For anyone who has ever gone into a tizzy over granola or kale chips, CircleUp is using crowdfunding to get your favorite snacks onto store shelves. This startup, which connects up-and-coming consumer product businesses with accredited investors, has raised $7.5 million to build out the platform.
Since its launch in April 2012, consumer companies have raised more than $10 million on CircleUp. CEO Ryan Caldbeck founded the company after seeing passionate entrepreneurs struggle to attract capital for their products. CircleUp features companies that are already producing and distributing their wares but looking to scale their business and reach a larger market.
“We love that investors are able to see, touch, taste, and experience the company’s products first hand,” said CEO Ryan Caldbeck. “An investor on our site can go to their local Whole Foods or Starbucks to see and test the products, which we believe helps the investor feel more connected to the investment that they are making. We also believe the lack of traditional funding for early stage consumer/retail products creates an opportunity unlike investments in other industries, where the risk of adverse selection for crowdfunding platforms is greater.”
Investors are often reluctant to invest in consumer products companies because they can involve high overhead costs and manufacturing and distribution challenges. As a result, people who lovingly produce natural face creams or kale chips can’t raise the money they need to get their businesses off the ground. However, consumer products make up a significant portion of the economy, and people are increasingly interested in buying natural, artisanal, handmade items. Caldback founded CircleUp to act as a bridge between promising, vetted companies and investors looking to diversify their portfolio. It seeks to provide a smoother, more transparent channel for investment.
Companies featured on the site raise an average of $1 million and are able to expand their reach through partnerships with corporations like P&G and General Mills. Since the beginning of 2013, the amount of money flowing through the platform has doubled and over 70% of listed companies close deals. Caldbeck attributes this success to CircleUp’s tight focus on this particular vertical. The team has extensive experience that makes it aptly suited to address this sector’s challenges, as well as expertise in the equity-based crowdfunding space.
In a statement, CircleUp said this is the largest raise for an equity-based crowdfunding site.
Union Square Ventures, which also invested in Twitter, Kickstarter, Lending Club, CodeAcademy, and Etsy, led this round. Google Ventures, Rose Park Advisors, Maveron, and others participated in this first institutional round.