Investing in Start Ups: Lessons from the BrewDog Collapse

The collapse of BrewDog’s Equity for Punks investment scheme has been a harsh reminder of the risks that come with backing unlisted companies.

More than 200,000 retail investors who bought into the company’s crowdfunding rounds will receive nothing from the recent sale of BrewDog’s UK and Irish assets to Tilray for £33 million.

Many people who invested as fans, not seasoned shareholders, have been left frustrated and confused.

This article uses BrewDog as a case study to highlight what happened, why the loss felt particularly painful, and what investors should consider before putting money into any young, unlisted business.

What Happened to BrewDog’s Retail Investors?

BrewDog raised around £75 million from ordinary investors through its Equity for Punks crowdfunding programme. Shares were marketed as a chance to “own a slice of the brewery” and support a company with big ambitions. But when the business ran into financial difficulty and ultimately sold off its UK and Irish operations, those small shareholders were last in the queue.

Administrators confirmed that no bidder made an offer that preserved the business or returned any value to equity holders, meaning retail shareholders were wiped out completely. Many had invested an average of a few hundred pounds, though some had put in far more.

Why the Loss Was Harder to Bear

Even though unlisted shares carry a known risk of total loss, three factors made the BrewDog outcome feel particularly bruising.

1. Professional Investors Were Protected, Retail Investors Were Not

When BrewDog raised money from private equity firm TSG in 2017, TSG received preference shares. These give priority in a sale. The result was simple: TSG got paid first; nothing was left for ordinary investors.

This structure is common in private companies, but many retail investors either didn’t realise this or didn’t understand how it could affect their position.

2. The Investment Was Not Eligible for EIS/SEIS/VCT Reliefs

Equity for Punks did not qualify for the UK’s tax‑advantaged early‑stage investment schemes - including the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) or Venture Capital Trusts (VCTs). This meant investors had:

• no upfront income‑tax relief

• no ability to offset losses

• no diversification

• no capital gains deferral

  
  

When the value fell to zero, the loss was absolute. Had the investment been made through a government‑recognised scheme, the financial hit would still have hurt, but tax reliefs would have softened the blow.

3. Emotional and Brand‑Driven Investing

BrewDog built a strong lifestyle brand. Many supporters invested not as analytical shareholders but as enthusiastic fans. This made the collapse feel personal. Reports show that some investors felt misled or poorly treated during the final stages, especially when closures and job losses were announced with little warning.

What Investors Can Learn from the BrewDog Example

The BrewDog situation offers valuable lessons for anyone considering putting money into a start‑up or unlisted company. Here are key areas to look at before committing funds.

1. Understand the Share Structure

Not all shares are equal. Some investors, often institutions, receive preference shares, liquidation preferences or other protections. Ordinary retail investors rarely do.

Before investing, ask:

• Are there preference shares?

• Who gets paid first if the company is sold or fails?

• Where do my shares sit in the “capital stack”?

  
  

If you’re at the very bottom, be prepared for a higher risk of losing everything.

2. Check Whether the Investment Qualifies for UK Tax Reliefs

EIS, SEIS and VCT schemes exist specifically to support early‑stage investing while reducing downside risks.

These schemes can offer:

• income‑tax relief (up to 30–50% depending on the scheme)

• loss relief

• capital‑gains benefits

• diversification (in the case of VCTs)

  
  

If the company you're considering isn’t eligible, think carefully about whether the higher risk is acceptable.

3. Assess Liquidity and Exit Options

Unlisted shares are hard to sell. Unless the company floats on the stock market or finds a buyer, your money may be locked up for years - or indefinitely.

Before investing, ask:

• Is there a realistic plan for an exit?

• Has the company demonstrated steady financial discipline, not only growth ambition?

  
  

4. Distinguish Marketing from Material Information

Strong branding and bold messaging are not the same as financial disclosure. Read the investment documents, not just the promotional material. In BrewDog’s case, administrators later made clear the business had been struggling for some time, resulting in closures, losses and redundancies before the sale.

5. Consider Diversification

Backing one company - especially a consumer brand you feel affinity for - can be emotionally satisfying but financially risky.

Small investors should consider spreading high‑risk allocations across several early‑stage companies rather than relying on one.

How to Feel More Confident When Investing in Unlisted Companies

Here are practical steps to build confidence and protect yourself:

• Read the shareholder agreement carefully, especially sections on liquidation, preferences and voting rights.

• Ask the company clear questions about share classes, valuation, and exit plans.

• Check the company’s financials where available - cash flow, debt, burn rate and profitability trends matter far more than brand image.

• Understand what happens if things go wrong - who gets paid first, and what are you realistically entitled to?

• Use UK tax‑efficient structures where possible, or accept the additional risk of going without.

• Invest only what you can afford to lose, especially in early‑stage or emotionally appealing ventures.

  
  

Conclusion

The BrewDog case was not unusual in outcome - start‑up investing has always carried a real possibility of total loss. But the combination of preference shares, lack of tax protections and brand‑driven investing made the disappointment much sharper for retail investors.

By understanding share structures, using available tax schemes and grounding decisions in financial reality rather than enthusiasm, investors can make clearer, more confident choices when looking at unlisted companies.