Rory Eakin, COO of CircleUp

January 16, 2013

Overview

I had the pleasure of sitting down with Rory Eakin, co-founder and COO of CircleUp. Rory gave a wealth of insight into the pioneering equity crowdfunding model him and his team have built to fund underserved companies in a targeted industry vertical (emerging growth consumer product and retail companies).  I’ve distilled and summarized key themes below for convenience, but the full interview offers far more depth. So make sure to carve out 20 minutes to give it a view.

Currently only open to accredited investors (as legislation permits), CircleUp is a front-runner in the investment crowdfunding space. It’s one of a handful of platforms “crowdfunding” (personally defining as executing transactions entirely online) from accredited investors today; to date eight companies have raised a total of ~$7.5 million on CircleUp’s platform.

I’ve paid acute attention to CircleUp because (i) it has traction, i.e. data exists, and (ii) i’m a big believer in the merit its crowdfunding model is proving out. Broadly, it couples domain expertise and curated partnerships with technology to efficiently and transparently deliver high-quality, shepherded deal-flow to investors. It’s a model championed by many other platforms—e.g. RealtyMogul and Fundrise attacking real estate—and I have no doubt it will be applied to nearly many other industry verticals in time. It just makes tremendous sense; on so many levels.

Good news for anyone interested in doing so, CircleUp presents a great analog. With each executed deal, its team is plotting one route on a guide map that shows how technology and private sector innovation can bring dramatic efficiencies to early-stage capital markets (read:disrupt).

These efficiencies are win-win-win: a win for businesses that are given indiscriminate access to capital; a win for investors who are given more robust access to private-markets; and a win for our economy which is enriched by the more efficient capitalization of innovating and job-creating companies.

Traditional intermediaries on the other hand —well— they should probably take note. The inefficiencies they’ve been lining their pockets with—of which have been served to them on a silver platter by legislative decree—are being eviscerated. One beautifully efficient, and information symmetric,  deal at a time : )

On that note, here are a few takeaways I hope you’ll find valuable:

  • Background

    • CircleUpan equity crowdfunding platform for accredited investors, was launched in July 2012 by Ryan Caldbeck and Rory Eakin
    • The team has domain-expertise in private equity investing, particularly in the consumer product & retail verticals
    • Clayton Christensen, the intellectual father of disruption, sits on the company’s cap table
    • Built CircleUp to solve a structural inefficiency in consumer product & retail private equity markets
  • The Model 
    • Market Thesis Attacking a market flawed by structural inefficiencies (outsized inefficiencies = outsized opportunities)
    • Curation Leverages domain-expertise to qualify deal-flow; to date, CircleUp has approved ~2% of applications for its platform
    • Liquidity Liquidates its marketplace organically (to date, largely through word-of-mouth), as well as through a partnership with SecondMarket
    • Ecosystem Through strategic partnerships, has created an ecosystem of value-added services for businesses and investors. Examples:
      • Pre-funding: Partnerships with MVCtest (product testing surveys) and SPINS (retail sell-through data)
      • Post-funding: Partnerships with General Mills & Procter and Gamble (“incubator days” with CircleUp companies)
  • Processes
  • Businesses
    • Less than 2% of applications approved; onboarding typically takes 2 – 4 weeks
    • Post-onboarding, deals have been executed  in as little as 3 weeks
    • Gain value from CircleUp’s ecosystem of value-added services and partnerships, as well as an engaged cap table. Early proof points show valuable investor communication post-funding
  • Investors
    • Must be accredited
    • Minimum investment is $5,000
    • Early CircleUp investors:  most have previous angel investing experience, many have relevant domain expertise; geographically disparate (investors on the East coast are discovering relevant deal-flow 3,000 miles away)
  • Data
    • Since July 2012: $7.6mn raised across 8 companies
    • High: $2.4 mn; Low: $.5 mn; Median: $.82 mn
    • Average Campaign Duration: 6 weeks (wide variance)
  • Additional Resources

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