Idaho-based company Prosperity Organic Foods (www.meltbutteryspread.com) recently concluded a successful raise of equity capital using CircleUp. Disclosure: I am an investor in Prosperity. Prosperity produces and distributes a line of delicious and healthy substitutes for butter under the brand Melt® Organic.
Prosperity CEO Meg Carlson reports the process was quick and easy. It was about eight weeks from the time Prosperity first submitted documents to CircleUp until it received the funds.
I visited with CircleUp COO and Co-Founder Rory Eakin. CircleUp was founded with the vision of providing the means for small consumer products companies to efficiently reach accredited investors. Growing consumer products companies need capital to support their inventory and receivables, but it is often extremely difficult for small consumer products companies to raise expansion capital.
Companies most appropriate for CircleUp’s services already have some traction in the market place and are seeking equity capital to support expansion. In the case of Prosperity, this was the company’s third round of investment capital and will support national expansion from about eight hundred stores to several thousand.
Companies seeking capital submit an on-line application. CircleUp reviews the application, does a background check on the entrepreneurs, and conducts its own research on the company and the industry. They accept around 2% of the applicants. Once accepted, the investment opportunity is opened up to potential investors. Companies must declare a minimum and maximum raise. Unless the minimum is reached, the company does not receive any funds. After the minimum is reached, the company can continue to raise capital until the maximum is reached.
For investors, there is a simple process to join CircleUp. You must certify that you are an accredited investor. Once your account is set up you can then browse the potential investments. Each potential investment has a deal room where documents have been posted. Potential investors can ask questions of the company management and exchange comments among themselves.
Once an investor decides to make an investment, money is sent to CircleUp’s escrow account and held until such time as the company achieves its minimum raise. Then the funds are transferred to the company and the company issues its investment certificates to the new shareholders. CircleUp withholds a commission for their services.
CircleUp is similar to the coming crowd-funding platforms authorized by the JOBS act (The JOBS act will change fund raising for startups). Unlike the anticipated crowd-funding platforms, CircleUp is limited to accredited investors only. Accredited investors have a net worth of more than $1 million exclusive of the equity in their primary residence or meet an income test.
Based upon Prosperity Organic Food’s successful experience, other Idaho entrepreneurs in the consumer goods space may want to consider CircleUp for a portion of their capital needs.
Dr. Kevin Learned is a counselor at the Idaho Small Business Development Center (www.idahosbdc.org) at Boise State University where he specializes in counseling with entrepreneurs seeking equity capital. He is past- president of the Boise Angel Alliance (www.boiseangelfund.com), and is a principal in Loon Creek Capital (www.looncreekcapital.com), which assists angels in forming angel funds. He can be reached by email to firstname.lastname@example.org or by phone at 208-426-3875.