Toronto-based Clearbanc has launched a new solution that allows founders to determine the valuation of their startup and connect with potential investors and buyers. The solution is now available free of charge for any startup.
Michele Romanow said the platform is intended to democratize access to the “elusive” valuation.
The solution, called Valuation, lets startups connect their online business accounts, and within 24 hours, receive a valuation report based on their current revenue, costs, cash on hand, market segment success, and other businesses in the sector. The platform uses data artificial intelligence (AI) algorithms to analyze a startup’s market position.
“We’ve invested over $1 billion into 2,800 different e-commerce companies, making us the largest e-commerce investor, and I think more important than any of that, we were really able to democratize access to capital for so many founders,” Clearbanc co-founder and president Michele Romanow told BetaKit.
“Now we’re thinking about the other thing that founders didn’t have access to for a long time, as part of our five founders’ ethos, which is democratizing access to valuation, which has been this incredibly elusive thing,” she added.
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Founded in 2015, Clearbanc has developed an alternative, data-based funding model for e-commerce, SaaS, and mobile app startups that lets entrepreneurs retain equity with its “20-minute term sheet.” The company’s capital offering lets businesses plug in their data sources to its platform, which allows algorithms to evaluate the startup’s financial health and revenue trajectory.
From there, Clearbanc enters into equity-free, non-dilutive revenue-share agreements with qualifying startups, typically investing between $10,000 and $10 million per company, and receiving a percentage of that company’s revenue over time, in addition to a six to 12.5 percent fee.
The valuations generated by the new solution, which are updated on a weekly basis, are determined by private data, entered by each startup, in addition to public data. As well as providing valuations, the new platform allows startups to see whether they qualify for capital from Clearbanc. It also facilitates introductions between startups and venture capital (VC) investors in the startup’s category, through a data-based matchmaking solution called “Meet Investors.”
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Clearbanc co-founder and CEO Andrew D’Souza told BetaKit the company was making informal introductions between startups and investors before the platform was developed, and began compiling information about investors’ theses. This research was used to create the matchmaking feature, which is aimed to make fewer, more targeted introductions, and help save time for both investors and startups.
More recently, D’Souza said Clearbanc has been doing the same with startups and buyers. With Valuation, Clearbanc now also facilitates introductions between startups and its buyer network, which includes large private equity firms and consumer-packaged good companies. The company also helps startups explore potential acquisition opportunities. This represents new territory for Clearbanc, which has, until now, chiefly concentrated on helping startups with investment.
“We needed one measure to figure out: how is the company really doing?”
D’Souza noted that Clearbanc had already built the necessary data infrastructure through its capital offering in order to build Valuation. He said the company hopes to “level the playing field” in favour of founders by disrupting the typical venture funding process, and that Valuation was the next step in achieving this mission.
“All of the roads led to this valuation concept,” he added. “We needed one measure to figure out how is a company really doing, and how can they track how they’re doing over time, how can they track whether it makes sense for them to meet a buyer, meet an investor, reinvest in growth, [or] launch a new product?”
Clearbanc began working on Valuation in 2019 and said it beta-tested the program with “thousands of startups” with a combined total value of over $32 billion. Approximately 60 of those startups, including Sheertex, which develops pantyhose made from “the world’s strongest polymer,” have already been connected with VC investors through Valuation.
“Thanks to their valuation dashboard, insights, and VC introductions, Clearbanc has been instrumental in raising our Series B,” said Sheertex CEO and founder Katherine Homuth, “Through Clearbanc’s VC partner program, I was able to connect with [more than 10] tier-one investors, saving me [over six] months of networking.”
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The COVID-19 pandemic has drastically altered how investment deals are done, with most recent deals closing virtually. Although Valuation was a pre-pandemic idea, Romanow said the platform can give founders a better sense of their worth during a time when sitting down with VCs is not an option.
D’Souza likened Clearbanc’s goal of increasing access to valuations to how Credit Karma and Borrowell have standardized consumer access to credit scores.
“We think for a business owner, valuation should be very much the same thing, where you get your valuation, you know what makes that valuation increase, you know the steps you can take to make your business more valuable, and you can set a goal,” D’Souza said.
“We can help you along that path to achieve that goal, through the data that we can provide,” he added.
Image courtesy Clearbanc.