Investing in an emerging new economy company requires as much care and diligence as any old economy investment.
Technology companies require significant funding in the initial stages.
The benefit for the investor in making the investment at a relatively early stage of the company s development is to acquire equity cheaply with the expectation of significant capital appreciation. Such investments can be for relatively modest amounts and frequently involve friends and acquaintances. For a layperson making this type of venture capital investment, this article identifies the main legal issues to be considered. Professional legal and tax advice should always be sought, regardless of the amount to be invested. An investor might be given an information memorandum relating to the business.