Crowdcube has become the first equity crowdfunding platform to be authorised by the Financial Services Authority (FSA) for its work raising finance for start-up and early stage businesses.
Since it was founded two years ago, Crowdcube has helped 36 small businesses raise a combined £5m via investments from individuals which can be as little as £10.
More than 28,000 investors have registered on its website since the launch in February 2011 and are able to use the online platform to make a direct investment in a business as a shareholder.
Darren Westlake, co-founder and CEO of Crowdcube, said: 'Our authorisation and the additional investor protection it affords will increase satisfaction and confidence, which is at the heart of our business and will be crucial to our long term success in the UK.'
The FSA's approval means Crowdcube will now be able to provide investors with access to advice from independent experts from the Financial Ombudsman Service (FOS). Investors will also benefit from the option of claiming compensation through the Financial Services Compensation Scheme (FSCS).
Lord Young, advisor to PM David Cameron on enterprise, said: 'Crowdfunding is a highly innovative and important source of finance for UK businesses. 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.'
Last year the FSA warned that selling crowdfunding should only 'be targeted at sophisticated investors who know how to value a start-up business, understand the risks involved and that investors could lose all of their money'.