If you want to grow, you need to raise capital. CircleUp’s crowdfunding platform takes it to the next level by connecting early stage consumer brands with angel investors.
It was a rude awakening for Amy and I to realize that the more success we achieved with our e-commerce business, the more cash we were going to need to finance production and growth. But having never raised capital before, the process at first seemed daunting.
Fortunately, times are changing and there are new funding platforms emerging in the consumer products space that make it much easier for small businesses to raise capital by helping to bring together angel investors and growth stage product entrepreneurs. One of the leaders in this space is San francisco-based CircleUp . I first heard about CircleUp crowdfunding platform about a year ago and I was impressed by their process and the companies that they had worked with.
Though we decided not to proceed With raising money at that time, we have stayed in touch with CircleUp and are considering doing a round of financing with them in the future. I recently reconnected with Steve Vigilante from CircleUp whom gave me an overview of how the platform works, and how it might benefit your business.
Access to a deep pool of angel investors
One of the main benefits of the CircleUp crowdfunding platform is that it can support companies that are smaller or at an earlier stage of development than what private equity investors would typically look at, by providing access to a deep pool of Angel investors. CircleUp typically works with companies whose revenues are in the $500,000 – $10,000,000 range.
CircleUp is focussed exclusively on the Consumer products space
The other benefit is that CircleUp is focussed exclusively on the consumer products space – so it’s really opening up a new market that traditionally had struggled to get access to equity funding.
The difference between Kickstarter and CircleUp
Now you probably heard of crowdfunding sites such as Kickstarter and Indiegogo – which at first glance May appear to be a similar concept, without the downside of giving up equity. I asked Steve to explain the difference.
Essentially Kickstarter and Indiegogo (and others) are for testing out products and getting some seed financing for an initial production run. The CircleUp crowdfunding platform is for companies that already have traction in the marketplace and need to raise a significant amount of money to grow their business. The average check size is much bigger as are the amount of funds raised.
So, Kickstarter may be a great way to test and finance the manufacturing for your first product, but if you’re looking for serious funding to grow your business, you’ll need more than crowdfunding can provide.
The CircleUp crowdfunding platform is curated – both on the investor and entrepreneur side
So chances are you’ve still got a lot of questions about who these investors are and how the application process works as we did certainly did when we first began speaking with CircleUp. Steve points out that there is a vigerous curation process and they are very selective about who they allow on the platform on both the entrepreneur and investor side.
CircleUp accepts between 5%-10% of companies that apply in order to keep quality high. In order for someone to become an investor on the platform they must be an accredited investor, but CircleUp also does additional vetting to insure investors understand the consumer products space,
Ok, so getting on the platform is one thing, but how does it work once you’re accepted. How is confidentiality handles and do you get any say over who your investors are?
While high-level info on your offer is available publically, the platform provides each entrepreneur looking to raise funds with a private deal room to which they control access. This allows you to only share confidential details about your business with investors that you pre-screen.
Strategic vs passive investors
Another concern is what role the investors may play in shaping your business. For some companies, the there may be great appeal in bringing on a strategic investor who also has industry experience that he can lend to your business as a mentor and advisor. For others you may be looking for more of a passive investor who will not meddle in the everyday aspects of the business. It’s completely up to you as to what type of relationships you would like to foster through the platform.
Supporting you through the process
The main attractions for me to CircleUp is, in addition to access to the investors, the fact that, as someone who’s never been through the fundraising process before, they offer a ton of support and resources to help you build a compelling pitch and increase your odds of success.
You will ultimately have control over how you value your company, however Steve cautions that it’s very easy to become deluded by the frothiness of tech valuations and even some of the exceptional cases in the consumer space. This is the biggest impediment to being successful at getting a deal done.
So, whether you’re in a position to raise funds today, or are just thinking ahead to the time when you may may need addtional capital, I storngly suggest you check out CircleUp at www.circleup.com to get a better idea of how the fundraising landscape is changing and what new options are opening up to consumer brands. I’ll be keeping you posted on our e-commerce business’s fundraising journey which may involve circle up at some point down the line. I’d like to give a special thanks to Steve Vigilante for speaking with Indie brand builder.