Toronto-based Clearbanc has raised $70 million ($92 million CAD) as the company surpasses $100 million USD ($132 million CAD) in funding to entrepreneurs seeking marketing capital this year.
Investors include many notable US-based and Canadian VCs, including Emergence Capital, Chamath Palipahitiya’s Social Capital, CoVenture, Peter Thiel’s Founders Fund, 8VC, iNovia Capital, Real Ventures, Portag3, Precursor, WTI, Berggruen, and FJ Labs. Emergence Capital partner Santi Subotovsky will join the company’s board of directors.
“Forty percent of VC dollars go to a company and then directly go into buying Google and Facebook ads which…is the most expensive capital you can use as an entrepreneur to grow your company.”
Launched in 2015 with co-founders Michele Romanow and Andrew D’Souza, the company initially sought to be financial services platform for entrepreneurs and independent contractors on platforms like Uber. Its mission is now funding entrepreneurs to support their marketing activities. “We are trying to invent a brand new asset class on how to fund entrepreneurs,” Romanow told BetaKit. “We started off very much in the gig space and then found—between my background in running Buytopia and understanding customer acquisition—this just made so much sense and it was such a big market need.”
Romanow noted two popular sources of funding that aren’t helpful for entrepreneurs at certain stages or industries. Equity financing requires giving up a piece of a company and setting high expectations for returns, while debt financing often requires a personal guarantee.
“Forty percent of VC dollars go to a company and then directly go into buying Google and Facebook ads, which, if you think about it, is the most expensive capital you can use as an entrepreneur to grow your company,” Romanow said.
Clearbanc provides companies with funding anywhere between $5,000 to $10 million. As the platform focuses on ecommerce businesses, the money is meant to go towards marketing spend and customer acquisition. Clearbanc uses data from platforms that client companies use—such as Facebook and Stripe—to evaluate financial health and revenue trajectory. Romanow argued that this allows Clearbanc to make better underwriting decisions than a human working with accounting data.
With Clearbanc’s revenue-sharing model, companies can make an agreement for $100,000, for example, and pay Clearbanc five percent of its revenue until it’s paid back $106,000. “If your business increases, we get that money back faster, and if your business slows down, we do nothing nasty,” Romanow said. “We don’t take a personal guarantee, we don’t compound interest, we don’t have a fixed payment handling.”
“I built the product that I wanted to have as an ecommerce entrepreneur.”
The flexibility to Clearbanc’s financing means that it can also quickly ramp up to support successful investments. Romanow noted two examples: monthly wine subscription service, VINEBOX, which used the funding to grow its business 500 percent, putting it in better position to secure a VC round; and Hunt a Killer, a murder mystery subscription box, which initially received $10,000 in financing two years ago only to surpass $8 million in marketing capital from Clearbanc this year.
Romanow said Clearbanc is using its new funding to grow the business, and have more money to give to entrepreneurs. It’s also working on building tools that allow entrepreneurs to optimize ad spend.
“I built the product that I wanted to have as an ecommerce entrepreneur,” Romanow said. “I wish we would’ve had this when we were building Buytopia.”
