The JOBS act supposedly paves the way for additional crowdfunded investments. But starting today, a new crowdfunding operator is in business hoping to take out some of the risk for anyone who wants to invest.
Called CircleUp.com, the company is taking a different approach to get around the 270-day waiting period for investors and small businesses to take part in the crowdfunding allowed by the new act. CircleUp is already partnered with an existing broker dealer, WR Hambrecht, and they are already prescreening ventures that are ready to be funded. The idea is to become a Kickstarter for small, established companies, and to offer a small piece of equity to the general public.
Well, not all of the general public. As with any investment vehicle in the precrowdfunding era, investors have to meet certain income and liquidity tests, meaning that you already have to have some money in the bank. The threshold is someone who makes $200K a year or a couple with a combined annual income of $300K.
The founder of the company is Ryan Caldbeck, and he is not a newcomer to the world of small business financing. Caldbeck spent seven years as a consumer-focused growth equity investor helping to evaluate and fund companies that had at least $10 million in revenue. He realized that there were angels out there who wanted to invest in companies they believed in, but didn't have access to those companies. "It takes a lot of networking and knowing the right people at the right time," Caldbeck says. "I wanted to build some transparency into the system." That was the idea behind CircleUp.
So what the service does is present investment opportunities to the public. Each potential opportunity is prescreened by the investment advisors at CircleUp, and the site collects on one page all kinds of company information, including financials and details about the actual business. At the moment, CircleUp is only looking at established consumer-product companies with merchandise already available in physical stores. The idea is to bring an element of reality to this sector and give potential investors some firsthand experience in the brands in which they want to invest. "For the companies looking to raise capital, CircleUp's investor network not only provides capital, but also an informed, passionate constituency of support to help the company reach the next level," Caldbeck explains.
Right now, the CircleUp site only lists three ventures. Investments are going for less than $5,000 per unit, a manageable level for first-time equity investors. Whether the idea will scale and attract the kind of investors that Caldbeck predicts, is hard to say. But it certainly is a site to watch as the crowdfunding arena heats up.