Ryan Caldbeck of CircleUp: Investing In Small Business with Crowdfunding

There’s good news for small business. If you operate a small business, by now you know how challenging it can be to find investors. The good news is that all of this is about to change. Ryan Caldbeck, CEO and Founder of CircleUp, joins Brent Leary to share his solution, a crowdfunding platform for the small business industry.

* * * * *

Ryan Caldbeck of CircleUpSmall Business Trends: Ryan can you tell us a bit about your background before we jump into crowdfunding?

Ryan Caldbeck: Sure, I spent the last seven years in consumer focused private equity. I was investing in private consumer companies above $10 million in revenue.  What I notice is that there are hundreds of investment firms around the county that will invest in larger consumer businesses, but almost none that will invest in smaller ones.

We started CircleUp to focus on that smaller end of the market, which is less efficient and a great place for investors to make money.

Small Business Trends: Can you tell us a little bit about crowdfunding in general?

Ryan Caldbeck: The basic concept of crowdfunding is a lot of individuals coming together to achieve a common goal.  That can take the form of individuals donating money to a company or to a cause, which is the most common form of crowdfunding. Or, it can take the place of individuals investing and receiving equity or debt in a company.

Small Business Trends: How does CircleUp play in the crowdfunding area?

Ryan Caldbeck: CircleUp is the largest equity based crowdfunding site in the county.  We have a group of accredited investors, because today the only investors that are allowed to invest in private companies are accredited investors.

The investors on our site are excited to invest in small consumer and retail businesses. Companies that have more than a million dollars in revenue, but again are too small for institutional investors. They come on to our site and find an opportunity that they like.  We have an investor overview and can sign the legal documents on our site, wire money through our sites and become equity owners in that business.

Small Business Trends: Can you take us through some of the other mechanics of how CircleUp works?

Ryan Caldbeck: We believe strongly in curating the companies that are on our platform. We think that the investors that come to CircleUp are looking for really high quality investment opportunities, and we want to present those opportunities to the investors after they have passed our own curation as professional investors.

The investor comes on to the site and can read an investor presentation and ask questions directly to the CEO. That is one of the features we think is really an important innovation in private investing.

Small Business Trends: What makes a good candidate for a company looking for capital on CircleUp?

Ryan Caldbeck: The number one criteria is, “Do we think that there is a great opportunity for investors to make money?”  We look at:

  • Whether the company has a path to sell strategic. So if you are a granola bar, we believe that General Mills, or Nestle, or Sara Lee would want to buy that granola bar in a few years.
  • Brand strength. In consumer products that is the piece that is the most defensible. That is the barrier to entry.
  • Financial performance; we look hard at the numbers.
  • The management team. Believing that the management team can take this business to the next level.

Small Business Trends: How long would it take for them to go from being a good candidate to potentially getting some investment money?

Ryan Caldbeck: When we launched, we anticipated it would take 90 days or so to raise money. In the offline world these companies typically take 12 to 18 months. On CircleUp what we found is so far is it’s actually taking more like 4 to 5 weeks, which has been surprising how quickly these companies have gotten funding.

Small Business Trends: How much on average can a company expect to get in an investment capital?

Ryan Caldbeck: Our target right now is to help companies that are raising somewhere between $250,000 and a million, maybe a million and a half. We can raise more if we want to.  But one of the things that we are cautious of is if there is a company that’s raising, let’s say $5 million dollars, or $10 million dollars, on the consumer product space what we know as former investors is that if the company only has a million dollars in revenue and it is raising 10 million bucks, that is a very bad situation for a consumer products company. It might work for technology companies, but it doesn’t work for a food business.

Small Business Trends: Can you talk a little bit about how you make sure you get the right investors?

Ryan Caldbeck: Number one, the SEC requires all investors and private companies are accredited investors. An accredited investor is someone who makes more than $200,000 dollars a year as an individual, $300,000 dollars a year as a couple, or a million dollars in assets, excluding their homes.

We also recruit individual investors that are excited about consumer companies. We think we’re building a platform that brings more to the table than just capital. Now the company has investors that aren’t just writing a check, but can also add value.

Small Business Trends: On average, only about 2% of the companies who are looking to get up on CircleUp are accepted. Do give the others advice on how they can make it in the future?

Ryan Caldbeck: We spend a lot of time doing that.  It is not just because we hope they come back to CircleUp.  We just think it is the right thing to do.

Small Business Trends: How significant will crowdfunding be in the future?

Ryan Caldbeck: My view is that crowdfunding will be really important in some industries, but not in all. A good example is technology companies. If you are in an early stage, tech startup, especially in Silicon Valley, and you can’t raise money from Angels or VC firms, that is a very bad sign.

But there are other industries, and consumers is just one of them.  Where there is no kind of efficient fund raising community, I think crowdfunding will help those companies and will allow investors to invest in the best companies.

This interview is part of our One on One series of conversations with some of the most thought-provoking entrepreneurs, authors and experts in business today. This interview has been edited for publication. To hear audio of the full interview, click the right arrow on the gray player below. You can also see more interviews in our interview series.

Click to listen!

Download File

5 Comments ▼

Brent Leary


Brent Leary Brent Leary is a Partner at CRM Essentials and organizer of the Social Business Atlanta conference. Brent serves on the advisory board of The University of Toronto CRM Center of Excellence, writes the Social CRM column for Inc.com's technology site, and blogs at Brent's Social CRM Blog.

5 Reactions

  1. All the different ways in which people are re-imagining the funding of and lending to small businesses is inspiring. What a great movement!

  2. Very insightful and informative. I give this post 5 stars!

  3. Martin Lindeskog

    Brent: I am very interested to learn more about the possibilities with crowd funding for my new venture. We want to apply lean startup ideas and then grow the business with the help and trade of our customers, ambassadors, fans, business partners, fellow bloggers, etc.

  4. Being Commercial Bee Keepers/our family is the largest Honey producers in the U.S., we decided that honey(a food source, not a sugar) was a healthy choice for consumers.

    Developing the first and only Raw Honey energy drink, (backed by the medical community) in the nation, RevHoney wants to reach beyond our Midwest states and into a national product for “all” ages. Approved by the Whole Foods Markets, we are giving a New Face to natural fuel, with healthy benefits….

    Our website will be more informative on the details of our transition from Honey Producers to Healthy fuel/food producers….

    We are being blocked by the “bad for you” energy drink companies, and soda companies for mass distribution.

    We have distributors who want to distribute our Raw Honey snack U-Tubes and Raw Honey drinks, but the owners and operators of the “energy companies” refuse to allow them to. We sponsor K-State University athletics, and Pepsi has stepped in to block us on campus. Schools are bringing in RevHoney through the back door for their students. We are growing stronger every year (in our 3rd year). Parents want a healthy drink for their family, and a substitute for sugar sodas and bad energy drinks. They have embraced RevHoney…..
    We started in 50 Convenience stores, and we are now in almost 200 Hy-Vee stores, Whole Food Stores, and reach out to 9 States.
    We need a distributor, or funds to self distribute….
    This maybe the wrong place to shout out to…
    Yet, life is always surprising me….

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>




Is your business credit worthy?