Venture Capital Firm and Crowdfunding Platform Come Together To Transform Startup Financing

Utah-Business-Sept-2008-todd-Crosland---IBFX-Fastest-Growing-Company-compressorVenture capital and crowdfunding are typically thought of as an unlikely match. Crowdfunding is largely driven by the concept of democratization of finance, in which the power is placed into the hands of the people. This ideology is the polar opposite of venture capital, a sector in which many professionals would likely consider crowdfunding to be based on grandiose and utopian concepts.

But surprisingly enough, the two have come together in a new and revolutionary initiative. Collaborative Fund, a New York City-based venture capital firm and an early investor in Lyft, Kickstarter, and Reddit, will be partnering with a San Francisco-based equity crowdfunding company called CircleUp.

Collaborative Fund will receive access to the approximately 200 startups on CircleUp, which it analyzes using proprietary algorithmic technology. About 92,000 data points per company are compiled and analyzed by CircleUp. These data points include financials, brand, leadership, customer engagement, and deal and exit potential.

Craig Shapiro, the founder and managing partner of Collaborative Fund, stated that he would never be able to be as efficient as he is if he didn’t have the technology of CircleUp. When CircleUp features startups on its platform, it gets a number of investors with deep pockets putting money behind these startups.  This increases exposure for consumer-product startups.

The venture capitalists play an important role in getting investors. If investors see that a professional venture capitalist has shown interest, they are more likely to invest in a startup. The more money that is invested in startups on CircleUp, the more money the fundraising platform earns. This is because CircleUp earns 5 percent commission on average. This adds up considering that Circle Up has helped over 160 companies raise more than $180 million.

This partnership is likely a bit of foreshadowing for innovations to come in the future. This may be a new chapter for the methods by which startups gain access to money, and the way that investors find startups that are seeking capital. This process is likely to make private financing accessible to a larger group of people.

CircleUp does not use the term “equity crowdfunding” to describe their business. Instead, they market themselves as a pioneer company for “marketplace investing”. The reason for this is that “crowdfunding”, to many people, implies the size of the investments being made. The average investment on CircleUp is currently higher than $100,000, a giant step up from the $15,000 on average that was being invested four years ago when CircleUp began. The term “marketplace investing” shows that the Internet has made it easier than ever before for investors find companies seeking investment.

The relationship between crowdfunding and venture capital is mutually beneficial. Crowdfunding, or marketplace investing, brings investors and entrepreneurs together. Venture capital firms bring greater amounts of money, as well as mentorship in guiding and advising startups.

While this is a harbinger for the future, not all venture capital firms will partner with crowdfunding platforms. Some venture firms will resist change while other will adapt. Nonetheless, this  type of partnership is showing a lot of promise. Collaborative Fund’s partnership with CircleUp is proof that in the future we may be able to eliminate the disconnect between the venture capital and crowdfunding industries.


Venture Capital in the Real Estate Industry

Todd Crosland Venture Capital Real EstateThe real estate industry has changed a lot in recent years due to the rise in technology. The most notable change is the increase in online real estate search websites such as Zillow, Trulia, Realtor, etc. These websites have made it easier for buyers to search for homes and easily connect with the seller. What hasn’t changed much in the industry are the procedures for buying and selling a home.

Venture capitalists are seeing this as an opportunity that they can take advantage of. By backing companies that use data analytics to streamline the home buying process, there could be a lot of upside here. In the first three quarters of 2014, venture capital firms injected $118.5 million into eleven real estate startup companies. $64.8 million was put into six real estate startups in the 3rd quarter, which was the largest VC injection into real estate since 2000.

One of the more notable deals was split between the venture capital firms, Crest Capital Ventures, Intel Capital, and Claremont Creek Ventures. These three VC firms helped raise $12 million for SmartZip Analytics Inc., a data analytics provider to real estate companies. The data specifically uses predictive measures to match real estate agents with homeowners that are on the cusp of selling their homes.

Another company, Agent Ace Inc., uses data analytics to match homebuyers and sellers with the best realtor for their specific home buying needs. They recently closed their Series A round with a $6 million investment round.

Buying a home is debatably the most important investments that someone makes in their lifetime. By streamlining the process through data analytics, consumers should be able to feel more comfortable when purchasing a home.

The Importance of Venture Capital in Utah

Todd Crosland Venture Capital Salt Lake CityA recent article on Beehive Startups discussed the venture capital scene in Utah as one of their writers attended the Utah Technology Through Time Conference. The conference was held in Salt Lake City as one of the main focal points of discussion was Utah’s startup environment.
One of the first topics discussed was the venture capital support for Utah’s booming tech startup industry. The conference brought together notable venture capitalists whose presence has been felt in Utah. The panel consisted of Ralph Yarro, founder of Think Atomic; Chris Cooper, partner at Pelion Venture Partners; Dr. Dinesh Patel, founder of Signal Peak Ventures; and Sid Green, founder of TerraTek and former Entrepreneur of the Year for the state of Utah.
The panel discussed Utah’s new investment high and posed the question, “how crucial is Venture Capital to Utah’s budding startup scene?” Recently the private research software company, Qualtrics, had a series B investment round of $150 million. The Provo-based company’s record-breaking investment round brought Utah’s overall investment to a record high. The panel went on to discuss the importance of funding needed to keep up with the innovation taking place in Utah.
Ralph Yarro pointed out Ray Noorda, along with a couple other investors who acted as “sugar daddies” and paved the way for Utah’s startup scene and attracted more venture capitalists. Also, state funded injections to the tech startup scene, such as the Small Business Innovation Research and Utah’s Technology Finance Corporation, made Utah a more attractive place for venture capitalists. These injections along with Utah’s high-profile investors brought Utah from the fringe of IT into a more central role that developed throughout the years.
Two more interesting observations were said about Utah’s developing startup scene. One of Utah’s biggest tech disadvantages was their lack of C-Level executives. It was difficult to convince big business heads to come to Salt Lake City and live in Utah. This is not the case anymore as Salt Lake City is becoming more attractive and bringing in more C-Level executives. Another aspect that was brought up by Dinesh Patel was that many entrepreneurs in Utah are content with quitting after selling a company for $5 to $10 million, whereas in Silicon Valley, entrepreneurs will sell their company and move on to their next venture.