This CircleUp Review will help you learn more about CircleUp's investment offerings, including how the alternative investments on CircleUp are structured, and what your potential returns might be. You can read more about the criteria we use to review investment platforms here.
CircleUp is a Reg D investment platform with a focus on consumer products and retail companies (commonly referred to as “CPG” companies for consumer packaged goods). CircleUp has a wide selection of open offerings, and differentiates from similar platforms both with their CPG focus and their “Classifier” algorithmic process for assessing prospective issuers. While some investments have minimums as low as $10,000, many require at least $50,000 (or more) to participate.
CircleUp emphasizes a close relationship between investor and company, promising open access to the CEO and even the (rather cool) ability to try the product before you invest by requesting a sample sent to your home.
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Types of investments CircleUp offers
Investments on CircleUp are in early- and growth-stage consumer and retail companies, typically with annual sales of at least $1M.
From their FAQ: “Specifically, we look to work with companies in the food, beverage, personal care, pet products, sporting goods, apparel, household products, retail, and restaurant industries.”
What do you get when investing with CircleUp?
Details can vary by investment, but investors typically directly receive preferred shares in the offering company, or in some cases common stock or convertible debt. Although CircleUp offers debt financing to companies, that’s not currently open to outside investors.
How does CircleUp make money?
CircleUp doesn’t charge any fees to investors, though they do charges listing companies a commission of the total amount raised, which they indicate is “intended to be generally consistent with what companies pay to investment bankers in the offline world for similar size fundraising rounds.”
Potential returns and cashflow
Investments on CircleUp are high-risk investments in startups and high-growth companies. While in some cases shareholders may be entitled to dividends, most of the investments have no explicit expectation of payments, dividends, or other cash flow. Most startup investments lose some or all of their value. While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection.
Breadth of offerings on CircleUp
According to their website, so far CircleUp has helped more than 280 companies raise more than $365M. It’s not clear how much of that $365M came from individual investors vs. institutional (they also say that more than 50% of their capital comes from institutional investors).
As of this writing, there are 12 active investments across a range of CPG sectors and company sizes.
Regulatory framework and due diligence expectations
CircleUp offers investments using SEC Reg D, and currently only offers access to accredited investors. CircleUp is also a registered broker-dealer (you can review more detail their page on FINRA’s BrokerCheck. Broker-dealers are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!)
A differentiator for CircleUp compared with other Reg D platforms is their use of algorithmic selection in evaluating potential offering companies, using a system they call “The Classifier”, which they say analyzes “92,000+ data points per company” to identify the ones most likely to see high growth. However, prospective investors should review offering documents carefully, as company valuations are set entirely by the issuer.
Also notable among Reg D startup investment platforms. CircleUp actively encourages investors to engage with company CEOs, and in some cases helps facilitate the delivery of product samples to investor homes.
This review was first published on 24 March 2017.