P&G Taps Crowdfunding Site to Scout for Startup Brands

For small companies selling consumer products such as makeup or snack food, a partnership with a big multinational company can mean the difference between obscurity and becoming a household name. How does a small brand get a behemoth’s attention?

CircleUp, a crowdfunding website that connects startup consumer brands with investors, wants to be part of the answer. Today, the company announced a partnership with Procter & Gamble (PG) to get companies on CircleUp in front of P&G executives scouting for new brands. It made a similar deal with General Mills (GIS)last year.

Most companies on CircleUp have $1 million to $10 million in yearly sales and are trying to raise about $1 million from wealthy individual investors, says Chief Executive Ryan Caldbeck, a former private-equity investor. Since opening its doors last April, CircleUp has helped eight companies close funding deals. In addition to connecting young companies with investors, CircleUp wants to expose them to multinationals that could lead to partnerships or acquisitions, he says.

Because the site accepts only 2 percent of the companies that apply to raise money on its site, Caldbeck says CircleUp can act as a screen for big consumer products brands. At the very least, companies that raise money from CircleUp’s pool of sophisticated angel investors are worth keeping an eye on, says Andrew Backs, manager of new business creation at P&G. “If it’s a bad idea, then it’s just simply not going to get funded,” he says.

There’s no obligation for the big companies to invest in startups raising money on CircleUp, or for the smaller brands to work with them. But the partnership gets them in the same room: An “incubator day” with P&G executives in San Francisco is planned for March.

The alliance also helps big companies solve one of the problems inherent in being a big company: It becomes more difficult to create new ideas from within—a problem known as the innovator’s dilemma. Indeed, the author of that theory, Harvard’s Clayton Christensen, is one of CircleUp’s backers.

BusinessWeek.com