For entrepreneurs who make granola or baby skincare products, a crowdfunding service called CircleUp may be the secret to their next leg of growth.
CircleUp is the first crowdfunding service focused just on consumer products companies. Unlike crowdfunding sites like Kickstarter, which are about donations to creative ventures, CircleUp allows accredited investors to snag a piece of a fast-growing company thanks to a partnership with W.R. Hambrecht, so it can act as a broker-dealer. \(Read More: Kickstarter's 10 Biggest Success Stories.\)
Since launching in April, CircleUp has closed raised $3 million for four companies — Little Duck Organics, a kids snack company, granola company 18 Rabbits, baby skincare company Episencial, and Melt, an organic butter spread. They each raised money in just a matter of weeks, a fraction the time it would have taken offline.
The matchmaking role CircleUp plays aims to meet demand on both sides: Accredited investors are looking to diversify away from stocks into other fast-growing areas, and consumer products companies are hungry for new sources of investment. (Read More: Crowdfunded Businesses May Owe Taxes, Too.)
Consumer products comprise 20 percent of the economy, but only 4 percent of angel funds, said CEO Ryan Caldbeck.
He noted that the average angel investor in consumer products make three and a half times their investment over a period of about four years.
The platform is focused on companies with more than $1 million in revenue, and it carefully vets the investments — accepting fewer than two percent of applicants. Because investors are buying a piece of a public company, they legally have to hold on to shares for at least a year. (Read More: 10 Ideas That Made $100 Million.)
CircleUp just announced a partnership with General Mills , which is looking to the platform as a good way to find and screen potential investments or acquisitions. Such a big name partner could help the platform draw even more startups, solidifying its reputation as the go-to place for the products that land on Whole Foods shelves.
—By CNBC's Julia Boorstin
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