Financial risk

In the dynamic and ever-evolving world of finance, risk is a constant companion that accompanies the promise of reward. This is especially true in early-stage investing, where participants aim to identify the next big startup success story while it's still in its infancy.

Early-stage investing, characterized by investing in startups at their beginning phases, carries significant financial risk. The stark reality is that most startups will not evolve into lucrative ventures. Market conditions, poor management, insufficient funding, and fierce competition are just a few reasons a promising startup might not succeed. From an investor’s perspective, these risks translate into high chances of losing their entire investment. Therefore, early-stage investing is often reserved for accredited investors with the financial means to weather potential losses.

The question of whether to allow anyone to participate in early-stage investing brings about a complex debate. On the downside, allowing broader participation exposes novice and unaccredited investors to substantial financial risks. Without the requisite knowledge, experience, and financial stability, these individuals are more likely to incur losses they cannot afford. On the other hand, preventing broader participation in early-stage investing can exacerbate wealth inequality, as it concentrates potential high-yield investment opportunities in the hands of the wealthy. This barrier hinders economic mobility and the democratization of wealth creation. Also, there is an aspect of simply respecting the right of people to make their own financial decisions, even if those decisions are risky.

Web3, or the decentralized internet, holds the promise of democratizing financial markets through decentralized finance. However, it also presents its own unique set of risks, including smart contract vulnerabilities, liquidity risks, and regulatory uncertainties.

To make participating in web3 financial markets safer, several measures can be taken, education, regulation, and security audits being a few of them; however, implementing these is easier said than done, and web3 still has the label of a much riskier market for people to participate in with much more emphasis of freedom and fewer regulations which is seen as a feature for some and a bug by others.

Questions we will tackle at this event:

- What are the risks of early-stage investing?

- What are the downsides of allowing anyone to participate in early-stage investing?

- What are the downsides of not letting anyone participate in early-stage investing?

- How can we make participating in financial markets more safe in web3?