Investing in startups is not for the faint of heart. While the returns one can realize by investing in a billion dollar “unicorn” in its earliest days can far exceed anything gained in the public markets, the risks are far greater as well.
Sitting at the top of that list of risks is the high rate of failure for startups, often estimated at 90 percent. And when things go south for a startup, its investors rarely get any of their money back.
To mitigate that 90 percent probability of losing 100 percent of their investment, investors in crowdfunded securities should remain well diversified.