You should include every risk that you can think of that is specific to your business.
Do not think in terms of “these risks are going to scare away investors!” because painting a rosy (but incomplete and inaccurate) picture for your investors is bad for every party involved, including yourself.
Investors respect transparency. Writing down the risks not only helps investors make a sound decision; it also protects you as a founder.
- Disclose All Risks. Disclose everything you can think of that is specific to your company and industry.
- Be Specific. The law requires that these risks be specific to your business, not generic boilerplate.
- Write At Least Six. Our system requires a minimum of six risks along with a few sentences of description for each. But we strongly recommend erring on the side of caution — even if you’re not sure, add it.
It's hard to think up risks out of thin air. This is why we've drafted a huge document trying to capture all the risks that can be relevant. It's a beast of a document, but definitely useful to dig through.
You ready? Open if you dare.