College accreditation and government regulation fail students and entrepreneurs

By Jason Stoffer, Maveron Partner

(Syndicated from PandoDailyStudents)

In 2009, I flew to Washington DC to meet Paul Freedman, an audacious young entrepreneur building what he hoped would be the world’s best community college.

As the son of UC-Berkeley professors, Paul wanted to give the higher risk students who typically attend community college the same educational opportunities he himself had accessed. He envisioned a school that provides individualized student support, gives students the skill set to transfer to the 4-year school of their dreams and incorporates the latest innovations in education technology. We invested in Paul’s company, Altius Education, which aimed to realize Paul’s dream through Ivy Bridge College (IBC), a partnership he launched with Tiffin University, a strong regional school in Ohio.

Since then, Ivy Bridge has changed the lives of thousands of students. Within three years of enrolling at IBC, 64 percent of IBC students graduate or transfer, a rate at least 50 percent better than the national average for other 2-year schools, according to industry-standard benchmarks published by CollegeMeasures and Complete College America.

IBC students have gone on to study at 4-year schools including USC, Penn State, Texas A&M, Pepperdine and Ohio State. We also built a competency-based learning platform called Helix, which uses assessment to understand what a student knows and then serves up course material to fill in the gaps. EDUCAUSE and The Gates Foundation awarded us a Next Generation Learning Challenge grant, to further develop the platform’s features.

In 2010, based on Ivy Bridge’s track record of helping a high-risk student body succeed in their goals, we became more public in our desire to spin out IBC into a separate stand-alone institution. We hoped to parlay our early success into building the most innovative community college in America.

As we began to apply for the necessary approvals, the regulators at the Higher Learning Commission (HLC), the body that regulates colleges in the Midwest, acted to stymie our plans. They forced us into a change of control process when all we wanted was approval for a branch campus in California. In non-regulatory parlance, that means they created additional layers and processes to achieve independent accreditation, in a clear effort to prevent us from ever becoming a standalone university. The regulator’s hostility came to a head in late July, when HLC ordered the Ivy Bridge program to be terminated by mid-October.

In every industry, new entrants, funded by private capital, drive innovation and shake up existing markets. General Motors never could have created Tesla and Motorola couldn’t invent the iPhone. In post-secondary education, new for-profit entrants into the system are just not allowed. Since 2010, HLC has only approved candidacy for accreditation of a single for-profit school that has been started in the past decade – Rocky Vista University. At the same time, it has placed two of the biggest for-profit education organizations in the country, University of Phoenix and Bridgepoint, under regulatory sanctions.

We wanted to make sweeping changes to how colleges are run, changes that would rock the existing system to its core.

These include:

  • A $5,000 degree program
  • A competency-based instructional approach where degrees are granted based on achievement of learning outcomes rather than time in class
  • Separation of instructors and graders, so instructors are vested in helping the students vs. having to both help them and grade them
  • Compensation of instructors based on how well they affect student outcomes

The regulators represent legacy constituents that appear ready to do anything to prevent these changes. These hidebound incumbents want to maintain their ability to teach students the same way they did a hundred years ago. This is at a time when new technologies and approaches can truly improve how students learn.

Investors are excited about the potential: $600 million in venture capital was invested in education in 2012, five times more than 2002. However, this investment is largely going into technology tools, services and supplemental education. Regulators have stifled those investment dollars from going to where they could have the most impact – reinventing the core of what happens in the K12 and college classroom.

These regulatory actions are clinging to outdated practices and causing the US post-secondary system to fall behind global competitors. In 1995, the U.S. ranked 2nd after New Zealand in terms of the higher education graduation rate among 19 OECD countries with comparable data. In 2010, its ranking dropped to 13th among 25 countries with comparable data.

Our society is in a place where our government and the regulators they enable are counting on incumbent non-profit schools to transform education in the US. New schools cannot be started because for-profits are collectively demonized as capricious actors who do not have the students’ best interest in mind.

I’d ask where we would be as a society if the legacy AT&T monopoly was in charge of mobile innovation and bringing the Internet to the masses or if agriculture was viewed as a vital national interest like in Cuba and we could only get bread at government stores?

We are allowing the government to behave this way in post-secondary education and, in doing so, delivering a poor legacy product to students while our international competitors are leaving us in the dust.

Decide.com Acquired by eBay

By Dan Levitan, Co-Founder and Partner at Maveron

Mike Fridgen, CEO of Decide.com

Mike Fridgen, CEO of Decide.com

On the heels of Maveron portfolio company SeatMe being acquired by Yelp, we’d like to congratulate another Maveron portfolio company Decide.com on the news today that the company has been acquired by eBay. When we met Mike Fridgen and Oren Etzioni in 2011, we were already impressed by their track record of value creation at Farecast. Moreover, we were immediately impressed by their passion to build an exceptional team, laser-focused on helping consumers navigate the confusing world of prices for consumer products.

Throughout the Maveron portfolio, we’ve consistently seen the power of a standout team, a big market, and a differentiated approach to building a brand change the way we engage in daily life—how we shop for our kids (zulily); pursue education (General Assembly); protect our pets (Trupanion); and make sure our parents and grandparents are safe (Lively). In fact, Maveron’s first investment ever was eBay in 1998, which used those three elements to reinvent marketplaces for used goods. In that spirit of the pursuit of excellence, we enjoyed being part of Decide.com’s journey as Mike, Oren and their team obsessively focused on helping consumers shop with no regrets. We agree with the folks from San Jose- the Decide Team will make a significant contribution in helping eBay create an even better shopping experience for their buyers and sellers. It will be exciting to watch eBay develop more of a Seattle presence.

While other VCs have turned away from consumer brands recently in favor of the enterprise, we remain more certain than ever around Maveron’s core belief: great entrepreneurs can use technology to disrupt markets and build great consumer brands more thoughtfully and inexpensively than ever before. We are committed and excited to find and partner early with the next wave of great entrepreneurs building the services, products, and platforms we soon won’t be able to live without.

We’d also like to thank Madrona for bringing us this opportunity. It was a pleasure to work with you Greg. We enjoyed this Seattle-based VC collaboration (working with Madrona and more recently Vulcan) and look forward to partnering on future deals.

Get comfortable with internal technology and big data

By Dan Levitan

Digital communications and social media have empowered consumers, whose voices can be heard loud and clear.

As has always been the case, the fate of a business is often determined by how well it generates consumer delight. However, these new platforms have provided consumers a bully pulpit like never before. Early stage companies able to react quickly to customer feedback are finding they are better suited to grow fast and outpace big, established businesses that are historically slower to move. We have seen the best of these early entrepreneurs pair an ability to foster, harness, and respond to consumer feedback with advanced technology and tools to get to product market fit and scale with far less capital than ever before.

We sat down with some of Maveron’s portfolio entrepreneurs including Jake Schwartz, co-founder and CEO of General Assembly, who have proven themselves particularly skilled at harnessing consumer engagement to quickly grow brands. These pieces of insight provide a decent playbook for any entrepreneur looking to scale a business.

Here’s what Schwartz has to say about big data:

“Without data, you don’t really have a consumer business in today’s age,” says Schwartz, who’s company provides working space and education to entrepreneurs. Now is the ideal time to start a consumer business, he says, because traditional barriers of entry have completely broken down. This open terrain gives entrepreneurs an opportunity to aggressively innovate around product, distribution, and marketing to build brands that resonate with consumers — and, most importantly, to mix the art of brand building with the science of data. Schwartz encourages entrepreneurs to become comfortable with their own internal technology and internal data, and use both as the central tool in making decisions.

Three Tips for Brand Building in the Digital Age

By Jane Park, founder and CEO of Julep

JulepBlogImage

Many of today’s marketers are like a bad date at a dance. Sure, they are dancing with you right now, but they keep looking over your shoulder to see if there is anyone hotter. In the new digital world, more than ever before, marketers need to be hyper focused on existing customers (the person you are dancing with right now), which can result in a beautifully choreographed word of mouth phenomenon and brand loyalty.

 

We’ve watched traditional beauty brands spend millions of dollars developing and marketing new products without ever truly getting to know their customers. John Wanamaker once quipped, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”  To me, it’s clear that any dollar that is spent without an intimate knowledge of your customers is wasted.  What’s exciting is that today, startups don’t have to spend much to gather information about their customers and engage directly with them through social media.  Building an enduring and valuable consumer brand always starts with a genuine conversation, and it’s easier than ever to reach customers this way. Here are three things we’ve incorporated into our playbook for using social media to build a brand in the digital age.

1.     Crowdsource Product Development

Now more than ever, customers can help determine your next best selling product. Companies have always relied on customer feedback to help develop products, but now, you can instantly use social media as a 24X7 focus group to solicit ideas from customers and make them part of the product development process. Using social media to help crowdsource products has helped us produce more products in an 18-month span than any other beauty company. If you’re ready to actively listen and respond to customers, they will happily tell you what they want. As you proactively feed their wish lists into the development process, you’ll not only create proprietary products faster than the competition that people actually want to buy, but you’ll also build a loyal and enduring customer base.

 2.     “Dance” with Customers Every Day

You can’t just talk to customers when you want to have a conversation; you have to be committed to constantly engaging in authentic two-way conversations in order to create previously impossible connections. Not only will this give you access to customers’ feedback and the opportunity to email them with new offers, but it will also create opportunities for you to respond to their needs as they are discovering them.  I appreciate any opportunity to anticipate and respond to our customers needs, bringing them closer into the circle of intimacy.  But you can’t fake authenticity – you have to always be there, in good times and especially in the bad.  I go onto our Julep Facebook page regularly to connect directly to the women who are making an effort to connect with us.  I have sent “thank you’s” and apologies from my personal email account.  The technical mechanics of social media don’t change the dynamics of an engaging in two way conversations – talking is talking regardless of the vehicle.

3.     Don’t Rely on Marketing Titles to Get the Job Done

At Julep, no one has a marketing title because I want everyone thinking about a strategy for satisfying existing customers, acquiring new customers and building products with longevity, which is what marketing is all about. In the digital age of marketing, we want the entire company to be inspired to learn more about customers. Whether it’s engaging personally in the conversations taking place on Facebook, following the excitement on Pinterest, or taking the time to research personal ways to surprise and delight our most loyal customers, we want every employee thinking of new ideas to harness the power of data to find, target, and delight customers in unprecedented ways.

 

Jane Park is the CEO and founder of Julep. Jane and her team have used social media to grow Julep into the fastest growing beauty brand in the U.S. You can follow Jane on Twitter @janeparkjulep

MOOCs: We’ve seen this movie before and it didn’t have a happy ending – PandoDaily

By Jason Stoffer, Maveron Partner

 

pandodailyimagesThe recent $43 million round of financing for Coursera fuels the growing hype, much of which has been sparked by VCs and industry pundits, around the “death” of traditional education. In theory, massively open online course (MOOC) platforms like Coursera should radically reduce educational costs, give students universal access to the best teachers, and enable better student outcomes. Results to date, however, have not yet lived up to the promise. Completion rates remain low, and there are significant obstacles in the way of MOOCs fully integrating into K-12 and post-secondary education.

Distance education has a 100-year history and has yet to live up to the hype. In fact, the “MOOC movie” has been played before – with the great promise of education delivered through radio and TV. From 1910-1920, the federal government granted 202 radio broadcasting licenses to educational institutions for course credits, yet only one remained by 1940.Then, in 1948, the University of Iowa offered the first correspondence course by TV. Dozens of schools followed, but with limited success.

So how can we make the sequel — the emerging MOOC — more successful than its predecessors? The deck is stacked in the MOOCs’ favor; the Internet, with its global reach and ability to foster community, is a superior platform to TV or radio to deliver and engage students in course content. And there is great value in easy access to content from some of the world’s best practitioners and professors.

Where MOOCs have seen early success is with highly self-motivated students. Open courses offer a brilliant young software engineer or mathematician in a poor village in the developing world the ability to be measured side by side with Stanford students. So that young prodigy on a MOOC is now discoverable by big employers like IBM or Google. These employers are beginning to buy into the promise – with Udacity featuring more than 400 global employers interested in employing their students.

That use case is narrow, though. Only a small slice of students are self-motivated enough to sit alone at home and complete a course in a self-directed way. Completion rates for MOOCS often range from 3 to 5 percent. These low passage rates cannot be compared apples to apples with traditional schools, given the cost of signing up for MOOC class is zero. Even when students pay tuition, MOOCs have lagged in retention and, just recently, San Jose State ended a pilot with Udacity due to extremely low pass rates.

For MOOCs to be more broadly applicable, three things need to happen:

First, best of breed MOOC content should be integrated into existing K-12 and college courses. Recent research from the US Department of Education shows that blended learning leads to stronger results than 100 percent in-person or online environments. To do this requires “flipping the classroom” — with students watching MOOC lectures at home and engaging in more experiential and team-based work in class. However, training teachers to integrate some standardized content and flip the classroom is a huge institutional challenge.

Second, for those students taking MOOCs on a standalone basis. MOOCs need to focus on ways to better replicate the campus environment. Fostering more engagement may take the form of physical meetups, where students connect and study together. These are happening today, but only sporadically. In my hometown of Seattle, there are only two Coursera meet-ups in the next two weeks.  Another approach to deeper engagement is through building more robust collaboration tools into the platform. These might take the form of streaming video, better group and team driven activities within courses or creating immersive online game-like simulations.

Finally, MOOCs can’t lose sight of the fact that many people on the platform are there to learn skills of value to real world employers. Employers may have been content to hire raw college graduates in the past, but today they want workers prepared for the modern workforce. One course that does this is Steve Blank’s Lean LaunchPad, which teaches potential employees about the customer development process and launching a product. But courses like this teach hard skills in a lecture format where learning is typically self-driven. These courses don’t teach employees how to work in teams, communicate upwards and downwards, take initiative and drive decisions with incomplete data.

These workforce skills can be taught using courses that include experiential learning replicating real life employment situations. Novo Ed, a new platform spun out from Stanford, is designed specifically for team projects and collaboration (disclosure: Maveron is a seed investor in NovoEd). In courses such as “Design Thinking Action Lab,” students are grouped together with others with similar skill levels and motivation and work together in projects. We’ll see more team-based courses like this across platforms and we’ll likely see game-like simulations introduced as well that replicate real world situations.

We need to collectively stop thinking about education technology and its latest incarnation, MOOCs, as the holy-grail in solving our nation’s education woes. Instead, we should accept MOOCs for what they are – a vehicle to get great content into learners’ hands but one that is nowhere close to maturing into its full potential.

Today’s MOOCs are at the beginning of a long and exciting journey to change education but one that will need to involve better online courses, more blended learning and destroying the “not invented here” complex that prevents professors and universities from using best of breed content created elsewhere.

 

Article originally posted on PandoDaily. Also, connect with Jason Stoffer on Twitter or LinkedIn.

SeatMe Acquired by Yelp

By David Wu

SeatmeCongratulations to the SeatMe team on the news today that the company has been acquired by Yelp. Like many entrepreneurial journeys, SeatMe started as an idea jotted on a notes app in early February of 2011. The idea was to make restaurant reservations better — both for members of the hungry public and members of the hard-working restaurant community. I loved the concept when I first met Alexander Kvamme in 2011 and enjoyed getting to know him and the team in a meaningful way, which led to Maveron investing in SeatMe’s Series A in April 2012. Alexander and his team have done an amazing job working day and night to help local restaurants and bars manage their restaurants, while also allowing customers to book reservations online. Now with SeatMe’s solution, more local restaurants and bars can provide an easy way for customers to book online reservations, enhancing the consumer experience for those who discover a great local business on Yelp.

Whether it’s getting to know founders earlier through our seed program or through core investments in startups during Series A, we are committed to passionate entrepreneurs like Alexander who are obsessively driven and strive for perfection. Congratulations to the team!

Connect with David on Twitter or on LinkedIn. Or welcome SeatMe to the @Yelp community on Twitter!

 

Tred Changes Car Shopping with Home Delivery Test Drives

By Jason Stoffer, Maveron partner

Tred Home Page

Congratulations to Grant Feek and the Tred (www.tred.com) team on their official launch and unique approach to simplifying new car purchases with the first home delivery test drive and no haggle buying service. I’m buying a car later this year and can’t wait to have the cars come to my house on the weekend, where my wife and I can drive them without having to bring our two little kids to the dealer.

 

I first met Grant as a Techstars mentor. I was immediately struck by his absolute obsession with changing the experience many consumers dread – the act of buying a car. The best consumer businesses are driven by extraordinarily motivated founders like Grant, entrepreneurs who are insanely driven to delight the end consumer.

 

In the automotive industry, you have to work within the confines of a complex distribution system and satisfy the needs of automakers and dealers, in addition to end consumers. In building the product and navigating toward launch, Grant has successfully navigated these difficult waters. Automakers love TRED as they are able to get more customers behind the wheel of their vehicles. Dealers love Tred’s conversion rates from test drives to sales are 40%, and because they’re converting more than 80% of shoppers to purchases. That’s much higher conversion and much lower leakage than other lead generators.  Consumers care because Tred cuts the time in a dealership substantially and eliminates all the pressures of making car buying decisions on the showroom floor by bringing cars directly to where busy families and professionals are comfortable — on their own terms, during their schedule, and at the best possible price.

 

 

As we continue to aggressively focus on planting more seed investments in game-changing ideas, we look forward to supporting Grant whenever and wherever needed in the early stages of his journey toward building a successful consumer business.

 

Five Tips for College Students to Get the Job of Their Dreams

Students

High school graduates take note: when you graduate college in four years you will face one of two paths. Depending on the choices you make, you may have multiple high paying job offers and an exciting career in your grasp. Or you may be moving back in with mom and dad as  of the 42% of college graduates from the past two years working in a job that doesn’t require a college degree.

What path you take is up to you. As a venture capitalist, I see dozens of companies hiring workers with varying degrees of experience and, when I speak to CEOs about what they want in a college graduate, they all have a few common words of wisdom.

1. Think About Your Career Early. College is a time for exploration but too many college students fly blind. Companies want students with a tangible set of skills. But many students don’t know which courses of study lead to professions with job openings, good placement rates, and good wage levels.

2. Know Which Fields of Study Lead to High Potential Career Paths. Every company in our portfolio needs great software developers, great designers and a cadre of analysts who understand how to derive insight from value. You . Don’t need to choose these fields if they do not inspire you but know you are a leg up career-wise if you do.

3. Experience is as (Or More) Important Than the Classroom. Employers used to hire smart graduates and train them on the job. Today, they want employees who are ready to go on day one. Explore career options throughout college by interning at companies in potential career areas of interest. Take advantage of your college’s experiential curriculum and any courses or programs that enable you to get real exposure to the workplace.

4. Don’t Count on Grad School to Figure it Out. Two years of grad school may cost $30,000 to over $100,000 and offers a dubious return on investment. Outside of specialized fields like medicine and law, you can often avoid this investment by being more deliberate in career planning during your undergraduate years.
5. Think about augmenting your college experience with other vocational training. Businesses like Lynda.com, General Assembly, Codeacademy and CreativeLive offer the ability to learn practical skills that may not be available in the college classroom. You can major in French Literature while teaching yourself skills as wide ranging as photography, computer programming and data science through these alternative education providers.

If high schools grads could take one thing away from this article, I’d want them to walk away knowing that a college degree is not a ticket to financial prosperity and a career of your dreams. The only way to make that happen is to be deliberate in choosing a path and taking your destiny into your own hands.

JasonStoffer

By Jason Stoffer

PandoDaily: Data, heart, virality, and leadership: Five tips for today’s entrepreneurial journey

By Dan Levitan

Syndicated From PandoDaily: http://pandodaily.com/2013/05/22/data-heart-virality-and-leadership-five-tips-for-todays-entrepreneurial-journey/

Digital communications and social media have empowered consumers, whose voices can be heard loud and clear.

As has always been the case, the fate of a business is often determined by how well it generates consumer delight. However, these new platforms have provided consumers a bully pulpit like never before. Early stage companies able to react quickly to customer feedback are finding they are better suited to grow fast and outpace big, established businesses that are historically slower to move. We have seen the best of these early entrepreneurs pair an ability to foster, harness, and respond to consumer feedback with advanced technology and tools to get to product market fit and scale with far less capital than ever before.

Recently we sat down with some of Maveron’s portfolio entrepreneurs who have proven themselves particularly skilled at harnessing consumer engagement to quickly grow brands. These pieces of insight, taken together, provide a decent playbook for any entrepreneur looking to scale a business.

1. Get comfortable with internal technology and big data.

“Without data, you don’t really have a consumer business in today’s age,” says Jake Schwartz, co-founder and CEO of General Assembly, which provides working space and education to entrepreneurs. Now is the ideal time to start a consumer business, he says, because traditional barriers of entry have completely broken down. This open terrain gives entrepreneurs an opportunity to aggressively innovate around product, distribution, and marketing to build brands that resonate with consumers — and, most importantly, to mix the art of brand building with the science of data. Schwartz encourages entrepreneurs to become comfortable with their own internal technology and internal data, and use both as the central tool in making decisions.

2. Never run out of cash, and never run out of heart.

Two things that can lead to certain death for any startup are lack of cash and lack of heart, says startup veteran and PayNearMe CEO, Danny Shader. “Raise the money before you need it! Given the choice between suffering a little more dilution because you didn’t wait until the last possible value creation moment and running out of dough, I’d opt for the former and try to make sure we have at least a year’s cash in the bank before we raise money,” adding that entrepreneurs strapped for cash might possibly take terms they don’t like. When working with investors, Shader also suggests that entrepreneurs work with VC firms that “have your back and add value that goes beyond money.”

3. Create a visceral emotional brand.

The difference between a cool, new product and a big, lasting brand is outsized consumer passion, the bit of magic that makes someone love your product so much that it becomes a meaningful part of their lives and they can’t help but tell all their friends. The intersection between brand building and technology has ignited a rise in high-end online retailers over the past five years, but it takes more than an e-commerce website and social media profile to connect with consumers. Michael Preysman, founder and CEO of Everlane says, “The most important piece to building a brand is to have a very strong point of view that doesn’t exist in the market today, and that people are receptive to.” His company, Everlane, offers luxury clothing online without the added markups from manufacturers, retailers, or middlemen. If people love your products they’ll love your company.

4. The best leaders think about others before themselves.

Leaders set the culture of a company, including an ethos of thinking about others before themselves and what’s best for a business before an individual. But in the fast-paced early days of a company, balancing the many requirements of the company and team members, both professionally and personally, is often among a CEO’s hardest jobs. Iggy Fanlo, co-founder and CEO of Lively, a health and wellness startup that is helping the aging population stay connected with family and friends, says that entrepreneurs need to remember that “people don’t need a lot of you some of the time, they need a little of you all the time.”

5. Passion, then more passion, but it works both ways.

Finally, a word from me. In my 30 years working with consumer companies, I’ve worked with many highly respected entrepreneurs who have created enduring consumer businesses. During that time, whether it was Starbucks, eBay, or hopefully the next billion-dollar brand, zulily, the one commonality is passion. It sounds so simple but it isn’t. An entrepreneur and their team have to have passion and driven by a vision to seamlessly integrate their product or service into the every day lives of consumers. To do that, however, the team has to instill a sense of passion into their customers and that only happens when you obsessively focus on exceeding their expectations.

Equity Crowdfunding is the 21st Century Investment Banker

By Dan Levitan, co-founder of Maveron

 

Dan Levitan, co-founder MaveronConsidered one of the greatest investors of all time, Peter Lynch had a simple investment principle - “invest in what you know.” This straightforward investment philosophy helped him find good undervalued consumer-oriented stocks and achieve an annual average return of 29 percent while managing the Fidelity Magellan Fund from 1977 to 1990, which grew from $20 million to $14 billion during that time.

 

We appreciate Lynch’s simple, yet adaptive, investment style, which focused on the basics of good management, exceptional businesses, and quality consumer products. However, in today’s Sarbanes-Oxley world, for lots of logical reasons, investors are increasingly unable to realize this type of return or get in early enough to see that magnitude of returns. For example, a single share of Starbucks bought at the 1992 IPO is now worth almost 100x its original price. Even if one invested at Facebook’s public nadir of $50 billion in value, and it reaches $350 billion market capitalization, it would only be a 7x return.

 

The JOBS Act has relieved some of the restrictions that were put into place by the Sarbanes-Oxley Act, with the most notable innovation being crowdfunding. As the investment banker who had the privilege to take storied retail brands like Starbucks public, I see the crowdfunding marketplace improving upon the investment banking franchises of yesteryear by allowing retail investors to once again gain early access to high-risk growth investment opportunities.

 

Providing that opportunity early to investors inspired us to invest in CircleUp, a great equity-based crowdfunding site focused on consumer and retail.  In our minds,  CircleUp’s equity-based crowdfunding approach will become the 21st century investment banker.

 

Rather than shying away from what some consider to be competition, we were the first institutional investors to back Ryan Caldbeck and Rory Eakin, the co-founders of CircleUp, and embrace the value that crowdfunding can bring to early-stage startups. Two years later, CircleUp is on its way to making their vision a reality with a game-changing approach and marketplace that matches promising consumer companies with the right investors. This week, the company successfully closed new funding of $7.5 million led by Union Square Ventures and Google Ventures, with participation from my firm, Maveron. The financing marks the next step for Caldbeck and Eakin in making CircleUp the investment platform for the next generation of consumer brands. Early evidence shows that there is a good chance the next Chobani, Vitamin Water, or Under Armor will start by raising capital on CircleUp.

 

In his Forbes article on the one-year old “Jumpstart Our Business Startups” (JOBS) Act, Caldbeck says “Equity crowd funding is the most disruptive thing to happen to the financial services industry in a very long time.” As a former investor at consumer private equity funds, Ryan saw a hole in the market – early stage consumer businesses with great potential struggling to find capital and not a head on fit with normalized fundraising models paired with investors who couldn’t gain early access to these high quality businesses.

 

I couldn’t agree more. Not only is crowdfunding great for investors, but it’s even better for entrepreneurs, opening up untraditional sources of capital and creating a network previously unavailable to early stage companies. While we know as well as any the value great institutional investors can bring to the table, we also know that institutional capital is not right for every type or stage of promising business. Raising capital from individuals rather than institutions, can provide entrepreneurs with benefits such as more internal control, or more flexible liquidity timelines. Unlike investment banking, crowdfunding gives independent investors complete transparency and visibility into where other smart investors, frequently their peers, are investing. Rather than a junior banker calling dozens of institutional clients and retail investors with research and analysis on potential investment opportunities, CircleUp offers individual investors direct access to opportunities. It provides a format where they can find the relevant information, receive sample products, and connect directly with the company and management team. This new approach allows influential private investors to speak with their pocketbooks, a signal that is vastly superior to the investment banking research analyst reports in today’s hyper connected world.

 

Lets face it, crowdfunding is the new investment banker and, in many ways, a new important player in the venture capital ecosystem. Maveron has been one of the few VC firms that have made bets on equity crowdfunding.  Just like all our investments, we’re looking for incredible entrepreneurs like Ryan and Rory and for businesses that are ready to disrupt industries, displace incumbents, and establish market leadership. We love the idea of investing behind disruptive companies like CircleUp, and relish in the fact they might end up being our competition for certain investments. With crowdfunding, more entrepreneurs with the next big idea will access capital and that’s a good thing for the entire entrepreneurial ecosystem.