CircleUp Raises $200 Million To Woo Consumer Retail Startups With A VC Alternative: Loans
Summary
While venture capital funds look to take equity in hot consumer brands in exchange for fueling their growth, a cottage industry is forming around businesses that can offer similar benefits without giving up so much ownership. CircleUp announced on Thursday that its credit division had secured more than $200 million in additional financing to back startups, with the money coming from investors including Michigan’s state pension fund and Pacific Life. While the stereotypical startup might raise money for hiring, investment in product or to open new offices, the companies CircleUp is targeting have more basic needs. In the retail and consumer packaged goods categories, floating the cost of inventory, or receiving deferred payment from bigger partners like a Walmart, can put companies in a crunch, forcing them to slow growth plans to pay for operations, says Asher Hochberg, managing director of CircleUp’s credit unit. “They face questions like, ‘How do I keep the lights on for the next year?’ Credit helps lower the dilution compared to if they raised equity.” Initially a marketplace that used data to identify fast-growing consumer brands and connect them with private equity and other investors, CircleUp raised a $125 million fund two years ago to make equity investments in companies directly.