explicit acknowledgement from each above-mentioned Investor that it has received and understood the risk warning issued by us. To the Prospective Investors classified as Non-Sophisticated Investors, the Reflection Period will be granted thus ensuring that they have time to reconsider their decision to invest in a Project without having any contractual obligations towards us or the Project Owner.

4.5      The basic risk warning level protection level is applied to the Investors classified as the Sophisticated Investors. We are assuming that an Investor classified as the Sophisticated Investor has the awareness of the risks associated with investing in capital markets and adequate resources to undertake those risks without exposing itself to excessive financial consequences. We do not assess the suitability and appropriateness of the Projects to the interests of the Investors classified as the Sophisticated Investors. We are assuming that an Investor classified as the Sophisticated Investor is able to independently obtain the information required to make the investment decisions in the Projects and when receiving the Services. Nonetheless, for those Investors classified as the Sophisticated Investors, We recommend getting acquainted with this Risk Warning and bear in mind the potential risks associated with investing in the Projects published on the Platform.

4.6      The Services provided by us do not include the provision of an investment advice, personal recommendation or consulting service, including legal or tax advice, in any manner or form, and therefore any information provided by us to you will not constitute investment advice, personal recommendation or consulting service and does not warrant or represent any future guarantee or assurance on the expected returns of any of your transactions. You bear all responsibility, without limitation, for any outcome of an investment decision or transaction.

5    RISK DISCLOSURE STATEMENT

5.1      Participating in the Offers and investing in the Projects published on the Platform entails risks and can cause significant deviations from the expected return. There is a significant risk of losing large amounts of the initially invested funds or even of experiencing partial or entire loss of the funds invested. You should carefully consider whether the participation in the Offer and an investment in the Project is suitable for you in light of your knowledge and experience in financial and business matters, investment objectives, financial means and the risks that you are prepared to take and the losses you are able to absorb. You should not participate in the Offer and make investment in the Project published on the Platform unless you fully understand the risks and potential consequences, including the potential risk of losing the entirety of the funds you have invested, and you are prepared to take such risks and able to bear such consequences. Please carefully consider the amount of your invested funds and act reasonably when investing.

5.2      You should only invest in the Projects published on the Platform as part of a well-diversified portfolio and ensure that your investable capital is spread across a number of assets and businesses, and not too highly concentrated in a small number of companies or businesses.

5.3      It is solely up to the Investor to decide whether to participate in the Offers and make investments in the Projects via the Platform and in which Project it invests. The information available on the Platform does not constitute a consulting service of us and does not replace expert advice. All possible losses are borne by the Investor, and therefore we advise recommend that you to carefully analyse and evaluate all associated risks, consider their impact and consequences, and inform yourself about the legal, economic and tax consequences of participation in the Offer and investment in the Project, if necessary, before investing in a Project and also during the duration of the investment. We recommend that you seek independent and professional advice, including, but not limited:

5.3.1      if you do not fully understand the risks of or services related to investing through the Platform;

5.3.2      if you feel a lack of knowledge, skills or experience, or doubt about the investment you are willing to make;

5.3.3      to ascertain that any investments made and held through the Platform remain suitable for you.

5.4      Your investment is not covered by the deposit guarantee schemes established in accordance with the Directive 2014/49/EU. Nor is your investment covered by the investor compensation schemes established in accordance with the Directive 97/9/EC. You may not receive any return on your investment.

5.5      The Offers published on the Platform are not the same as traditional investment products or savings products. We advise you not to invest more than 10 % of your net worth in the Projects published on the Platform.

5.6      You may not be able to sell the investment instruments when you wish. If you can sell them, you may nonetheless incur losses.

5.7      Investments made through the Platform are not made in or accompanied by a prospectus that is lodged with or registered by a regulatory authority, and therefore statutory liability in relation to the content of prospectuses would not apply.

5.8      The information about the Projects on our Platform is provided exclusively by the Project Owners. To enable you to make an informed investment decision every Offer is accompanied by a KIIS reflecting the indicators, features and risks that are specific, related and associated with the Project and the Project Owner. The KIIS is drawn up and exclusively provided by the Project Owner as it is in the best position to provide the information required to be included therein. The applicable law does not provide that the KIIS should be approved by a competent authority. We have undertaken to use reasonable efforts to ensure that the KIIS is clear, correct and complete. We do not check the profitability of the Project. The information provided in the KIIS and forecasts made by the Project Owners are no guarantee of the future development of the Project Owner and/or its Project. Prior to participating in a particular Offer and placing an investment in a particular Project, we strongly recommend you to carry out a subjective analysis of the Project and its KIIS. Although we may, we are not obliged to inform about ongoing developments in the Project.

5.9      Most of the Project Owners raising funds through, or published on, the Platform are early-stage, small- or medium-size companies that may or may not have a proven track record. Investing in such companies comes with a number of significant risks as there is no certainty whether the company you invest in will succeed to the point where your investment is returned, or you receive any return on your investment. The reality is, most early-stage, small- or medium-size companies face a range of business risks and thus may fail and even if they achieve success, they may not be in a position to provide returns to the Investors. Therefore, investing in these companies may involve a number of significant risks and challenges mainly due to both the low probability of such companies eventually succeeding and/or being able to return any value to the Investors, and the general low liquidity of the investments in these companies.

6    RISKS TO BE CONSIDERED

6.1      We have listed below the general risks, Project related risks, and Services related risks that you should consider and be aware of before making any investment through the Platform. Please note that the risks described in this Risk Warning are not intended to be an exhaustive or comprehensive description of all relevant risks.

6.2      Despite all the precautions taking, the zero risk of losing the investment does not exist. So you should diversify your investments and only invest an amount that you are willing to lose. The Offers published on the Platform are subject to various general risks and business related risks.

 

GENERAL RISKS

Loss of investment

You may lose the entire, or part, of your investment. If a Project you invest in fails, the Project Owner or CrowdedHero will not pay you back your investment. The Projects available through the Platform include an opportunity to invest in early-stage companies as well as companies with a proven track record. Even though we have in place the policies and procedures designed to ensure that the Projects are selected in a professional, fair and transparent way by us and we are carrying out a thorough evaluation and due diligence of each Project by assessing whether the Project meets the criteria set by us prior to publishing it on the Platform the risk to business failure is still high. If a Project does become profitable, it is not guaranteed that your initial investment will be returned, or you will receive a return on your investment.

Risk of dilution

Any investment you make through Platform represents a direct or indirect share of the total capital of the Project Owner’s company. Your investment may be subject to dilution in the future as the Project Owners’ company may need to make further capital increases. This means that if the Project Owner raises additional capital at a later round, it will issue new shares to the new Investors, and the percentage of the business that you own will decline. These new shares may also entitle the new shareholders with preferential rights (such as preferential rights to dividends, special voting rights, pre-emption rights or rights in relation to other Project matters), and the exercise of these rights may work to your disadvantage. Please check the Offer and the Articles of Association of the Project Owner’s company to see if the shares you are buying will have these pre-emption rights.

Rarity of dividends

Dividends are payments made by a company’s (i.e., Project Owner) profit to a person (i.e., an Investor) who has become a shareholder of this company. Most of the Project Owners raising funds through, or published on, the Platform are early-stage, small- or medium-size companies. Therefore, if there is a profit, it is rarely distributed as dividends but is reinvested in the company to continue its development. This means that you are unlikely to see a return on your investment until [a] the Project Owner’s company generates profit, [b] distributes dividends or [c] you are able to sell your shares.

Development fluctuations

The target profitability and the information regarding each Project are mere business plans. As such, they may suffer fluctuations in their development and obtain returns different from those expected in the beginning or during the development of operations due to market events, political events, macroeconomic changes (such as inflation risk) or social circumstances, including changes in the applicable law.

Legal and tax differences

Legal risk arises from the fact that the legislative acts regulating state supervision, the asset, ownership, investment activities or taxation of earned income may change during the investment period and influence your investment and the outcome of your investment.

Please note that we do not provide legal or tax services. We recommend that you seek independent and professional legal or tax advice both before and after investing to comply with the effective applicable law.

Hypothetical valuation

Projections presented in the documents accompanying the Offer and Project prepared by the Project Owners and published on our Platform may be based on hypothetical data gathered on the date of preparation of such documents. Please note that any and all estimates and assumptions are subject to significant economic, business, and other uncertainties beyond the control of the Project Owner or CrowdedHero. Although such assumptions are believed to be realistic, the Project Owner or CrowdedHero makes no representations or warranties that the Project Owner will, or likely to, achieve projections similar to those presented as hypothetical performance is not necessarily indicative of future results.

Currency risks

All Offers placed on CrowdedHero are denominated in Euros. When initially converting a foreign currency for the sake of placing an investment via the Platform in Euros, there is a risk that you may suffer losses due to unfavourable changes in currency exchange rates.

 

PROJECT RELATED RISKS

Please note that information related to the risks of the Project is disclosed by each Project Owner in the KIIS. Prior to placing an investment in a particular Project, we strongly recommend you to carry out a subjective analysis of the Project and its KIIS.

Project default risk

Those are risks that are inherent to the Project and that may cause the Project to fail. These risks may concern but are not limited to project dependencies, such as funding, legal, licensing, copyrights, the occurrence of adverse scenarios with a negative impact, (technological) development of competitors or competitive products, or risks deriving from the Project Owner.

Sector risk

Those are risks that are inherent to the specific sector of the Project. Such risks may be caused, for instance, by a change in the macroeconomic circumstances, a decrease of demand in the sector in which the Project Owner operates and dependencies on other sectors.

Risk of default

The Project or the Project Owner may be subject to bankruptcy or other insolvency proceedings, and other occurrences concerning the Project or the Project Owner which may result in the loss of the investment for the Investors. Such risks may be caused by a variety of factors, including but not limited to: (severe) change in macroeconomic circumstances, mismanagement, lack of experience, the financing not fitting the business purpose, unsuccessful product launch, lack of cash flow.

Risk of lower or delayed returns

There is a risk that the return from the investment is lower than expected or that the Project defaults on capital or interest payments. This means that you should not relay on receiving stable returns from your investment.

Risk of illiquidity

Almost all investments you will make through the Platform will be highly illiquid. This means you should assume that buying shares in illiquid companies cannot be sold easily.

Early call risk

The Project Owner has the right to repay you your investment at any time prior to the formal repayment date. Your investment may be materially curtailed because of this.

Unsecured investment

Equity investments are typically an unsecured obligation, meaning there is no security over the property or assets of the Project supporting the repayment of your interest or capital. This means that if a Project fails, it is unlikely that you will have your initial investment or outstanding interest payments returned since there is no security over any remaining assets.

No assurance that the financial information from the Project Owners will be accurate or accessible

The financial statements of the Project in which you invest may not be subject to a statutory audit. As such, the financial information presented to you may not have been ascertained or reviewed by a qualified auditor. The financial statements of the Project also may not be made accessible to you in the absence of requirements in their home country for them to do so. In addition, the information made public by a Project Owner may also be general in nature and may not have been verified by any independent parties.

No assurance that the information provided in the KIIS by Project Owners will be complete, correct and clear

The Project Owners are required to draw up a KIIS and notify us of any change of information provided in the KIIS so that the KIIS is updated at all times and for the duration of the Offer. We will be also informing the Investors who have made an investment in the Project about any material change to the information in the KIIS that was notified to us. However, please note, that we will be able to do so only if the Project Owner notifies of any changes of information provided in the KIIS.

Although we have in place and we are applying adequate procedures to verify the completeness, correctness and clarity of the information contained in the KIIS, there may be a situation that there is an omission, mistake or inaccuracy in the information provided in the KIIS that may have a material impact on the expected return of the investment. If we will detect such an omission, mistake or inaccuracy we will be reaching out to the Project Owner and require it to promptly complete or correct that information. We will be also informing the Investors who have made an investment in the Project about the steps taken and further to be taken by us and the option to revoke their investments made in the Project.

 

SERVICES RELATED RISKS

Platform risk

We have in place a sound and prudent management and business continuity plan and financial projection carried out to ensure successful and sustainable operations of the Platform and provision of our Services. In the unlikely case of CrowdedHero going out of business, the team grants its full collaboration with third parties and appointed representatives, to ensure smooth exit and minimized losses for the Clients affected. In order to mitigate the risk, we advise you to diversify your investments across various asset classes, as well as several crowdfunding marketplaces.

Outsourced service providers

To ensure the efficient and smooth provision of the Services, we have entrusted some of our operational functions, in whole or in part, to a third party, for example, provision of the payment services to an authorized payment service provider. Although we have done our reasonably best to ensure that the outsourced arrangements do not impair the quality of the Services, we cannot assure that they will be available to us at all times and thus our Services will not be impacted. Payment services provided by third party(ies) (financial institutions or associations or other payment service providers) are not a part of the Services.

Risk of the failure of the Services

There is a risk that we may be temporarily or permanently not able to provide the Services. The Services are provided “as is” and “as available”. We make no representations or warranties of any kind, whether express, implied, statutory or otherwise about the Services, including, without limitation, any warranty that our Services will be uninterrupted, error-free or free of harmful components, or that any information and data, including your data, will be secure or not otherwise lost or damaged.

 

7    RISK WARNING NOTIFICATIONS

7.1      If you are a Prospective Investor or Investor classified as the Non-Sophisticated Investor you will be receiving the following risk warnings while using our Services:

7.1.1      that based on your knowledge, skills or experience the Services offered on the Platform by us may be inappropriate for you;

7.1.2      each time you will be investing an amount that exceeds the higher of either EUR 1 000 or 5 % of your net worth as calculated according to the Simulation ((if Simulation data has been submitted to us), you will be receiving a risk warning informing that investing in a Project involves the risk of losing the entirety of the money that you may decide to invest; and

7.1.3      in order to continue your investment, We will issue a risk warning stating that, you expressly acknowledge that you have received and understood the risk warnings issued by us.

7.2      We also will provide to the Investors classified as the Non-Sophisticated Investors information about the Reflection Period. This information will be provided on the Platform and sent to the Investor’s classified as the Non-Sophisticated Investors e-mail after it has invested in a Project.

8    REVISION AND MONITORING OF THIS RISK WARNING

8.1      We reserve the right, at our sole discretion, to modify, amend, supplement or replace this Risk Warning at any time. We will review and revise this Risk Warning when there are any material circumstances arisen that may affect our ability to apply this Risk Warning pursuant to the provisions of statutory and law requirements. What constitutes a material change will be determined at our sole discretion.

8.2      We will inform our Clients on all material amendments to this Risk Warning by publishing the updated version of this Risk Warning on our Platform.

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