San Francisco-based Clearbanc, a startup that provides a unique form of non-dilutive funding for rapidly-growing ecommerce brands and consumer SaaS companies, has unveiled the next progression of its investment platform, the 20-Min Term Sheet.
With the launch of the new product, Clearbanc plans to ramp up its capital deployment with a goal of investing $1 billion in at least 2,000 companies this year, leveraging the company’s proprietary AI system that speeds up the due diligence process.
“We tried to build the most founder-friendly product on the market,” Clearbanc co-founder and Dragons’ Den star Michele Romanow told us in an interview, adding that many early-stage startups get bogged down in the months-long fundraising process while an astonishing 40% of the dollars raised go directly to buying Google and Facebook ads.
Clearbanc’s Founder-Friendly Model ?
Clearbanc’s model instead provides startup companies with near-instant access to capital ranging from $10,000 to $10 million or more, in return for a 6% premium that is paid back via a founder-friendly revenue share agreement. No equity or additional interest is taken. The model is designed to democratize access to capital while facilitating brand growth without founders losing equity ownership, avoiding many of the inherent downsides associated with traditional venture capital.
Romanow, who created Clearbanc alongside CEO Andrew D’Souza, notes that the 20-Min Term Sheet currently only provides financing to companies with a minimum eligibility requirement of $10,000 average monthly revenue and at least six months of consistent revenue history.
Despite this revenue requirement, Clearbanc’s non-dilutive model has been growing in popularity among early-stage entrepreneurs as the seed and pre-seed venture capital environment grows increasingly complex.
“Two years ago, we gave founders $70 million and last year we gave more than $150 million,” Romanow said. “Our team is 60 people, a lot of that is data science as we do all of the decisions in a very automated way without humans needed to do the due diligence.”
Unsurprisingly, this growth caught the attention of traditional venture capital firms. Clearbanc raised $70 million in funding last November from multiple top venture capital firms including Emergence Capital, Social Capital, CoVenture and Founders Fund.
500+ Ecommerce Investments ?
Clearbanc has already invested in more than 500 e-commerce brands including Buffy.co, Teysha, Vinebox, Piglet, VNYL, Bokksu. Romanow says that Clearbanc is also actively reviewing adjacent markets to introduce the new funding model, with a specific interest in startups that have created subscription-based products.
One industry that seems primed for this form of funding is digital media, where news outlets are simultaneously suffering from a broken advertising-driven revenue model and an increasingly risk-off venture capital environment. This has ultimately led many in the media to adopt subscription models that offer a steadier revenue stream.
At the end of the day, Romanow hopes to buck the trend of founders losing the majority of their own company’s equity by the time the IPO rolls around (see Lyft) and Clearbanc is well on its way to making a real difference.