One of the primary risks associated with investment-based crowdfunding is the dominance of inexperienced retail investors participating in these platforms. Unlike seasoned institutional investors, retail investors may lack the knowledge, expertise, and risk awareness required to evaluate investment opportunities effectively. Some retail investors may also not have the necessary knowledge or financial literacy around crowdfunding, making investing much riskier.
Retail investors may also be unlikely to have sufficient knowledge, experience, or resources to conduct a satisfactory level of due diligence on the issuer to make an informed decision when investing, or to have access to financial advice to be able to do so.
This inexperience can lead to uninformed investment decisions, increasing the likelihood of losses and dissatisfaction among investors.
