Investment platform CircleUp has new offerings designed to service specific institutional clients and entrepreneurs who want more privacy around their capital raise.
When CircleUp launched in 2011, it was around an online “marketplace” offering accredited investors the opportunity to invest in high-growth consumer companies. Since then, the company has had 20,000 brands apply to be on the marketplace (five percent are accepted). It then launched Helio, a proprietary algorithm that uses machine learning to collect and analyze industry data and then predict potential for breakout success of early-stage consumer product companies.
But it’s also gradually developed another set of offerings to better meet companies’ needs. Now, some brands have the opportunity to raise capital through institutional investors via a private offering, and not on CircleUp’s web-based marketplace. For these deals, CircleUp acts as more of an investment banker or matchmaker, connecting brand to investor.
The new offering has gradually rolled out over the past year.
“What a lot of CEOs want is privacy. Raising capital is a difficult process, it’s a challenging time in a company’s lifecycle depending where they are at,” Ross Davisson, CircleUp’s VP of business operations, told NOSH. “They also want to be really secure about their data. Who is going to know about their business and their sales results and product roadmap? These are all things you talk about with investors, but obviously you want to be really careful with.”
Companies who list on the original CircleUp platform are often seeking smaller raises from angel investors. Generally speaking, the companies opting for this new solution are further along in their lifecycle, looking for a lead investor and want investment from institutional investors who can provide strategic guidance as well as capital.
“Once you have a couple million dollars in revenue and you’re trying to raise a couple million dollars of capital, getting that in $25,000 checks or $50,000 checks is just very time consuming,” Davisson said.
An example of a recent deal using this new offering was that of JMK Consumer Growth Partners’ investment in Miyoko’s Kitchen. The vegan cheese brand wanted absolute privacy around its raise, and only wanted institutional capital.
CircleUp also curates deals for institutional investors, such as their partnership with General Mill’s 301 Inc. In these situations, CircleUp can present institutional investors with brands that only fit in the categories they want to invest in.
Some brands, said Davisson, take more of a hybrid approach and work with both the institutional capital offering as well as the marketplace.
“Understanding what that CEO is looking for is fundamental and then we can sort of design a program, choose your own adventure if you will,” Davisson said.
In these instances, brands and CircleUp work to find a lead institutional investor who can provide the bulk of the raise and then go on the marketplace for follow on investing to fill out a round. For example, recently CircleUp connected smoothie brand Bright Greens with The Kellogg Company’s venture arm eighteen94 and then the brand went on the marketplace to fill the rest of its $2 million round.
Above all else, Davisson says, CircleUp is there to help businesses manage what can be a confusing and sometimes difficult process.
“Entrepreneurs are experts at building their businesses and everything that goes into it. The thing they do infrequently and sporadically is raise capital. And that’s part of what we get so excited about at Circle Up. How do we make this process better for entrepreneurs?” Davisson said. “How do we make it easier for entrepreneurs who are building great businesses to not get twisted around trying to raise capital? Which is not why they even started a business. They didn’t start a business to raise capital.”