Creating an Alternative to Venture Capital: Q&A with Clearbanc

There can be a vicious circle for DTC brands when raising money. In order to grow, you need to get investment. Once you get investment, you usually have to give away equity in your business. You end up spending the majority of the investment on Facebook ads, meaning you quickly have to raise more money. And the process starts again. Here, we speak to Andrew D’Souza (pictured below), CEO, Clearbanc, a financer looking to break this cycle, and return control of the business, to the business. 

Can you quickly explain how Clearbanc works? 

Clearbanc is changing the way e-commerce and DTC brands raise money by providing fast, affordable growth capital with the most founder-friendly terms possible. Our AI assesses the financial health and revenue trajectory of prospective companies based on their 20-Min Term sheet application — a product we launched to make it easier for founders to access unbiased capital to grow their businesses without giving up equity.

Once a company’s application is approved, Clearbanc offers founders funding from USD$10k  to USD$10m (and from £25k in the UK, though if the business is incorporated in the US, minimum funding is still USD$10k) to help them grow their customer base and fund their digital marketing and inventory spends. We charge 6% on the capital provided, collecting a portion of the company’s revenue until they’ve paid back 106% of the original investment.

We’ve invested in 1000+ brands this year, including Le Tote, Leesa Sleep and Public Goods, and we’re on track to invest USD$1bn in 2,000 companies within a year.

What gave you the inspiration to establish Clearbanc

My co-founder Michele and I built Clearbanc to address the challenges of our own experiences as founders and entrepreneurs. I’ve been working in startups for the last 10 years, and it was always my responsibility to help these companies raise money from VC’s to help them build out sales & marketing teams. I also advised a number of early-stage startups through their fundraising and M&A processes, totalling over hundreds of millions in equity investment and exits.

As a Canadian, I live & breathe the challenges faced by building startups that weren’t born and raised out of Silicon Valley. I kept seeing this trend of startups outside of the Valley essentially being locked out of the VC ecosystem, while options like small business loans from banks require personal guarantees and put stress on founders. And then there’s the long and drawn-out process of fundraising, which takes 3-6 months and distracts founders’ attention away from growing their business. We knew there was an easier way to fund founders.

Andrew D’Souza, CEO, Clearbanc

Apart from the lengthy VC process, the ecosystem is also incredibly biased, championing and funding a small subsection of entrepreneurs that come from similar backgrounds. VC’s will turn entrepreneurs down because they don’t have the right network, didn’t attend the right school, or don’t look like their ideal founder.

How does your approach take the bias out of VC funding (with regards to gender, location etc)?

Because we look solely at a company’s data, we remove the need for in-person meetings entirely. By assessing financial health and revenue trajectory, we can democratise access to capital for founders, regardless of age, race, gender or geography and focus solely on whether it’s a growing, viable business.  In leveraging AI we’ve invested in 8x the number of female-founded companies than the traditional VC industry average.

In many ways, VC capital is elite capital. Last year, US News reported that 80% of all venture capital deals were distributed between 4 states (California, Massachusetts, New York and Texas) and 9 states didn’t receive any venture capital at all. That doesn’t mean there aren’t successful entrepreneurs in those nine states, it just means the VC ecosystem doesn’t reach them.

In this year alone, we’ve funded companies in 43 states and plan to use our latest fund to give more founders fast and easy access to growth capital.

Given the number of business who approach you, is there any particular business area / category that you are particularly interested in at the moment?

Our primary focus has been growing DTC and e-commerce startups to fund repeatable parts of business like marketing and inventory costs. With our latest funding round, we’re planning on expanding into new markets and verticals in an effort to reach entrepreneurs of all sizes, from USD$10,000 a month to hundreds of millions of dollars in sales.

We’re also looking global. There’s a huge demand for Clearbanc capital from companies outside of the US and Canada. So many talented and energetic entrepreneurs don’t have access to VC capital where they’re based, and we’re excited to unlock that. 

Beyond the actual monetary support, how else do you work with your brand partners? 

We’re always looking for new ways to give our brand partners resources to help set them up for success. We recently announced our new Venture Partner Network, which draws together some of the greatest minds in e-commerce, DTC, product development and investment, so that our portfolio companies can access industry advice and insight, normally only associated with traditional VC firms.

We’ve signed up some amazing partners, including Jack Abraham of Hims, Ryan Hoover of Product Hunt, Jesse Horowitz of Hubble and Harry Stebbings of Twenty  Minute VC. The goal here is to level the playing field for e-commerce founders and growing startups by providing them with mentorship and advice from some of the industry’s leading minds.

What does the future have in store for Clearbanc

We’ve just raised a USD$50m Series B to grow our team and explore new verticals and markets, as well as a USD$250m Fund 3, which will allow us to invest in more founders.

Our goal is to help founders win and build a new way to fund companies all over the world. We want to solve the problems that exist for entrepreneurs, globally, and we are starting with e-commerce and DTC.