In Episode 76 of The Wendel Forum (originally aired on September 15, 2012, on 960 KNEW AM radio), show moderator Dick Lyons, co-founder of Wendel Rosen’s sustainable business practice group, welcomes Ben Lee, director of business development at San Francisco-based CircleUp, a crowd funding platform founded in April.
Ben Lee of CircleUp
CircleUp provides an online mechanism for consumer products companies and retailers to reach out to a broad network of potential investors, who may fund the companies in exchange for equity. CircleUp, which affiliated with WR Hambrecht, takes a commission.
So far, they’ve received 600 applications; they’ve selected 10 companies and four – including a baby skin care brand and an organic food brand – have been successfully funded. CircleUp’s team serves as a curator for the investors. In evaluating companies, they look for businesses with $1 million to $10 million in annual revenue. Usually these companies are seeking to raise $500,000 to $2 million to launch new products and achieve the next stage of growth. The typical investment is $5,000 to $25,000 (while each company’s offer is different, these are generally in the form of preferred stock shares); CircleUp assists with larger transactions offline.
While CircleUp streamlines what can otherwise be a year-long funding process, raising money through the platform can still take several months. Although CircleUp selects companies and presents opportunities, investors must do their own due diligence. Like any private company investment, crowd funding is risky and the investment horizon may be three to seven years.
Lee says CircleUp’s goals include enhancing the ecosystem around consumer products, helping as many small consumer brands get financing as possible, and making sure CircleUp’s platform is a great experience for investors and companies.
Have you participated in crowd funding? What do you see as the biggest opportunities and challenges to this form of financing?