- Toronto-based Clearbanc recently announced it raised $300 million in funding include a $50 million investment led by Highland Capital and $250 million for a third fund
Toronto-based Clearbanc recently announced that it raised $300 million in funding including a $50 million investment led by Highland Capital with participation from Arcadia, iNovia and Emergence Capital. And Clearbanc also raised another $250 million from limited partners for its third fund. The $250 million third fund is five times the size of Clearbanc’s second fund.
What Clearbanc does is offer startups with an alternative to raising venture capital in the form of non-dilutive revenue-share agreements. And the company uses machine learning technology to make quick decisions around potential investments. One of the company’s goals is to back 2,000 companies by 2020.
According to TechCrunch, the company runs a campaign called the “20-Min Term Sheet” and it invests between $10,000 to $10 million in e-commerce startups with positive ad spends and positive unit economics. And Clearbanc charges 6% on its capital plus a portion of the revenue until 106% of the original investment is paid back.
“The 20-minute term sheet was our take on showing the market how fast we could get startups access to capital,” said Clearbanc co-founder and president Michele Romanow via TechCrunch. This saves venture firms and founders a lot of time.
So far, Clearbanc has invested in 791 online brands so far this year including Le Tote, UNTUCKit, Leesa Sleep, and Public Goods. And these investments have generated an average of $121 million in monthly revenue.
“(Founders) don’t need to go and pitch their life story,” added Clearbanc co-founder and CEO Andrew D’Souza via TechCrunch. “They don’t need to spend hours and hours on due diligence and they don’t need to get on a flight and meet VCs in person, we’ve automated all of that.”
The $50 million investment will be used for expanding into new verticals and to launch a venture partner program — which will provide the founders of its portfolio company access to experienced investors and operators. Atomic founder and managing partner Jack Abraham and Product Hunt founder Ryan Hoover will be supporting the new venture partner network.
And Clearbanc’s leadership team includes Charlie Feng (VP of Business Operations and co-founder), Tanay Delima (VP of Product and co-founder), and Ivan Gritsiniak (VP of Finance and co-founder). And the venture partners at Clearance include Gary Vaynerchuk (CEO of VaynerMedia), Ruma Bose (serial entrepreneur), Morgan Hirsh (founder of public goods), Jesse Horwitz (Hubble co-founder), and Ali Hamed (Coventure partner).
D’Souza and Romanow also pointed out that Clearbanc’s revenue-share model could potentially become a larger asset class than equity in the long term. D’Souza believes that Clearbanc will raise “bills and billions for funds in the coming years.”
Another point worth mentioning is that Clearbanc’s data strategy helps avoid one of the biggest problems with the venture capital industry, which is bias in investments around gender and socio-economic status. Crunchbase reported that Clearbanc has funded eight times more female founders than the venture capital industry average.
Romanow started to develop the idea for Clearance while on the set of the Dragons’ Den reality TV series (similar to Shark Tank in the US), according to Fortune. Romanow was one of the judges of the startups since 2015 and made an offer to an entrepreneur who built a wooden iPhone case who needed $100,000 to fund a digital marketing campaign. Instead of taking equity in the company, Romanow offered to provide the capital as long as 5% of the sales would be paid back to her until she received the $100,000 back plus interest.
Now Clearbanc is nearing $1 billion in digital marketing investments. And with a 6% return on investments, it equates to $60 million in revenue.