Tropos-AR 1A
The AR SDK that does everything
€105,000
total amount raised
- Eligible for a tax reduction
This campaign has been closed
Part C: Main risk types
Type 1 – Project risk
1. Risk associated with the team's knowledge of the market and correctness of forecasts
Risk: The TROPOS-AR team might not have (proper) knowledge of the market and/or make incorrect forecasts. The augmented reality and spatial computing market turns out to be a fad. The current growth does not accelerate but declines.
Consequence: If the team does not have sufficient knowledge of the market, it could set incorrect targets. In this case, TROPOS-AR would have to go and look for the use-cases that really do work and focus purely on providing the best solutions for those use-cases. It could however lead to a slower growth or a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of the company, with partial or complete loss of the invested capital.
Note: TROPOS-AR’s timeline is an actual example of how the company mitigated the risk of being too early in the AR market. The founding team behind TROPOS-AR did not participate in the boom of the WebAR market (which eventually caved in), but waited until Native AR became technically possible and giants like Apple started creating devices purely for this market. It is still possible that the Spatial Computing market does not materialise and AR glasses never become a thing but TROPOS-AR believes betting on Apple to make the innovation of augmented reality go mainstream, is the safest bet one can make.
Risk: The TROPOS-AR team might not have (proper) knowledge of the market and/or make incorrect forecasts. The augmented reality and spatial computing market turns out to be a fad. The current growth does not accelerate but declines.
Consequence: If the team does not have sufficient knowledge of the market, it could set incorrect targets. In this case, TROPOS-AR would have to go and look for the use-cases that really do work and focus purely on providing the best solutions for those use-cases. It could however lead to a slower growth or a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of the company, with partial or complete loss of the invested capital.
Note: TROPOS-AR’s timeline is an actual example of how the company mitigated the risk of being too early in the AR market. The founding team behind TROPOS-AR did not participate in the boom of the WebAR market (which eventually caved in), but waited until Native AR became technically possible and giants like Apple started creating devices purely for this market. It is still possible that the Spatial Computing market does not materialise and AR glasses never become a thing but TROPOS-AR believes betting on Apple to make the innovation of augmented reality go mainstream, is the safest bet one can make.
2. Risk associated with the need for new financing
Risk: There will be a need for new financing in which case there is a risk that the company is unable to secure enough funding to complete their planned expansion within the timeframe that was set. Indeed, the company does not have enough money on its bank account to survive 6 months following the closing of the fundraising, without making any revenues.
Consequence: On the one hand, there is the risk that the company will not find investors, which would lead to a delay of the plans for upgraded infrastructure and completetion one by one instead of in parallel. In the worst case, it could lead to the dissolution or bankruptcy of the company, causing the investor to lose part or all of his investment. On the other hand, there is the possibility that the company will find new investors, which will lead to dilution, which will be even greater if there is a lower valuation than the one currently used.
Note: In the event of a new capital increase, investors will have the opportunity to re-invest in new rounds of financing, at the investment conditions in force at the time. Furthermore, TROPOS-AR is aware that the current economic climate has little guarantees for the future and it might take a long time before the Western world returns to a positive investment climate. Therefore, the decision was made to first be profitable (which the company accomplished in 2023) and then fundraise and to have those new funds go mainly to better infrastructure, not to expansion with is a higher operational cost. In short: if TROPOS-AR can not raise funds for growth within the AR market, competing companies probably have the same issues. TROPOS-AR has a healthy monthly income that shows profitability. In the event no new funding would be coming in, TROPOS-AR would put their staff on hold. Without staff, the operational cost would be about €3k a month. So €15k is needed to survive 6 months without making any revenues. However, TROPOS-AR affirms that it is unthinkable to not make any revenues. Indeed, they already have projects lined up that start on January 1st.
Risk: There will be a need for new financing in which case there is a risk that the company is unable to secure enough funding to complete their planned expansion within the timeframe that was set. Indeed, the company does not have enough money on its bank account to survive 6 months following the closing of the fundraising, without making any revenues.
Consequence: On the one hand, there is the risk that the company will not find investors, which would lead to a delay of the plans for upgraded infrastructure and completetion one by one instead of in parallel. In the worst case, it could lead to the dissolution or bankruptcy of the company, causing the investor to lose part or all of his investment. On the other hand, there is the possibility that the company will find new investors, which will lead to dilution, which will be even greater if there is a lower valuation than the one currently used.
Note: In the event of a new capital increase, investors will have the opportunity to re-invest in new rounds of financing, at the investment conditions in force at the time. Furthermore, TROPOS-AR is aware that the current economic climate has little guarantees for the future and it might take a long time before the Western world returns to a positive investment climate. Therefore, the decision was made to first be profitable (which the company accomplished in 2023) and then fundraise and to have those new funds go mainly to better infrastructure, not to expansion with is a higher operational cost. In short: if TROPOS-AR can not raise funds for growth within the AR market, competing companies probably have the same issues. TROPOS-AR has a healthy monthly income that shows profitability. In the event no new funding would be coming in, TROPOS-AR would put their staff on hold. Without staff, the operational cost would be about €3k a month. So €15k is needed to survive 6 months without making any revenues. However, TROPOS-AR affirms that it is unthinkable to not make any revenues. Indeed, they already have projects lined up that start on January 1st.
Type 2 – Sector risk
Risk: A competing company emerges and releases an SDK product that is very similar to that of TROPOS-AR but does so with way more financial resources, so they can outclass TROPOS-AR in all fields
Consequence: TROPOS-AR would have to change its funding strategy and raise as equal amounts of capital to compete. If TROPOS-AR can’t, the strategy would be to focus on the sub-markets TROPOS-AR is best positioned in at that point and where that competing company is struggling.
Should this not work or only partially, it could lead to a slower growth or a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of the company, with partial or complete loss of the invested capital.
Note: TROPOS-AR tries to mitigate that risk by forming key partnerships with companies like Unity Technologies and Worldline. As well as protecting and trademarking the designs of their user interface and some other key components of their AR SDK.
Consequence: TROPOS-AR would have to change its funding strategy and raise as equal amounts of capital to compete. If TROPOS-AR can’t, the strategy would be to focus on the sub-markets TROPOS-AR is best positioned in at that point and where that competing company is struggling.
Should this not work or only partially, it could lead to a slower growth or a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of the company, with partial or complete loss of the invested capital.
Note: TROPOS-AR tries to mitigate that risk by forming key partnerships with companies like Unity Technologies and Worldline. As well as protecting and trademarking the designs of their user interface and some other key components of their AR SDK.
Type 3 - Risk of insolvency and bankruptcy of the project owner
Risk: The risk of insolvency means that the company does not have sufficient funds to meet its payment deadlines (cessation of payments). Consequence: If the company does not find alternative financing (shocked credit), it may go bankrupt. The insolvency or bankruptcy of TROPOS- AR may lead to lower or non-existent returns and in the worst case to a partial or total loss of the invested capital.
Type 4 - Risk of lower, delayed or no returns.
1. Risk associated with the lack of guarantees.
Risk: Neither the shares of TROPOS-AR nor the Participatory Notes of the TROPOS-AR 1A compartment of Spreds Finance provide guarantees of a return or repayment of the invested capital.
Risk: Neither the shares of TROPOS-AR nor the Participatory Notes of the TROPOS-AR 1A compartment of Spreds Finance provide guarantees of a return or repayment of the invested capital.
2. Risk associated with the lack of a fixed return.
Risk: Participatory Notes do not offer a fixed return. The return of the Participatory Notes depends solely on the performance of the Underlying Asset, namely the shares of TROPOS-AR.
Consequence for both risks: If the project owner's predictions do not come true (within the predetermined timing), there is a risk of lower or non- existent returns and, in the worst case, partial or complete loss of the invested capital.
Note for both risks: Co-founder Sven Van de Perre previously owned a videogame company that had one main investor. That person passed away right in the middle of the production of a €1 million budget game, which eventually led to the bankruptcy of that company. The company had €7,000 outstanding debt. Investors in Participatory Notes bear the same economic risk as if they were investing directly as shareholders of TROPOS-AR.
Risk: Participatory Notes do not offer a fixed return. The return of the Participatory Notes depends solely on the performance of the Underlying Asset, namely the shares of TROPOS-AR.
Consequence for both risks: If the project owner's predictions do not come true (within the predetermined timing), there is a risk of lower or non- existent returns and, in the worst case, partial or complete loss of the invested capital.
Note for both risks: Co-founder Sven Van de Perre previously owned a videogame company that had one main investor. That person passed away right in the middle of the production of a €1 million budget game, which eventually led to the bankruptcy of that company. The company had €7,000 outstanding debt. Investors in Participatory Notes bear the same economic risk as if they were investing directly as shareholders of TROPOS-AR.
Type 5 - Risk of failure of the financing vehicle
Risk: Although each Spreds Finance compartment is ‘bankruptcy remote’ (meaning that no other creditor can claim a right on or against this compartment) in relation to the others and in relation to the ‘general’ liabilities of Spreds Finance itself, as a result of (i) the terms and conditions of the Notes, (ii) the articles of association of Spreds Finance and (iii) Article 4 of the Law of 18 December 2016 on crowdfunding; there is a subsidiary risk of insolvency of Spreds Finance.
Consequence: Should such insolvency occur, Noteholders may be exposed to the risk of a significant delay in the recovery of their investment. Note: The probability of this risk occurring is extremely low given the structure and organization of Spreds Finance, in particular the compartmentalization mechanism and the "bankruptcy-remoteness" described above. Each participation taken or loan granted to a project owner is recorded in a separate compartment and is appropriately accounted for in the accounts, taking into account the fact that the accounts are kept by compartment. As a result of (i) the conditions attached to the issue of Participatory Notes, (ii) the articles of association of Spreds Finance and (iii) article 10 of the law regulating the recognition and delimitation of crowdfunding and containing various provisions relating to finance and notwithstanding articles 7 and 8 of the Mortgage Law of 16 December 1851, the assets of a particular compartment serve exclusively to guarantee the rights of investors with respect to this compartment.
Risk: Although each Spreds Finance compartment is ‘bankruptcy remote’ (meaning that no other creditor can claim a right on or against this compartment) in relation to the others and in relation to the ‘general’ liabilities of Spreds Finance itself, as a result of (i) the terms and conditions of the Notes, (ii) the articles of association of Spreds Finance and (iii) Article 4 of the Law of 18 December 2016 on crowdfunding; there is a subsidiary risk of insolvency of Spreds Finance.
Consequence: Should such insolvency occur, Noteholders may be exposed to the risk of a significant delay in the recovery of their investment. Note: The probability of this risk occurring is extremely low given the structure and organization of Spreds Finance, in particular the compartmentalization mechanism and the "bankruptcy-remoteness" described above. Each participation taken or loan granted to a project owner is recorded in a separate compartment and is appropriately accounted for in the accounts, taking into account the fact that the accounts are kept by compartment. As a result of (i) the conditions attached to the issue of Participatory Notes, (ii) the articles of association of Spreds Finance and (iii) article 10 of the law regulating the recognition and delimitation of crowdfunding and containing various provisions relating to finance and notwithstanding articles 7 and 8 of the Mortgage Law of 16 December 1851, the assets of a particular compartment serve exclusively to guarantee the rights of investors with respect to this compartment.
Type 6 - Risk of illiquidity of the investment
1. Risk associated with the absence of an organized exchange market for Participatory Notes
Risk: Neither the project owner nor Spreds Finance organizes an exchange market for Participatory Notes. It is thus up to the investor himself to find a buyer for his Participating Notes. Given the absence of an exchange market for Participatory Notes, there is no way to adequately establish a comparative pricing methodology for Participatory Notes.
Consequence: A holder of Participatory Notes may not be able to find a buyer for the Participatory Notes it wishes to sell (at the price at which it wishes to sell).
Note: The intention is not to sell the Participatory Notes but to sell the Underlying Asset, often on the occasion of the sale of the Underlying Company itself (see Appendix B, (d)).
Risk: Neither the project owner nor Spreds Finance organizes an exchange market for Participatory Notes. It is thus up to the investor himself to find a buyer for his Participating Notes. Given the absence of an exchange market for Participatory Notes, there is no way to adequately establish a comparative pricing methodology for Participatory Notes.
Consequence: A holder of Participatory Notes may not be able to find a buyer for the Participatory Notes it wishes to sell (at the price at which it wishes to sell).
Note: The intention is not to sell the Participatory Notes but to sell the Underlying Asset, often on the occasion of the sale of the Underlying Company itself (see Appendix B, (d)).
2. Risk associated with the vote by the general meeting of holders of Participatory Notes to sell
Risk: Any decision by Spreds Finance to sell shares of TROPOS-AR is subject to the approval of the holders of Participatory Notes representing at least 75% of the outstanding Participatory Notes, unless Spreds Finance is required to sell them under a contractual or statutory provision. Consequence: Investors thus bear the risk that the general meeting of the holders of Participatory Notes may refuse to approve the sale of the participation, in which case all investors are bound by this decision and thus must wait to obtain redemption of the Participatory Notes.
Risk: Any decision by Spreds Finance to sell shares of TROPOS-AR is subject to the approval of the holders of Participatory Notes representing at least 75% of the outstanding Participatory Notes, unless Spreds Finance is required to sell them under a contractual or statutory provision. Consequence: Investors thus bear the risk that the general meeting of the holders of Participatory Notes may refuse to approve the sale of the participation, in which case all investors are bound by this decision and thus must wait to obtain redemption of the Participatory Notes.
3. Risk associated with an investment in a young company
Risk: Investing in shares of young companies entails the risk that a buyer for the shares will not be found, or not at a fair price yielding a market return, or that a buyer will not be found within a reasonable period of time.
Consequence: If no buyer is found for the holding, redemption of the Participatory Notes is not possible.
Note: Spreds Finance will make every effort within its powers to obtain the best possible price.
Risk: Investing in shares of young companies entails the risk that a buyer for the shares will not be found, or not at a fair price yielding a market return, or that a buyer will not be found within a reasonable period of time.
Consequence: If no buyer is found for the holding, redemption of the Participatory Notes is not possible.
Note: Spreds Finance will make every effort within its powers to obtain the best possible price.
Type 7 – Other risks
Risk: Spreds Finance has not conducted an analysis of the proposed project or of the financial situation of the Underlying Company. Consequence: Any investor considering subscribing to Participatory Notes should make its own analysis of TROPOS-AR's solvency, activity, financial situation and prospects.
Note: Any decision to invest in Participatory Notes should be based on a comprehensive analysis of the project and of this sheet of essential investment information. Spreds Finance's model does not provide for the presentation of analyzed projects to investors but allows investors to invest based on the information made available to them, after making their own analyses.
To the best of the project owner's knowledge, there are no other material risks associated with its activities.
Note: Any decision to invest in Participatory Notes should be based on a comprehensive analysis of the project and of this sheet of essential investment information. Spreds Finance's model does not provide for the presentation of analyzed projects to investors but allows investors to invest based on the information made available to them, after making their own analyses.
To the best of the project owner's knowledge, there are no other material risks associated with its activities.