CircleUp has raised a $7.5 million Series A round of funding, which is believed to be the largest amount raised for an equity-based crowdfunding site.
The round was led by Union Square Ventures, whose portfolio of companies includes Twitter, Kickstarter and Etsy. Other investors in the round include Google Ventures, Maveron and Rose Park Advisors.
The round will enable CircleUp to hire more engineers and designers to build out the platform.
CircleUp is different from other crowdfunding platforms. Under its model, investors get equity in the investment, so the firms seeking equity stakeholders get vetted and angel and seed investors must get accredited before either one can access the consumer-focused crowdfunding platform. In addition, the average raise from the site is $1 million. In comparison, Kickstarter relies on pledges, or donations, from individuals. The average raised is $10,000.
According to Ryan Caldbeck, chief executive officer and cofounder of CircleUp, “Hundreds of investment firms invest in consumer product firms above the $10 million level, but there are almost none below that.”
He told attendees at the Next Great Consumer Brands Conference earlier this month, copresented by Consensus Advisors and The Nasdaq OMX Group, that so far CircleUp has helped 12 firms raise an aggregate of more than $10 million.
Caldbeck previously was at private equity firm TSG Consumer Partners before founding CircleUp. He said there are many investors with consumer backgrounds who have money to put to work but not necessarily access to companies that fit their investment profile. The platform helps to streamline that process.
David Krane, general partner at Google Ventures, has joined the CircleUp board. According to Krane, Google wanted to be an investor because it likes seed and angel investing — Google Ventures does about 50 to 60 seed investments each year. CircleUp got its attention because it is the “first of its kind with a focus on consumer companies.…This platform brings people together on both sides of the fence.”
Krane also pointed to the efficiency of the process that enables completion of due diligence and fosters investment decisions quickly at 61 days rather than the year or so that typically occurs in Silicon Valley for tech firms.
Dan Levitan cofounded venture capital firm Maveron with Starbucks Coffee Co. chairman and ceo Howard Schultz, and the two have an in-depth familiarity in the consumer space. Maveron’s portfolio of investments past and present include: Drugstore.com; eBay; Groupon; beauty firm Julep; activewear firm Lucy, and babies and children’s e-tailer Zulily.
“Maroven was the first institutional investor to commit to the company when it started 18 months ago,” said Levitan, who added, “CircleUp is a great accelerator for these [smaller] companies that frequently have a hard time to get access to angel and seed investors, many of whom have had previous experiences running successful consumer firms.”
Christy Prunier, founder and ceo of pre-teen skin-care firm WillaGirl Inc., who closed on a $1 million investment from several investors through CircleUp, said, “One investor now behind Willa comes from a consumer background and has experience investing in consumer brands. Another investor introduced me to my chief financial officer.”
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