A FundersClub member investing equally across all of our investments would have yielded a net unrealized IRR of 37.1%* as of March 31, 2016. However, investing in startups and small businesses is risky. Each year, many companies in the US go out of business due to changing market conditions, unforeseen challenges, and other problems. FundersClub funds invest in high-risk opportunities and may not retain their value. If a business in which a fund owns stock goes out of business, your ownership interest in such fund will lose all value. While there are no guarantees that this strategy will reduce your risk, some investors choose to address this risk by practicing portfolio diversification. That is, investing in smaller amounts and spreading their investment across a larger number of different opportunities, which also helps them to support a broader number of entrepreneurs.
[*]A FundersClub member investing equally across all available investments would have, net of administrative costs and carried interest, an unrealized annual net rate of return (“Unrealized Net IRR”) on their portfolio of 37.1% for the period from FundersClub’s launch on July 25, 2012 through March 31, 2016. This data speaks only as of the date hereof, and FundersClub disclaims any obligation or undertaking to provide updates or revisions to reflect any change in its expectations or returns.
The stated IRR is unrealized and based solely on our own estimate of the current value of our fund investments; was not provided or verified by the companies or third party valuation; and does not represent actual return of capital or gain to FundersClub members. Our methodology for determining the unrealized IRR is described in this post. The actual return outcomes for investments are highly uncertain and may, in the end, be significantly lower than the stated unrealized IRR. Additionally, our past performance is not indicative of future returns, so we can’t provide assurances that comparable returns individually or in the aggregate will be achieved by any current or future FundersClub fund.
Disclosure: Investing in startups carries a high degree of risk. In general, financial and operating risks confronting both early and developmental-stage companies, as well as more mature expansion-stage companies are significant. Many emerging growth companies go out of businesses every year. It is difficult to know how companies will grow, if at all, or what changes may occur in the market. A loss of an investor’s entire investment is possible and no profit may be realized. Investors are responsible for conducting their own due diligence.