Toronto-based revenue share investor Clearbanc has launched a new product to support entrepreneurs facing a finance crunch due to COVID-19. Called Runway, the tool helps businesses analyze cash flow and expands Clearbanc’s financing options to include B2B and SaaS companies for the first time.
“Capital is the most important tool to sustain and grow a business and is now needed more than ever.”
The new product comes as Clearbanc has also laid off 17 employees to extend its own runway in light of COVID-19.
Michele Romanow, president and co-founder of Clearbanc, told BetaKit that the company’s new Runway product is directly correlated to changes in the market brought about by the current global pandemic.
“There is no playbook for the current economic crisis and recovery, and every founder needs more insight and options to navigate this incredibly difficult time,” said Romanow.
Runway analyzes a business’ burn rate and cash on hand to offer them monthly equity-free financing to help founders sustain their operational window, or ‘runway.’ To do this, the product uses Clearbanc’s proprietary AI platform to assess companies’ current business metrics, including cash balance, overhead, revenue, margin, growth rate, and industry segment. The platform then creates a custom funding plan with investment to help founders extend their existing capital and maintain momentum.
Clearbanc’s loan model works by the company offering growth capital in the form of revenue share agreements that see the recipient paying back an agreed-upon percentage of their revenue until the capital is fully repaid.
The venture capital market, where tech startups most often turn to for capital investment, has been affected by the current pandemic. Data from Pitchbook shows venture capital deal volume is projected to slow dramatically in the United States in the coming months, with Canadian VCs anticipating a similar drop in early-stage investing.
“Venture capital is even harder to come by,” said Romanow. “Capital is the most important tool to sustain and grow a business and is now needed more than ever. Clearbanc Runway fills a huge need in the market.”
For the first time, Clearbanc is also expanding its overall non-dilutive capital beyond consumer companies to include B2B and SaaS companies.
Runway is available to e-commerce, direct to consumer, and enterprise SaaS companies that meet a minimum eligibility requirement of $10,000 monthly revenue and at least six months of consistent revenue history.
The need for startups to extend their runway in light of COVID-19 also impacts Clearbanc, which laid off 17 employees today, representing approximately eight percent of its overall team. Romanow told BetaKit the decision was made because Clearbanc had to restructure its organization around “new priorities” to help navigate the long-term economic impact of COVID-19.
According to Romanow, the layoffs mainly affected office managers and recruiters, positions that Clearbanc felt it was not able to maintain “in this new world.”
“We recognize it’s a tough job market out there right now, we are opening up our networks to help them through this time,” Romanow told BetaKit.
The co-founder added that despite these changes, Clearbanc is still seeing an increased demand for capital and funding to new companies.
Clearbanc raised $393 million CAD ($300 million USD) last year and subsequently hired more than 140 employees. At the time, the startup used the capital to help scale its alternative fundraising model with eyes on international expansion. That same year it also launched its 20-minute term sheet to sell equity-free capital.
To date, Clearbanc has reportedly invested around $1 billion in 2,200 online brands.