By Rory Eakin, Founder of CircleUp
Crowdfunding was a hot topic during Angel Capital Association 2012 Summit in Austin this week. It featured prominently in the formal agenda, and was a frequent buzzword running through the hallways during the breaks. Strong voices spoke out on both sides, but two clear themes seemed to emerge: 1) crowdfunding is coming, and it has the potential to change the Angel landscape significantly, and 2) a lot of uncertainties remain about how established Angel groups will engage with crowdfunding platforms, and whether this will help or hurt the early stage funding ecosystem.
The most frequent concerns were around trust and the role of intermediaries. How can investors establish the trust and knowledge required to make a thoughtful investment on a crowdfunding platform? Crowdfunding investors, like any investors, don’t want to waste time shifting through unattractive investment opportunities. What role, and responsibilities, should there be for an intermediary to look after investors?
These are critical issues that must be answered if crowdfunding is to succeed. At CircleUp, we are tackling these issues directly with three parallel approaches:
- Managed Dealflow - CircleUp reviews all companies before allowing them to post information on our platform. While final investment decisions are always the responsibility of the investor, investors on CircleUp know they are considering opportunities that have met our initial standards. We believe maintaining quality dealflow is essential for sustained engagement within any community of investors, advisors and companies.
- Focus – We focus on expansion capital for consumer products and retail companies. We love the consumer space because of the great companies we find in this middle-stage of growth – some traction in the market already, but too small for Private Equity or strategic investors. These companies are also easier for investors to diligence because the investor has more information – you can try the product, look at historical sales, and talk to customers. While these are still risky investments, the risk of outright fraud is minimized given the historical information on the company.
- Transparency – We believe trust is established through transparency. Investors on our platform interact with the company, and each other, in company facilitated forums. These communities, supported by social networking tools, help investors conduct their diligence to determine if an investment is right for them.