What does failure mean for crowdfunded startups?

August started with yet another start-up going bust: Bubble and Balm, Crowdcube's first crowdfunded equity project ceased trading. Amy Andrew documented this is her article “Blow for crowdfunding as Crowdcube's first fundraiser beauty start-up Bubble & Balm throws in the towel”

What does this mean for the crowdfunding industry, the fastest growing investment sector in the country? The collapse serves as a timely reminder of the inherent risks associated with investing in start-ups, but should not reflect negatively on the equity crowdfunding market generally.

Start-ups will fail regardless of their fundraising. The important issue here is that small investors are treated appropriately and have their rights adequately safeguarded. Here at CrowdBnk, we are big believers in openness and transparency, and have implemented structures and post-transaction services that protect the interests of investors to the fullest extent possible. As an FCA-platform, we have implemented robust measures to ensure that investors are aware of the risks involved with investing in start-ups, and place restrictions on the amount individuals can invest to ensure that they will never lose more than they can afford.

Failure is a fact of life and investors should crowdfund with full knowledge of the risks involved and ensure that they stick to the golden rule of investing - diversify, diversify and then diversify some more!