If it is a professional investor — it is fine. They write it off and move on.
Unless there was some sort of fraud or something, true professional investors will be fine with it. The only real exception will be if they’ve written a really, really big check, often over multiple rounds.
It’s part of their portfolio strategy. Every early-stage investor expects a portion of their investments to fail, a portion to have middling performance, and a smaller portion to make them a lot of money.
So worry about failing. Sweat it every day. But don’t add to your worries by worrying about your investors’ money, too. I did. Looking back, it probably held me back a smidge.
There is one big exception: folks that can’t afford to lose it. They often freak out when a start-up is at risk. So try to avoid taking money from them.
If you aren’t sure if they can afford the loss — Ask. Ask them upfront. If they look or sound nervous, maybe don’t take their money.