CircleUp takes data-driven approach to startup investment
- Venture capital fund CircleUp Growth Partners is using technology in the form of machine learning platform Helio to increase the chance of picking successful early-stage consumer goods and retail startups to invest in, according to Project NOSH.
- An array of data-driven insights based on Helio's analytics and algorithms allows CircleUp to efficiently whittle down thousands of investment choices to what it anticipates will be around 18 promising startups a year. Ben Lee, managing director of CircleUp Funds, told FoodNavigator-USA that using Helio technology enables the company to assess more investment opportunities “than could ever be evaluated manually.”
- Propelling the initiative is CircleUp’s latest round of $125 million in venture capital funding, which was oversubscribed, demonstrating the overwhelming interest in the firm’s technology-driven investment model. Among the investors are investment company Temasek, Euclidean Capital, Annie’s Homegrown co-founder and former CEO John Foraker, Plum Organics founder Gigi Lee Chang, and Bumble and bumble co-founders Tevya and Deva Finger.
CircleUp’s stated mission on its website is: “Help entrepreneurs thrive by giving them the capital and resources they need.” The company reports that there are 28 million small businesses in the U.S. that are either too small to garner the interest of private equity firms or not suitable for traditional bank loans. So CircleUp is stepping in, applying AI machine learning processes to assess the growth and investment potential of startups across a myriad of sectors in order to then connect the most promising upstarts with capital markets.
The Helio AI tool collects and analyzes billions of data points — including retailer listings, social media reviews, data from CircleUp partner Nielsen and proprietary information — from more than 1.2 million companies across North America. Advanced analytics and algorithms are used to develop insights about brands, categories and geography, along with projected company performance.
This is a huge departure from the way decisions by CPG companies and investors historically have been made with deals “sourced and analyzed using time-consuming, manual processes riddled with human bias,” CircleUp co-founder and CEO Ryan Caldbeck wrote in a post on LinkedIn. “Investment decisions are often based on feeling and ‘gut’ rather than data and facts. Investors who want to invest in consumer and retail usually have to spend upwards of 75% of their time sourcing deals manually — this includes going to trade shows around the country to meet companies in-person.” The process is so hard and expensive for investors to find emerging consumer and retail companies, according to Caldbeck, that many don’t bother or give up looking.
CircleUp’s first two investments with this platform include female-focused supplement brand HUM and meat snack brand 4505. CircleUp Public Relations Director Kira McCroden told Project NOSH that 4505 was one of the top performing brands based on the Helio analysis of the meat snacks category. This shouldn’t come as too much of a surprise, given strong consumer and CPG interest in the high-growth meat snacks space. A recent study by research firm Technavio projects global meat snack sales will reach $9.47 billion in 2021, reflecting a 9.5% compound annual growth rate.
Initial funding by CircleUp is only the beginning of the relationship for brands it invests in. Startups also have an opportunity to use the Helio platform after the deals close to inform and guide decisions regarding potential product line or new channel expansion.
Since its founding in 2012, CircleUp has a history of connecting more than 250 startups with funding sources. The roster includes several up-and-coming food and beverage companies with recognizable brands — like Banza, Barnana, Caulipower, Halo Top and Miyoko’s Kitchen — many of which are filtering into mainstream grocery stores.
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