While headlines telling of angel investing and venture funds in startups have been focused on technology firms, CircleUp has been carving out a niche in the consumer brand space. Operating an equity crowdfunding platform for accredited investors, deals on CircleUp are limited to the consumer space where sourcing liquidity in the past has been harder to come by for firms, even as their growth may be on par with the so-called ‘hot tech startups’.
Examples of startups in the space include niche apparel makers, national supplement firms and boutique coffee producers. Through CircleUp, these firms are able to raise funds from a larger group of participants who can also assist in introducing the brand to their networks. For investors, the crowdfunding platform also makes it easier to invest in the sector.
Gaining traction for their platform, CircleUp has begun to introduce initiatives to benefit both companies and investors. They include the launch of a secondary market in September, to improve ongoing liquidity of crowdfunding campaigns that were initiated on the platform. In addition, the firm has also partnered with venture firm, Collaborative Fund, which is to commit $4 million to be invested through the platform.
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Adding to those initiatives, CircleUp is introducing the Marketplace Index Fund. Being launched this month, the fund is open to accredited investors with a minimum investment size of $100,000, with a waiting list for smaller sums and a $25 million target size for the fund. Operating like an ETF, the fund contains a 0.5% management fee, and 0% carry fee.
Based on a proprietary algorithm for evaluating companies, the fund will be investing in funding deals on the CircleUp platform. For investors, one of the appeals is the investment diversity offered in place of needing to participate in multiple individual funding campaigns.
According to CircleUp, companies that have raised funds on their platform have generated 86% annual revenue growth since raising on the platform. In addition, unrealized investment returns were estimated at 50%+.
Since launching in 2012, total investment flow on CircleUp is expected to be around $300 million, with about $200 million having been raised during 2015.