What can go wrong
Read this before you trade.
- 01
Total loss of principal
Private companies fail. Shares you buy through Truffle can go to zero. Size to what you can lose in full.
- 02
Illiquidity
Pre-IPO equity has no public market. Resale may take months or be impossible. You may hold to a liquidity event that never comes.
- 03
Valuation uncertainty
Reference prices are derived from last funding round, tender offers, and secondary prints — all lagging indicators. Your mark may differ materially from the next clearing price.
- 04
Transfer restrictions
Most shares are subject to company-level restrictions: right of first refusal, board consent, co-sale, drag-along, and transfer locks. Any one of these can block, delay, or alter a deal after terms are agreed.
- 05
ROFR — right of first refusal
The issuer or existing shareholders can buy your block at the quoted price before the counterparty, forcing you to unwind the trade. Truffle does not waive ROFR on your behalf.
- 06
Counterparty risk
The deal depends on the other side signing, funding, and delivering. Truffle is a neutral venue and is not a guarantor. Escrow mitigates but does not eliminate counterparty failure.
- 07
Information asymmetry
The seller typically knows more about the company than the buyer. Private companies have no public filing duty. Representations in the SPA are the buyer’s only contractual protection.
- 08
Tax complexity
Private-equity transactions trigger capital gains, AMT, Section 83(b), QSBS (Section 1202), and state-level treatments that vary by holding period and entity. Get your own tax counsel before signing.
- 09
Document defect risk
Auto-generated agreements and ROFR notices are document templates, not legal advice. They reflect the parties’ input. If the input is wrong (entity name, share class, price), the document is wrong. Every agreement should be reviewed by your own counsel before signing.
- 10
Share-class mismatch
Matches are gated to the same share class — Preferred Series D only matches Preferred Series D. Cross-class trades (Common for Preferred) are not supported at the platform layer. If you intend to cross classes, that must be negotiated off-platform and re-papered.
- 11
Escrow and settlement
Principal moves through a third-party escrow agent. Escrow failure, bank error, or transfer-agent delay can stall or unwind a settled deal. Wire timing and cut-offs are the parties’ responsibility.
- 12
Regulatory change
Federal and state securities rules evolve. An SEC no-action posture or exemption Truffle relies on today may change. A rule shift mid-deal can delay or prevent settlement.
- 13
Accreditation and eligibility
Participation is limited to accredited investors as defined in Rule 501(a). False attestation can void the transaction and expose you to rescission rights, fines, and civil liability.
- 14
Jurisdictional restrictions
Certain jurisdictions are restricted or blocked by OFAC and corresponding securities laws. Attempting to transact from a restricted jurisdiction is your own liability.
- 15
Concentration risk
A single block can represent a large share of your net worth in one name. Standard portfolio theory does not apply cleanly to illiquid positions. Concentration compounds every other risk on this page.
- 16
Privacy and identity
Identity is anonymous to the counterparty until mutual NDA. After reveal, counterparties learn your identity. NDA breach by a counterparty is a civil matter under the signed agreement — Truffle facilitates but does not enforce.
- 17
Operational risk
Truffle is software. Software has bugs, outages, and integration failures. We aim for high reliability but do not warrant availability. Have a manual fallback with your counsel for any time-critical deal.
Not exhaustive. See Terms, Disclosures, and Compliance.
Not investment advice. See trust.