Providing non-derivative capital to founders, Clearco is the largest e-commerce investor in the world. A capital solutions firm, Clearco (formerly Clearbanc) launched in 2015 to provide an alternative funding solution for founders in e-commerce, mobile apps and SaaS, along with operational support for businesses at whatever stage they are in.
Clearco utilises an AI-powered algorithm to review start-up applications, which are assessed on their revenue, growth rate, unit economics and other financials in a “20-minute term sheet.” Businesses can receive up to $10 million of investment from Clearco.
With over $2.4 billion invested in more than 6,000 businesses to date, Clearco’s portfolio has eight times more women-founded businesses than traditional VC firms and 30 percent of founders are people of colour. Over 20,000 growing e-commerce and SaaS companies are also connected to the business.
With a return for investments between $10,000 to $50,000 of up to 2 percent of revenue across four years, fees are capped at 6 percent. Its partners, including Facebook, Affirm and Google, then receive a revenue share on all referred companies from day one.
Alongside its financial backing, the company is building a suite of tools and services that support all facets of founding a company. Clearco offers access to its global network and roster of entrepreneurs to enable on-going support for businesses, as well as sharing insights and data to help inform founders’ business strategies, otherwise unavailable to them individually. What’s more, Clearco helps founders shape and determine exit strategies, even identifying and matching them with potential buyers.
Having themselves raised $700 million of investment for the platform, Clearco co-founders Andrew D’ Souza, CEO, and president Michele Romanow, are seeking to fill a gap in the funding market for those who don’t fit into the traditional seeding or bank roll structure. Now, BoF sits down with Romanow to hear more.
What values inform your business model?
It’s about helping founders win. The cards are typically stacked against founders — it is largely access to capital that holds most founders back. We aim to represent the freedom of the entrepreneur and one of our values is ownership — if you are doing the work to build your company, you should own the majority of it. It’s also about the freedom to make those decisions and to build a company the way that you want to build it, with your own values.
You have to be gutsy to do this in the first place — you’re going to have to figure out how to get your business finance; you have to come up with an endless amount of creativity to keep going. If we can be a small part of that, we get pretty excited.
What size companies do you work with?
We look to work with any company that is doing more than $10,000 of monthly revenue — so we start very small — and we’ll give a company or founder from $10,000 all the way up to $10 million. Our largest company last year did $400 million of sales — we can scale quite significantly with companies.
We’re then looking for businesses that have strong unit economics, so after you’ve paid for the cost of your product and the cost of your ads, you are making money. There are so many companies in the fashion apparel and beauty industry that are into those criteria that are historically overlooked by the fundraising process. We’ll do everything across home goods to food and beverage, and we have a huge concentration in beauty and apparel. There are many emerging designers we’ve been able to back.
If you are doing the work to build your company, you should own the majority of it.
We have also seen many more brands emerge, especially in the last three years, that have all been about long-lasting, forever products — representing a return to quality, without the return to super high-end pricing. We continue to back a bunch of those brands.
How is AI leveraged to benefit Clearco founders?
We provide non-dilutive access to capital, enabled by an AI-powered, 20-min term sheet. This means when a founder comes looking for capital, they connect us to the data sources that run their business, from their payment processor and their ad spend account to their Facebook or Google account and shipping logistics. We then generate the term sheet and say, “this is how much capital we can give you.”
We did that to be fast, because we think founders’ most valuable resource is time, and typically, raising equity is extremely inefficient — it can take three to six months, a pitch deck and multiple pitches.
We didn’t anticipate the other benefit of using the AI software: we weren’t looking at the founder, where they grew up, what their products look like. We just care about the data: is your business growing? Do you have positive unit economics? And that gave us a very different portfolio. We have eight times more women founders than the venture capital industry average; 13 percent of our founders are people of colour, compared to 2.6 percent in the VC industry; we’ve backed founders in all 50 states in the US — we’ve taken the bias out of who gets access to capital.
How do you ensure data and insights are actionable and impactful for founders?
There’s a lot of insights that we have automated, like how your cost of acquisition compares to all of our other companies in your category, or where you should be buying your next ads. For example, today, Facebook isn’t working as well compared to TikTok, so we can then share where we would recommend looking to acquire your next group of customers. Our AI also gets smart about variables that matter in different regional markets. Every unique market has different ad conversions and using different platforms to convert on, and so we use all that data.
There is a network of support — they can see our insights tool, our dashboard, and they can understand how they can improve their business.
Every founder gets their own individual coach to work with, and people have support. For instance, we can give you insights into negotiating your inventory. We can introduce you to other founders from the 6,000 on our books who can share insights from experiencing similar supply chain problems to you, or challenges in contacting a particular retailer. Our founders talk to each other about their suppliers, the materials they’re using, how to get their customers to recycle. So, there is a network of support — they can see our insights tool, our dashboard, and they can understand how they can improve their business.
What is Clearco’s growth strategy for the mid to long-term?
First, we intend to grow into more countries. We launched in the UK, Australia, and the Netherlands, and we plan to launch in the rest of Europe and a couple of key markets in Asia. We were successful in San Francisco, where there’s the most amount of venture capital, so we believe founders in other jurisdictions need us too.
Second, we will continue to build out our insights tools for founders. One of the products that we built recently is a Buy-Sell network, where, if your company is at a size of scale, and you are looking for a buyer, we can connect you to all companies that are buying. I was eight years into my entrepreneurial journey before I had an exit, and it was game-changing for me. So, products like that are on our horizon.
What does the future of entrepreneurship look like to you?
During the Covid-19 pandemic last year, there was double the amount of new businesses created than any other year. People looked at their lives and said, “am I really waking up to do what I want to do?” Realistically, it’s never been easier to become an entrepreneur with barriers to entry lowered — access to capital, information, to a support network, is increasingly democratised. Because of that, we’re seeing more entrepreneurs and I hope that continues.
Founders are our best problem solvers, and the future lies with people that are innovative and creative — especially when they can get capital to fund their business.
This is a sponsored feature paid for by Clearco as part of a BoF partnership.