Alison Vercruysse has experimented with different sources of funding for her San Francisco-based organic granola company, 18Rabbits since its founding in 2008.
Initially, Vercruysse funded her venture with help from her friends and family. She later pitched her idea to to several angel groups, even some who primarily invested in food ventures — but it took her several years for her to tap into their capital.
She met one of her biggest investors by chance. While eating at a restaurant in New York City’s SoHo area, Vercruysse struck up a conversation with a stranger next to her, who happened to find her granola venture interesting. He agreed to invest in 18Rabbits on the spot.
Vercruysse kept thinking there must be a more receptive audience than the one she found through traditional angel rounds. So she recently decided to pursue “crowdfunding,”a growing practice by which startups can solicit funds from large numbers of contributors online.
In search of equity-investments from crowds of investors, Vercruysse approached CircleUp, a platform connecting businesses to accredited investors. The San Francisco-based startup focuses specifically on funding consumer products businesses, and only features companies it considers to have high-growth potential.
In approximately seven weeks, 18Rabbits raised $500,000 from 39 investors.
Vercruysse plans to seek later rounds of funds through CircleUp. “It took me years to accumulate that kind of network and those contacts before [crowdfunding],” she said.
Vercruysse is one of several entrepreneurs raising funds for consumer products via crowdfunding. Kim Walls, chief executive of Episencial, a Los Angeles-based baby skincare company, also found crowdfunding to be a more effective method of raising capital — her company closed a $500,000 in two weeks on CircleUp.
Prior to crowdfunding, Walls had bootstrapped her company with funds from previous tech jobs. After asking for investments from friends and family, and gaining limited funding from a couple of angel groups, she felt crowdfunding might better connect her with her clientele, who she thought might be more compelled to fund her venture.
“Our consumers are women. They are very active in the social space, and where social media intersects with fundraising,” Walls said. “The fact that women are more social and spending money on consumer products, and more inclined to support other women [makes crowdfunding] a fantastic platform which didn’t exist before.”
Consumer products may lend themselves better to crowdfunding investments instead of traditional venture capitalists because “very few VCs actively invest in the consumer products space,” said Sharon Vosmek, chief executive of Astia, a San Francisco-based non-profit helping women-led high-growth ventures which often partners with CircleUp.
She added that crowdfunding could also help women entrepreneurs in particular — many of whom develop consumer products — who might not have angel investors in their personal networks. “Men and women are still in separate business networks,” Vosmek said, explaining that traditional angel investors often associate in exclusive circles. A crowdfunding platform, however, allows an entrepreneur to “reach angels, regardless of [your] own personal relationships.
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