Earlier this year, equity-based crowdfunding website CircleUp completed a major financing round, having raised $14 million from venture capital firm Canaan Partners. Now, the San Francisco startup is beefing up its roster of veteran advisors and investors with the addition of Honest Tea co-founder and Yale School of Management professor Barry Nalebuff, who will lead one of its new “Circle” funds.
“We saw a need for investors to invest alongside very experienced consumer products investors and Barry is somebody we had been in touch with for years,” says CircleUp co-founder and COO Rory Eakin. “He has a phenomenal background, and we’re really excited to partner with him on this product.”
Given his background with Honest Tea and his investments in a number of different beverage companies, including Q Drinks and Kombucha Brooklyn, Nalebuff’s will unsurprisingly focus his attention on food and beverage upstarts.
“Until now, there hasn’t been a good platform for people to do crowdfunding for investments,” Nalebuff told BevNET. “Many food and beverage startups depend on angels when they’re at an early stage. Their revenues are too small, and the business is certainly too risky for a venture group to come in.”
In April, CircleUp launched its Circles platform, which represent a set of diversified funds that offer angel investors an alternative to direct financial involvement in companies. Circle investors do not own any shares in a company; instead, they own a portion of the fund, which is managed by CircleUp.
These funds are available in two options: investor led, as is the case with Nalebuff’s Circle, and thematic, which will focus on investment opportunities in specific sectors like consumer electronics and gluten-free companies.
Nalebuff’s Circle, however, will differ from most other of the investor-led funds. His will allow investors to pick which specific companies to co-invest in on a deal-by-deal basis, as opposed to investing in all the companies of a Circle’s portfolio.
“I don’t want to take the view that somebody is forced to invest with me,” he explained. “I feel much more conservative when dealing with other people’s money than I do my own.”
As to what he looks for in potential investments, Nalebuff points to a few important areas of focus when conducting due diligence.
“I certainly care that the management team gets it,” he said. “That they have knowledge and passion and hopefully some experience too. I think the business has to be scalable so it’s not a job and it’s a real company. I’d like to understand why it is that somebody isn’t going to copy them and if they do get copied why they will succeed anyway. And of course I like the valuation to be reasonable.”
Another important criteria, though perhaps not as measurable, is the same one behind Nalebuff and his then-partner Seth Goldman’s venture to start Honest Tea back in 1998, that of social responsibility.
“I care that I’m proud of the product that the company is selling,” Nalebuff said. “If it were a hyper-caffeinated chewing gum, well, that might make money, but I’m not interested in being involved. I want something that helps make the world a better place.”