The Financial Services Authority has for the second time offered official backing to a crowdfunding site.
Crowdcube investors will now be able to claim compensation from the FSA should the project they invest in run into trouble, The Telegraph reports.
To date Crowdcube, which operates very much like its higher-profile competitor Kickstarter, has helped raise £5m for some 36 small businesses. Global crowdsourcing efforts are believed to have raised some £1bn in 2011.
Crowdcube co-founder Luke Lang said of the news: “When we talk about taking crowdfunding mainstream, it is crucial that people have that confidence of the additional protection they’ll get as a result.”
Last year the FSA stated that crowdfunding should be targeted only at “sophisticated investors who know how to value a start-up business, understand the risks involved”. However, its increasing popularity appears to have led to a softening of this stance.
The Government’s enterprise adviser Lord Young added: “I am delighted to see that the UK financial services industry and its regulators are reacting dynamically to new models of business finance, such as equity crowdfunding, so that the UK can maintain its position as world leaders in this space.”