CircleUp, a leading equity-based crowdfunder based in San Francisco, today announced a Series A financing round led by Union Square Ventures, home to such portfolio gems as Twitter, Kickstarter, Lending Club and Etsy. Since its launch just over one year ago, CircleUp has raised more than $10 million for consumer companies, many from within the natural products industry. To develop value beyond the capital raise, CircleUp has also inked partnerships with Procter & Gamble and General Mills, not to mention a content partnership with New Hope Natural Media.
NBJ asked Ryan Caldbeck, CircleUp's CEO, for an update.
How will CircleUp use the new capital internally?
Caldbeck: CircleUp is an investment marketplace that connects investors and high-growth consumer and retail companies. Unlike traditional offline sources of capital, such as angel groups or private equity firms, there are significant network effects to our marketplace. Essentially that means that the CircleUp community – both investors and companies on our site – finds more and more value from the marketplace as we grow it. To grow the marketplace, we need to continue to innovate and find ways to add valuable features for both companies and investors. We already have features like automatic conference call scheduling between our investors and companies that help streamline the process for both sides. We think there is an opportunity to add tremendous value to our community, in particular the companies on the site, by creating innovative features that help smooth not only the investment process but also help the companies after close. We raised the Series A Round because we want to invest in this innovation.
Are you still seeing roughly 90 percent of your entrepreneurs come from natural products?
Caldbeck: We are closing approximately 70 percent of the companies that have been put on the site. In the past year, we’ve closed 12 deals and helped the companies raise more than $10 million in total. The average company on our site has more than $1 million in revenue and is growing more than 70 percent per year. We focus on consumer products and retail companies, but within the food space I would say roughly 90 percent of the food companies are natural or organic products. The investors on CircleUp are always looking for interesting investment opportunities. For a smaller consumer business, that often means having an interesting niche – such as natural or organic – that could be attractive to a much larger strategic company, like a Kraft or Hain Celestial. That could come in many forms, including differentiated branding or a unique product. Natural and organic is one of those niches that is getting a lot of attention from sophisticated consumer investors.
How will this round change the landscape for natural products startups?
Caldbeck: CircleUp’s Series A Round will improve the experience on CircleUp dramatically, both for consumer companies and the investors on the site. While we are incredibly proud of what we have done, we think there are so many ways we can do better and add more value to the companies on our site and our community overall. First, a better site experience for the companies, before, during and after the raise. In addition, we want to expand our educational materials and provide more offline events that can connect our community with relevant consumer experts. Finally, we think this is a great validation of what we’re doing. Union Square Ventures and Google Ventures are two of the most well-respected venture firms in the country, especially for marketplaces. Their investment is a nice stamp of approval for the incredible opportunity ahead for the CircleUp community. In addition, we’re fortunate to have our existing investors Maveron and Clayton Christensen invest as well – another great testament to the growth CircleUp has seen since launching in April 2012.
What does Union Square bring to the table?
Caldbeck: We were fortunate in that we had an oversubscribed round and received several amazing term sheets from top tier funds in a short amount of time. Union Square Ventures is a dream partner. They are the single best venture capital firm in the country for marketplaces. Think of Lending Club, Etsy, Kickstarter and Funding Circle, just to name a few. In addition, they have great experience with consumer internet – Twitter, Zynga, Foursquare, to name a few more. Union Square has amazing experience helping to scale marketplaces and to ensure the marketplaces are adding real value to the community participants. In our case, that means they will help us think through ways to add value to the consumer companies on CircleUp.
What does Google Ventures bring to the table?
Caldbeck: Pairing Google Ventures with Union Square Ventures was an incredible opportunity. While Union Square has fantastic marketplace experience, Google Ventures is a top tier fund with an amazing operating team. They have a team of people on staff that are dedicated to helping the portfolio companies. They have a great track record, including companies like Blue Bottle Coffee, OnDeck Capital, Nest and DocuSign. Google also recently announced a large investment into Lending Club. Having Google Ventures be a part of our A Round is great for our community because, as their operating team adds value to CircleUp, the experience on our site will be that much better for the consumer companies applying.