SAVERS suffering from low ­interest rate fatigue were given a wake-up call this week by the first failure of an attractive business funded by ordinary investors through crowdfunding.

The collapse of Bubble & Balm, a fair trade soap maker which in 2011 raised £75,000 from 82 investors subscribing between £10 and £7,500 through the Crowdcube online platform, is the first high-profile knock to an industry which in the past three years has attracted £1 billion of money lured from more conventional savings and investments.

Crowdfunding allows investors to take relatively small stakes in the potential future success of start-up businesses. Crowdcube, one of the biggest crowdfunding sites, said the failure was "a good example of the need for people to diversify their portfolios and spread their money around".

The collapse came on the same day fund manager Nicola Horlick reported she had raised £150,000 through crowdfunding website Seedrs in less than 24 hours. Some 136 investors participated in the funding for her Glentham Capital venture, which initially will provide finance for Hollywood films.

Seedrs was launched a year ago as the first platform of its kind to gain full regulatory approval and investment protection. Seed Enterprise Investment Scheme (SEIS) tax relief of up to 78% is available on investments, and the platform has already attracted 12,000 investors.

Scotland's big crowdfunding success story Brewdog sees the movement as "more than just raising finance, it is about building a community and shortening the distance between us and the people who like our beer", according to co-founder James Watt. On its second fundraising, Brewdog has raised £2.5 million in the first six weeks towards its £4m target over six months.

Entrepreneurial Spark, the Scottish growth business support hub, is looking at launching its own crowdfunding platform following Brewdog's success.

The Financial Conduct Authority has warned only sophisticated investors who understand the risks should join crowdfunding, which as a sector has yet to be regulated, though there is a trade body with a code of practice.

Peter Adcock, managing director of independent financial advisers Adcock Financial, said: "As romantic as crowdfunding is on the surface, people need to be calculating when assessing whether they should invest in start-ups. Does this type of investment match their risk profile, is it part of a properly diversified portfolio and, just as importantly, does it tie in with their financial goals?

"What people also need to understand is that even when a start-up does turn into the next Apple or Facebook, this will usually take a number of years. You should expect not to see your money for at least five years but realistically it will be even longer than that."

But Craig McKenna, adviser at Falkirk-based The Growth Academy which works with Crowdcube, said 80% of the platform's investments by value came from sophisticated investors, while the remainder tended to come from customers or other people interested in a business. "The number of people who are putting in £10, £50 or £100 to a company on a whim is pretty small," he said.

Alan Wardrop, director at Glasgow-based independent financial advisers Johnston Wardrop & Gray, used crowdfunding himself for a term loan to help develop the business, and was so impressed he became an investor himself, using FundingCircle. He says: "The upside is the rates, you are getting perhaps 7.5% before charges, and that is an average, you have the option to lend at higher risk."

Investors can choose their time period, three or five years, and loans could be transferred to other members if a return of capital was needed. But he added: "The downside is it is a bit inflexible because you are dependent on other people."

The warning came as a survey by financial adviser website unbiased.co.uk revealed Edinburgh and Glasgow appear to have the lowest appetite for financial advice in the UK, with the exception of Belfast. The percentage of the population by postcode searching for a financial adviser was 0.4% in Glasgow and 0.5% in Edinburgh compared with figures of 5% to 10% at the top of the table - though Kilmarnock did make tenth place with 4.4% of people looking for advice.

This week's Bank of England decision to keep interest rates at 0.5% continues to crank up the pressure on dissatisfied savers.

Research by Moneyfacts highlights that one year on from the government's Funding for Lending Scheme (FLS), "savings rates have plummeted to alarming levels, whilst choice in the market has also diminished considerably". A year ago savers could choose from 470 easy access accounts and achieve an average rate of 1.08%. Today, easy access account numbers stand at 364, whilst the average rate has dropped to just 0.67%. Sylvia Waycot at Moneyfacts said: "As FLS is set to be with us for a few more years there needs to be a counterplan to help savers, or there are going to be meagre returns for some time."

Another part of the government's response to the small business funding crisis has been the lifting of restrictions on riskier Alternative Investment Market (AIM) shares. From Monday, anyone with a share Isa will be able to buy AIM shares as well as main market stocks.

Trevor Greetham, investment guru at fund group Fidelity Worldwide, said AIM shares were already exempt from inheritance tax and from next year would also escape stamp duty, but added: "Most AIM stocks are not worth a second look, although the good ones make exceptional investments. AIM attracts a high proportion of riskier technology or natural resources stocks, and this market has been a roller-coaster ride in recent years, outperforming on the upside but offering some scary dips as well."