Equity-based crowdfunding startup CircleUp raises $30M

The round was led by Collaborative Fund, and will be used to develop its product and data teams

CircleUp, a marketplace for equity investments in private companies, has raised $30 million in a Series C funding round, it was announced on Monday.

The round was led by Collaborative Fund. Other investors in the round included Jon Winkelried, former President and Co-COO of Goldman Sachs; John Powers, former president and CEO of Stanford Management Company; Tom Glocer, former CEO of Thomson Reuters and director of Morgan Stanley; and Nigel Morris, co-founder of Capital One through QED. Previous investors including Union Square Ventures, Canaan Partners, Maveron and Rose Park Advisors also participated.

This round brings CircleUp's total funding to $53 million.

Founded in 2011, CircleUp provides 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, they offer an efficient way to access a network of sophisticated investors as well as value added partners.

"We are a marketplace that connects innovative small businesses with the capital needed to grow.  The companies that use our platform tend to have over $1M in revenue and are quickly growing, but fall outside of the historical focus of VCs, are too small for most private equity firms. On the investor side, we provide access to a new asset class, private equity in highly curated consumer and retail companies, that may provide stable and strong returns," Ryan Caldbeck, CEO of CircleUp, told me.

"We accomplish this by carefully vetting the companies that are listed on our platform, approving only about 5% of applicants, using a combination of proprietary algorithms and a dedicated team of private equity professionals who evaluate innovative consumer and retail brands.  The marketplace itself dramatically lowers the cost for both sides of the market to find the other party, helping both investors and companies do what they do, better."

The typical company on the platform is a consumer brand, including food & beverage, personal care, apparel, pet and retail, one to three years old, with $1 million to $10 million in revenue and growing at 80-100% per year.

"Traditionally, it takes consumer companies nine to 12 months to secure the capital they need, while companies listed on CircleUp receive their funding in about 60 days," said Caldbeck.

"In addition to capital, we provide entrepreneurs on our platform access to a network of experts from major consumer companies, including General Mills, P&G, Johnson & Johnson and Virgin America, who provide advice and additional resources."

To date, more than 120 consumer brands have raised funds totaling over $135 million with CircleUp’s help. The average company that raised on CircleUp has grown more than 80 percent annually since funding on the site. The average investment on the platform is now $100,000.

CircleUp separates itself from the competition through who it serves, its data driven approach and its focus.

"We have built our platform on three primary pillars. First, a focus on an underserved, attractive asset class -  early stage, non-technology companies. Second, a data driven approach to evaluating companies, incorporating over one hundred different data sets in a series of machine learning algorithms to evaluate the companies," Caldbeck said.

"Finally, a focus from day one on compliance and engaging with regulators in the financial services space to ensure we are doing things the right way."

The new funding will be used to further develop CircleUp’s product and data teams, as well as "enhancing our machine learning algorithms so we can vet the most promising companies even more accurately and efficiently," said Caldbeck.

The new mone comes on the heels of a big year thus farfor the company, which saw the launch of a secondary market in September to provide investors with liquidity rarely found in private equity, and just last week it announced a partnership with 301 INC, General Mills’ new business development and venturing unit, in which General Mills will invest through our marketplace to seed emerging consumer food brands.

In, the next five to 10 years, he told me, he wants to see, "A broad, deep private capital marketplace that helps hundreds of thousands of entrepreneurs thrive."

"We are looking forward to a lot more to come in 2016," Caldbeck said.