The equity-based platform allows accredited investors to invest in privately held startups
Most entrepreneurs and investors are in agreement that crowdfunding is a great idea on paper. But there are still a few kinks to work out. While donation-based platforms like Kickstarter are taking off like wildfire, investment-based platforms are struggling due to a tight regulatory environment at the moment. A new equity-based platform, CircleUp, emerged from stealth mode Wednesday with $1.5 million in funding to stoke the crowdfunding fires.
It's a tricky situation, since the current regulations restrict crowdfunding to accredited investors only. Such was the reason that ProFounder--the crowdfunding platform co-founded by Kiva founder Jessica Jackley--was forced to shut down in February.
There is a ray of hope, though, with the passage of the JOBS Act earlier this month, which will allow non-accredited investors to invest via crowdfunding sites. But that won't take effect until 2013.
So how is CircleUp dealing with the regulatory environment now? It's only welcoming accredited investors onto its platform--and it says it will continue to work exclusively with accredited investors even after the JOBS Act takes effect.
Other than that one irritating detail, the site is an ideal place for entrepreneurs and investors alike. Those looking to invest have the security of knowing that the platform focuses on high-growth consumer-product companies with at least $1 million in revenue--companies that produce food, personal care, pet products, apparel, and more. And entrpreneurs on the site are mingling with individuals who invest $1000 to $25,000 per investment.
"Social networks have provided a layer of trust and connectivity to the Internet," the company said in a statement. "With increased comfort online, more Americans are finding ways to connect for meaningful personal and commercial interactions online. Private investments in small businesses are the next step in the evolution that began fifteen years ago with simple consumer transactions on eBay, and have continued with very personal matchmaking for housing and dating on sites like Craigslist and financial transactions through investment brokerage firms and online banking."
Gartner Research estimates that crowdfunding will be a $6.2 billion market by 2013.
As for its own funding, CircleUp raised $1.5 million from Maveron, Triple Point Ventures, special advisor to General Atlantic David Topper, and a slew of other angel investors.
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