Blue Patent GmbH, a company funded in the fall of 2011 on the German equity crowdfunding platform Seedmatch, has suspended operations. In a disappointing announcement made this past week, Seedmatch shared the news the young company was ceasing operations. In an effort to support transparency, the investment crowdfunding site communicated that insolvency proceedings had commenced earlier this month. Investors in the startup had already been made aware of the unfortunate event as the founders had communicated with their supporters via the Seedmatch platform and email.
The company was founded as a patent research and copyright warning platform. Founded by Jan Stütz a European trademark attorney, Blue Patent had built up a group of global experts to facilitate the process. They had received additional follow-on investments from venture firm Steel House Ventures Limited and the Investment Bank of the State of Berlin. Crowdfunding represented a total of 100,000 Euros.
The demise of a startup company is representative of the high risk nature for investors backing a startup company. While not all firms are successful, whether they raise capital via crowdfunding or not, recent data indicates that crowdfunding is associated with more viable firms.
Seedmatch has crowdfunded 47 startups since launching in August 2011. Around 20 of those young companies have received follow on financing after their crowdfunding round. Out of all their funded companies only two have failed: Betandsleep and now Blue Patent.
Seedmatch should be lauded for their open and candid approach to the companies that have leveraged their platform to raise capital. The site regularly acknowledges the associated risk of early stage financing but the risk-reward equation continues to prove a compelling proposition. Some of these companies will grow and become highly successful firms. One such method for risk mitigation is obviously portfolio diversification which has been regularly advocated as well.
A vibrant and robust entrepreneurial environment is paramount for creating a growing and sustaining economy. Firms like Seedmatch create much needed market efficiencies for capital allocation. For investors interested in backing young businesses, to the companies themselves who are in need of capital to grow, Seedmatch introduces investors to innovative young companies. This demand is the same for the German economy or for any other economy around the world. While Blut Patent represents the 2nd such failure of a young firm this must be viewed in contrast to the other 45 firms that continue to operate, hire employees, and generate growth for the German economy.
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