I interact with a countless number of early-stage, organic food companies and I can tell you one thing – running these businesses is not an easy task.
Aside from the tight profit margins, increasing food costs, and extensive paperwork dealing with organic certification, raising investment dollars is a very challenging endeavor.
These are not high-flying technology companies, which attract the lion’s share of angel investment money. Furthermore, most investors don’t understand the intricacies of consumer packaged goods (CPG) companies.
Fortunately, a San Francisco-based start-up called CircleUp is helping to address this fundraising problem.
CircleUp uses a crowdfunding platform (somewhat similar to Kickstarter) that matches accredited individual investors with CPG companies.
Since CircleUp rigorously pre-screens both the investors and the companies, the fundraising process is very, very quick. Normally, it takes about 9-12 months to close a round of financing, but CircleUp decreases that time frame to two months or less.
Aside from the careful selection of qualified companies (only 2% of those who apply get approved), there are a few other factors that make this an efficient process.
One, the team is strong. Co-Founders Ryan Caldbeck and Rory Eakin have deep experience in the CPG and investment space. Two, there is no negotiation between parties once a company is on the platform. Terms and valuation are pre-determined, and investors can either accept or reject any deal that has been presented to them.
Funded by Maveron, the venture capital firm of Starbucks’ CEO Howard Schultz, Triple Point Ventures, and others, CircleUp has so far helped to raise several million dollars for nine CPG companies, six of which are organic food businesses.
Not surprisingly, CircleUp has so far drawn rave reviews.
Jeffrey Tusa, Chief Financial Officer for Rhythm Superfoods, said “it took us only two weeks to raise money through the CircleUp platform. The team is super-sharp, very responsive, and experienced in the CPG and health/wellness category. Plus, these guys are ex-investment bankers and ex-consumer investors. To have that firepower was worth its weight in gold.”
Not only did Rhythm Superfoods get investment capital, but Jeffrey Tusa characterized several of his new angel investors as “heavy hitters”, one of whom has been actively involved in providing operational guidance and may take a seat on the board of directors.
Alison Bailey Vercruysse, Founder and CEO of 18 Rabbits, was equally as enthusiastic and said that “my experience with CircleUp was awesome. Without them, I would have had to do a lot more negotiating and meeting with potential investors. Also, it is really hard to find investors who know the CPG space.”
Having kept a close eye on CircleUp over the past year, I am incredibly impressed with the progress that it has made, and the company is playing an increasingly important role in the growth of early-stage, organic food businesses.
And for those of us who care deeply about this sector, we should be very grateful.
More investment dollars directed towards organic means additional jobs, a greater number of healthy products for consumers, and fewer chemicals sprayed on our crops. It’s a win-win all around.
If you know of an organic food company that has at least $1 million in revenues and is looking to raise between $100,000 and $2.5 million, get in touch with CircleUp.