Investing in start-up companies, up-and-coming consumer goods brands, and private equity has traditionally been the exclusive domain of institutional investors and hedge funds.
Now, a new association between online investment marketplace Covestor, and equity-based crowdfunding platform CircleUp, is bringing those capabilities to individual investors.
This product offering will allow more individuals to invest like private equity firms.
You can now invest seamlessly alongside early-stage investors in retail and consumer goods.
In recent years, many successful companies have received early rounds of funding through crowdfunding and angel investing networks, much like CircleUp — and we’re happy to share that this private equity investing ability is now available through Covestor Qualified.
What is private equity?
Private equity investing allows individuals to get in on the ground floor with innovative companies that can disrupt their industries.
Investors typically need many millions of dollars to participate in private equity, but through this new product offering, Covestor and CircleUp aim to provide those opportunities to even more more individual investors.
Increasingly, non-traditional investments like private equity are being used to diversify investment portfolios.
Shares of private companies are not traded on public stock exchanges and are called “illiquid” because they cannot be easily traded or sold. Although private equity investments can be “illiquid”, by investing in them investors may potentially improve the risk-adjusted performance of their aggregate portfolio.
A new investing opportunity
Covestor has always allowed clients to invest in actively managed portfolios, and passive portfolios, that provide exposure to traditional asset classes like stocks and bonds.
Covestor Qualified clients can now also get access to these private-equity portfolios managed by entrepreneurs and venture investors, called Circles, from CircleUp.
Circles are separately managed funds that give individuals a way to invest in private opportunities not available in the public markets. They can provide diversification for investors with lower minimums, and bring together investors and companies that otherwise may not have connected.
CircleUp and Covestor believe that true diversification should involve more than only publicly listed investments, and we are excited to bring this type of online investing to our platform.
Circles vs. traditional private equity investing
Circles allow investors to diversify their private equity exposure and lower risk, rather than investing in just one company.
CircleUp specializes in early-stage, consumer and retail companies that are growing at a high rate — the companies that have raised funds through CircleUp have posted 80% average post-investment revenue growth on a year-over-year basis from April 2012 through March 2014. Investors in Circles own preferred stock of private companies and are entitled to a percentage of earnings if the company is sold, goes public, or pays a dividend.
CircleUp conducts due diligence on private companies before including them on its platform. CircleUp also continues to support companies after it has helped facilitate investments in them, in part through third-party partnerships with large public companies.
It gets even better: Circles have zero management fees.
How it works
Circles are run by entrepreneurs and venture investors, as well as private equity and venture capital firms. So, investors in the Circles are able to leverage the CircleUp team’s experience evaluating and investing in early-stage consumer companies.
Covestor’s Investment Management Team, under the leadership of Chief Investment Officer Sanjoy Ghosh, have selected five Circles we are making available to Covestor Qualified clients at this time:
1) Brad Barnhorn Consumer Circle
Building on 25 years of operating and investing experience in consumer, Brad’s fund will focus on: healthy food & beverage, healthy living space, and targeted investments in other dynamic growth opportunities.
2) Kevin Park Consumer Circle
Kevin will focus on companies that sell clever, exciting, and disruptive products in > $1 billion industries, with a focus on: seed-stage companies, food, apparel, and packaged goods.
3) Pat Finn Consumer Circle
Patrick’s investments will focus on high growth companies with strong, sustainable gross margins, primarily in: healthy food & beverage, niche apparel, and natural & organic personal care categories.
4) B Corp Circle
B Corps use the power of their business to solve social and environmental problems, and are certified by the nonprofit B Lab to meet rigorous standards, including social and environmental performance, accountability and transparency.
5) Silas Capital
A venture and growth equity firm that invests in the next generation of consumer brands. As former entrepreneurs they’re passionate about building exceptional companies.
At Covestor, we’re on a mission to simplify online portfolio management.
Knowing that your comprehensive wealth management strategy often requires diversification, we’re excited to make yet another asset class available through Covestor’s transparent online investment marketplace.
Learn how you can start investing in Circles through Covestor.
To begin investing in Circles through a Covestor Qualified account of your own, get in touch with our team via email at clientservices@interactiveadvisors.com.
DISCLAIMER: CircleUp and Covestor are not affiliated entities. Accredited Individual Investor Note: Investments resulting from introductions by Covestor may involve a high degree of risk. Covestor has not evaluated or endorsed the merits of any investment opportunities presented through its services and makes no recommendations regarding the appropriateness of particular investment opportunities for particular investors. Each potential investor may rely on his, her or its own judgment regarding the merits of a particular investment opportunity. Participating in CircleUp is limited to investors who qualify as “accredited investors” under Regulation D of the general rules and regulations under the Securities Act of 1933 of the Securities and Exchange Commission AND who have such knowledge and experience in financial business matters that they are capable of evaluating the merits and risks of prospective investments.
Securities sold through private placements are not publicly traded and are intended for investors who do not have a need for a liquid investment. There can be no assurance the valuation is accurate or in agreement with the market or industry valuations. Additionally, investors may receive restricted stock that may be subject to holding period requirements. Companies seeking private placement investments tend to be in earlier stages of development and have not yet been fully tested in the public marketplace. Investing in private placements requires high risk tolerance, low liquidity concerns, and long-term commitments. Investors must be able to afford to lose their entire investment. Past performance is no guarantee of future results.
