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Union Square Ventures is Cornering the Crowdfunding Market

As you’ve undoubtedly heard by now, CircleUp announced its $7.5 million Series A yesterday. Surpassing Funders Club’s $6 million “seed” round in October, this represents the largest raise by a U.S. investment crowdfunding platform to-date. A few notable stats for context.

  • CircleUp has facilitated over $10 million in investments for 12 companies;
  • Median raise of ~$800k;
  • ~70% success rate for listed companies (keep in mind CircleUp’s curation rate of 2%);
  • Average number of investors per deal is ~25 (ergo, average individual investment size is $32k).

What does this mean for CircleUp? It could deploy the capital to grow horizontally into other verticals, copying and pasting its existing model and targeting comparable deal sizes. Or, it could grow vertically, and up the value-stream in consumer products/retail. I’m leaning towards the latter. In my previous post—Crowdfunding’s Disruptive DNA: The Why, How and Who—I spoke to my belief that CircleUp’s trajectory, as well as others’, points to a $10 million transaction, in time. This trajectory will follow a pattern of low-end disruption. A pattern that’s been repeatedly observed across countless industries; and a pattern that another USV portfolio company, FundingCircle, is currently following, and executing in spades. It launched with a maximum raise of $250k; upped to $500k; and just recently announced it will facilitate small business loans up to $1 million.

CircleUp’s round was led by Union Square Ventures (USV), and included follow-on participation from Clayton Christensen’s fund, Rose Park Advisors. From PEHub:

“CircleUp is a classic disruptive innovation, elegantly simplifying the complex process of financing high growth small businesses and thereby expanding the addressable market by bringing capital to great non-tech companies that have historically struggled to get efficient access to it,” said Rose Park Advisors Managing Director Matt Christensen, who also led CircleUp’s Seed Round in 2012.

Great quote!  As for USV? The revered fund is going all-in on the digitization of our private funding markets, moving to corner the global crowdfunding market. Its investment in CircleUp represents its fifth investment in the space, each in respective category-leaders: CircleUp (equity crowdfunding for emerging growth companies); FundingCircle (debt crowdfunding for small businesses); Kickstarter (reward crowdfunding); Lending Club (U.S. Peer-to-Peer ); and Auxmoney (German Peer-to-Peer).

What else is left? For one, a platform gunning for the early-stage market. Lots of choices. In the U.S., an Angellist, WeFunder, FundersClub, StartupValley, Seedinvest et al. Or, internationally, a Seedrs, Crowdcube, OurCrowd, et al. They may be consciously avoiding early-stage plays, or simply waiting for the right platform at the right time. Unsure.

But my best guess? If they continue raising their exposure to the future state of private funding, I bet they go after a real-estate platform soon. As we’ve discussed before, the opportunity is ginormous.

Not that the industry needs it, but CircleUp’s raise is yet another point of validation. Let’s enjoy it :-).

We’re reclaiming our capital markets, redrawing them just as they should be: transparent, efficient and equally accessible. And what hasn’t been hit on as much by mainstream press—but I’m most excited about—meaningful!

Exciting changes, exciting times. Even though it’s in the smallest of ways, I’m thrilled to be a part of it with you all. Onward and upward.

One last thing… for reference, here’s a list of capital raises by crowdfunding platforms to-date. If you know of others let me know, and I’ll update in short order:

  • CircleUp
    • Seed Round: $1,500,000 (Source)
    • Series A: $7,500,000 (Source)
    • Equity platform; San Francisco, CA
  • CommunityLeader
    • Series A: $850,000 (Source)
    • Equity platform + ancillary products (white labeling being one); Minneapolis, MN
  • CrowdCube
    • Seed Round: ~$500,000 (Source)
    • Equity platform; UK
  • Crowdfunder
    • Seed Round: $400,000 (Source)
    • Equity platform; Los Angeles, CA
  • EarlyShares
    • Series A: $1,150,000 (Source)
    • Equity platform; Miami, FL
  • FundersClub
    • Pre-Seed: $529,000 (Source)
    • Seed Round: $6,000,000 (Source)
    • Equity platform; San Francisco, CA
  • Invested.In
    • Seed Round: $880,000 (Source)
    • White labeling platform; Los Angeles, CA
  • RealtyMogul
    • Seed Round: $500,000 (Source)
    • Real estate platform; Los Angeles, CA
  • SellanApp
    • Seed Round: ~$193,000 (Source)
    • Revenue-share; Netherlands
    • Raised seed round on Symbid, crowdfunding platform based out of the Netherlands
  • SoMoLend
    • Seed Round: $2.0M (Source)
    • Debt platform; Cincinnati, OH
  • WeFunder
    • Seed Round: $550,000 (Source)
    • Equity platform; Cambridge, MA

About Jonathan Sandlund

Founder, TheCrowdCafe

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