Do guidelines exist on how to assess risk, or the risk-reward ratio?
There are a couple of things you can do to assess risk. Risk in these ventures takes different forms. This kind of risk differs from quantifying the risk in an investment in the public market. A private placement is more qualitative in nature. First of al, you have management risk. Can the management carry out the plan they are so passionately presenting? Do they have the ability, the experience, the background, and the track record to accomplish the forecasted sales and/or manage the internal operations? More importantly, are they going to be able to form a team within the ranks, or will they succumb to resentment as a result of negotiating founder stock shares? Has discord been struck among the members? Another type of risk you have to evaluate is product and technology risk. If this is a technology that has not yet been developed, significant risk emerges. If the assembly of existing, well-tested technologies have been molded into a new technology, the risk is substantially less. So
