06: How to raise investment capital on CircleUp’s crowdfunding platform - with Steve Vigilante from CircleUp

It was a rude awakening for us to realize that the more success we achieved with SoYoung, the more cash we were going to need to finance production and growth - but if you’ve never raised capital before, the process can be daunting

Well fortunately the times are changing and there are some new funding platforms emerging in the consumer products space that make it much easier for small businesses to raise capital by helping to bring together angel investors and growth stage product entrepreneurs. One of the leaders in this space is San francisco-based Circleup’s crowdfunding platform . I first heard about Circleup crowdfunding platform about a year ago and I was impressed by their process and the companies that they had worked with.

Though we decided not to proceed With raising money at that time, we have stayed in touch with Circleup and are considering doing a round of financing with them in the future. I recently reconnected with Steve Vigilante from Circle up whom gave me an overview of how the platform works, and how it might benefit your business.

Access to a deep pool of Angel Investors

One of the main benefits of Circle Up is that it can support companies that are smaller or at an earlier stage of development than what private equity investors would typically look at, by providing access to a deep pool of Angel investors. Circleup typically works with companies whose revenues are in the $500,000 - $10,000,000 range.

CircleUp is focussed exclusively on the Consumer products space

The other benefit is that circle up is focussed exclusively on the consumer products space - so it’s really opening up a new market that traditionally had struggled to get access to equity funding.

The difference between Kickstarter and Circleup

Now you probably heard of crowdfunding sites such as Kickstarter and Indiegogo - which at first glance May appear to be a similar concept, without the downside of giving up equity. I asked Steve to explain the difference.

Essentially Kickstarter and Indiegogo (and others) are for testing out products and getting some seed financing for an initial production run. Circleup is for companies that already have traction in the marketplace and need to raise a significant amount of money to grow their business. The average check size is much bigger as are the amount of funds raised.

SO Kickstarter may be a great way to test and finance the manufacuring for your first product, but if you’re looking for serious funding to grow your business, you’ll need more than crowdfunding can provide.

The Platform is Curated - both on the investor and entrepreneur side

So chances are you’ve still got a lot of questions about who these investors are and how the application process works as we did certainly did when we first began speaking with circle up. Steve points out that there is a vigerous curation process and they are very selective about who they allow on the platform on both the entrepreneur and investor side.

Circle up accepts between 5%-10% of companies that apply in order to keep quality high. In order for someone to become an investor on the platform they must be an accredited investor, but Circleup also does additional vetting to insure investors understand the consumer products space,

Confidentiality

Ok, so getting on the platform is one thing, but how does it once you’r accepted. How is confidentiality handles and do you get any say over who your investors are?

While high level info on your offer is available publically, the platform provides each entrepreneur looking to raise funds with a private deal room to which they control access. This allows you to only share confidential details about your business with investors that you pre-screen.

Strategic vs Passive Investors

Another concern is what role the investors may play in shaping your business. For some companies, the there may be great appeal in bringing on a strategic investor who also has industry experience that he can lend to your business as a mentor and advisor. For others you may be looking for more of a passive investor who will not meddle in the everyday aspects of the business. It’s completely up to you as to what type of relationships you wouldlike to foster through the platform.

Supporting you through the process

No, well there is a cost that typically between 5% of your raise, the main attractions for me to Circle up is, in addition to the investors, is the fact that, as someone who's never been through the fundraising process before they offer a ton of support and resources to help you build a compelling pitch and increase your odds of success.

Now, while you will ultimately have control over how you value your company, Steve cautions that it’s very easy to become deluded by the frothiness of tech valuations and even some of the exceptional cases in the consumer space. This is the biggest impediment to being successful at getting a deal done.

So, whether you’re in a position to raise funds today, or are just thinking ahead to the time when you may may need addtional capital, I storngly suggest you check out Circlup at www.circleup.com to get a better idea of how the fundraising landscape is changing and what new options are opening up to consumer brands. I’ll be keeping you posted on SoYoung’s fundraising journey which may involve circle up at some point down the line. I’d like to give a special thanks to Steve Vigilante for speaking with Indie brand builder.