With fresh capital and a new name, Clearbanc has moved beyond its investing roots to become a full-stack founder support platform.
The Toronto-based startup has secured $125 million CAD ($100 million USD) of equity financing and $313 million CAD ($250 million USD) in debt to fuel its growth. The Series C round also makes the company Canada’s newest unicorn, with a reported valuation of close to $2 billion USD.
“We started to realize that the capital and funding is one part of a relationship that we can have.”
Emphasizing its move beyond equity-free investing, the company has also removed the ‘bank’ reference from its name and re-branded to Clearco.
“We started to realize that the capital and funding is one part of a relationship that we can have, but we can actually think about this as a much bigger, much bigger platform,” Clearco co-founder and CEO Andrew D’Souza said in an interview.
Clearco was launched in 2015, and since that time has provided $2 billion USD in financing to more than 4,000 companies. Clearco provides growth capital in the form of revenue share agreements that see the recipient paying back an agreed-upon percentage of their revenue until the principal plus a flat fee is fully repaid.
The company initially focused on B2C e-commerce businesses, but over the last year has expanded into new verticals and products to support the broader entrepreneurial journey. Clearco’s products now include a valuation tool; ClearAngel, which provides companies at the earliest stages revenue-share funding and support; an inventory program, whereby Clearco purchases inventory directly from suppliers; and a Venture Partner Network, which launched in 2019.
Speaking with BetaKit, D’Souza and Clearco president Michele Romanow noted the company has more product launches planned for this year.
D’Souza said the decision to expand Clearco beyond financing came about through conversations with its portfolio companies. “A lot of people came to us around valuation and to understand how their business is growing day over day, week over week, and what they can do to improve that,” he said.
The $125 million CAD in equity financing brings the company to a nearly $2 billion valuation. The round was led by United States venture growth-equity firm Oak HC/FT, with participation from new investors Founders Circle and eInvestors. Clearco’s major existing investors also participated in the round, including Highland Capital Partners, Inovia, and Emergence Capital. A number of angel investors also participated, including executives from Stripe, Square, Affirm, Adyen, Robinhood, Betterment, Airbnb, Hubspot, and Apple.
The $313 million in debt came from specialty finance company Credigy, a subsidiary of National Bank. According to Clearco, the debt came at a “significantly lower cost of capital” than previous financings, allowing the company to offer more competitive rates to its growing portfolio “than any pay as you grow financing company in history.”
Clearco also claims that with its current debt facilities, it has the capacity to provide more than $2 billion a year in financing to companies.
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The Toronto company has amassed a significant amount of debt facilities to make these investments. In 2019, Clearco secured $328 million CAD ($250 million USD) and raised an $853 million CAD (£500 million) fund when it launched in the United Kingdom. Clearco’s other investment vehicles include a $10 million fund dedicated to ClearAngel, which a spokesperson for Clearco told BetaKit earlier this year will expand as demand grows.
Toss in $170 million USD of total equity funding to date, and Clearco is well-capitalized to pursue its goals. The top priority: accelerate Clearco’s international expansion.
D’Souza noted that while the first half of 2020 led the company to step back and evaluate the changes to the economic landscape, the latter half of 2020 showed Clearco there was an opportunity for its model on a global stage.
“Our goal is to change the face of fundraising, and we’re really proud to be showing it can be done.”
“We realized there’s a huge need for what we’re delivering,” D’Souza said. “There’s a need for our products globally as economies are restarting around the world and there’s the opportunity for us to…create a much deeper relationship with the founder that we’re backing; beyond just capital, we can actually invest in data products and actually helping [companies] make better decisions.”
“We started to realize that the world was going to look quite different…[and] we realized that it was a good opportunity for us to actually double down and really start to scale, and sort of accelerate some of our plans,” the CEO added.
Clearco currently has operations in the United Kingdom and the United States (its biggest market), with a small presence in Canada as well. With its latest capital raise, Clearco is focused on expanding that global presence this year to a number of regions in Europe and “a couple of key markets” in Asia.
Clearco is among a growing group of enterprises that have begun to offer alternatives to traditional VC funding models. Over the last number of years, companies in the commerce space have moved into lending as a way to serve customers that might not meet venture capital or bank loan requirements. Shopify Capital is one such offering, providing Shopify merchants loans. Amazon and PayPal also offer similar working capital loans also based on a revenue-share model. Revenue-based financing itself has been called the next phase for private equity and early-stage investing.
“I think it’s great that there is getting to be this whole sort of ecosystem of alternative models that are coming out, people that are trying to find new ways of financing businesses,” said D’Souza.
With its move beyond just revenue sharing, Clearco sits somewhere between a venture fund and an investment bank. Clearco sees itself as a partner for its portfolio, akin to a venture fund that can provide investment and business support.
“We think of ourselves as being much more of a partner and an investor, because if it’s just capital, then there’s lots of ways you can go to the capital,” said D’Souza. “If you’re somebody who can actually help provide guidance and do this at scale, there’s not many people in places that will do that for 4,400 companies at the same level…of care and fight that a VC with eight or 10 portfolio companies would.”
RELATED: Clearbanc deepens push into e-commerce with inventory financing
D’Souza said that Clearco has already seen results from its strategy, noting portfolio companies that are nearing the exit or IPO stage. “And the founders own way more than if they had taken that series A or B venture route,” he said.
Clearco’s model also represents an opportunity for often-underlooked founders in the VC and banking space. With an underlying proprietary AI-driven platform that elevates companies for investment, Clearco claims to have funded eight times as many female founders as typical VC, 30 percent of those founders being people of colour.
“Our goal is to change the face of fundraising, and we’re really proud to be showing it can be done,” said Romanow.
“We want to create an asset class that’s bigger than venture,” added D’Souza, noting that while Clearco is on its way to building this new asset class the company still has a ways to go. “$2 billion [in capacity per year] is nothing to sneeze at. It’s not small, but it’s one percent of the way up the mountain,” he told BetaKit.
To scale the mountain, Clearco hired close to 100 employees last year, bringing its team to around 300. The company plans to double that number as part of its global expansion over the next year.
“We want to create this idea that there’s founder-owned, founder-controlled businesses and celebrate the entrepreneurs that are controlling their own destiny and betting on themselves,” said D’Souza.
UPDATE 22/04/2021: This article previously incorrectly listed an executive from AirWallex as an investor in Clearco. Based on updated information from the company this has been removed as neither AirWallex nor its executives have invested in Clearco.