The funding environment for technology-focused startups these days is getting to be a bit ridiculous, so some tech industry folks may need to use their imaginations for a second to understand this concept. There are a lot of companies out there today — with real products, real employees, and, yes, real revenues — who have a very hard time finding the investors needed to take them to the next level of growth.
Think about businesses like your favorite energy bar maker, organic pet food brand, or craft brewery. To get from the stage of being on some local store shelves to being featured in a large-scale retailer like Whole Foods, they are almost certainly going to need some extra money from outside sources. But VCs and private equity firms aren’t quite as spendy when it comes to these types of companies as they are with the latest batch of consumer web apps: They typically want to see a consumer retail brand have at least $10 million in annual revenue before they’ll even consider taking a stake in it. Meanwhile, there are a lot of rules and regulations surrounding who is legally allowed to invest in private companies, so they can’t just go raising funds from any customer, friend, or family member who wants to support them.
CircleUp is a San Francisco-based startup that has built an online platform to allow consumer product companies to raise money from accredited investors. Much like AngelList does for tech startups and the angel investment community, CircleUp allows both retail companies and the people who would potentially like to invest in them to evaluate each other and communicate in a private social networking setting.
It then goes a step further. CircleUp also serves as a broker-dealer to allow the funding transactions to take place via the site. It is currently doing this through a partnership with WR Hambrecht, but it is now in the application process with securities regulator FINRA independently. This makes CirlceUp a true “crowdfunding” site, where accredited investors can take equity in companies that they give money to.
CircleUp launches in public beta today, backed with $1.5 million in its own seed funding from Starbucks CEO Howard Schultz’s Maveron venture capital firm, Triple Point Investors, and JP Morgan veteran David Topper, among other angel investors. CircleUp has four full-time employees: Co-founders Ryan Caldbeck and Rory Eakin have backgrounds in finance and business consulting, and they’ve brought on two full-time engineers and designers for the tech side of the house.
Here are the numerical details of how CircleUp works: In order to be considered as an investment opportunity on CircleUp, companies must deal in the consumer product or retail/restaurant space and have booked at least $1 million in annual revenue in the previous year. Qualified companies can use CircleUp to raise between $100,000 to $1 million in growth equity from investors who each pitch in $1,000 to $25,000 each. The website lets companies and investors conduct the financing round and talk online throughout the whole process. CircleUp takes a commission on the funding companies raise from people they met on the site (it doesn’t take a commission from donations received from existing friends, family and acquaintances.)
CircleUp will be open to all individual accredited investors right away, but is featuring just a few consumer product companies at launch. More companies will certainly be added going forward, but with lots of vetting, CircleUp CEO and co-founder Ryan Caldbeck says. “Every week or two we will add a few more companies, but it will always be heavily curated. We think an important part of maintaining credibility is delivering high quality investment opportunities.”
CircleUp has already had some seriously positive traction from operating in stealth mode for several months. More than 150 companies have reached out asking to be included on the site, and during CircleUp’s private beta a West Coast apparel company raised $1 million in new equity through the platform.
To me, CircleUp seems to be coming to the right space at exactly the right time. Lots of people are making their own small and large fortunes in tech right now, and many of them are keen to become active as investors themselves. Sure, they can join AngelList and invest in the web startup scene they know best, but maybe they want to branch out and take a small stake in a company that’s not so closely related to their day jobs — to be a partner in a custom bicycle company, or a handbag designer, or an ice cream shop. CircleUp will make it easy for them to do just that, and it will be interesting to see what comes out of the site in the months ahead.
CircleUp (www.circleup.com) is an online private company investment platform. We provide accredited investors free access to direct investments in high-growth consumer product and retail private companies that were previously difficult to identify and access. For retail and consumer product entrepreneurs, we offer an efficient way to access a network of sophisticated investors as well as value added partners. Typical investments on CircleUp are food, personal care, pet product, apparel or retail/restaurant companies with $1-$10 million in revenue and are...
AngelList is a community of startups and investors who make fund-raising efficient. Started by the dudes who do Venture Hacks. Meet the startups and investors. As of March 22 2011, approximately 275 startups and 417 investors have raised money and invested via AngelList.