Small business owners know that scaling up is a daunting, capital-intensive endeavor. While it’s true that the internet has theoretically put new customers within reach, the capital needed to overcome high cost of acquisition rates may be more than a small business can muster — especially with parallel inventory and operational demands. Enter Clearbanc, a fintech startup/SMB lender that just announced $70M in funding to scale its own mission to step in and support these founders.
Clearbanc is the latest, and perhaps most visionary, endeavor by serial entrepreneurs Michele Romanow and Andrew D’Souza. Both are prolific founders and angel investors; they embody the type of persistent and thoughtful leadership that we readily get behind. We first worked with Andrew during his tenure as COO/CRO of edtech company Top Hat in Toronto, and were impressed by his clear and thoughtful leadership through a high growth phase. Michele of course, needs little introduction; she has gone far since her first startup which worked with caviar fisheries in Canada’s Eastern provinces. She previously sold SnapSaves, a company she co-founded, to Groupon in 2014, and her company Buytopia.ca was named one of Canada’s fastest growing companies. She was named to Forbes Top 20 Most Disruptive “Millennials on a Mission”, is on the list of the 100 Most Powerful Women in Canada, and is virtually a household name across Canada, thanks to her regular appearance on Dragon’s Den (Canada’s Shark Tank).
In fact, Michele’s appearance on the Dragon’s Den was the genesis of Clearbanc. As she watched hundreds of passionate founders pitch their business, Michele realized that a gap existed in the lending marketplace: neither traditional banks nor venture capital models were poised to support the type of growth sought by e-commerce founders. Clearbanc lends based on proprietary revenue analysis — not based on the founder’s personal credit score; plus they understand that funds will be primarily spent on customer acquisition. Clearbanc plugs directly into payment processors, taking a cut of all sales until debt (plus a fee) is repaid. The process is simple for both parties, and is agnostic to the payment processor; Clearbanc works on top of Square, Paypal and Shopify — giving access to millions of potential high-growth companies.
We are aligned with Michele and Andrew’s assessment of the challenges facing SMBs, and their vision for making a market out of this challenging situation. Powerhouse brands currently dominate the e-commerce mindshare and price game: TechCrunch reports that Amazon has a 49% lock on all e-commerce, with eBay at a distant 6.6%. To compete against their favorable prices and shipping rates, it’s imperative that founders ramp up quickly. Unfortunately, as e-commerce startups turn to social media to find customers, they’re hit with the reality that reaching — and then converting customers — is prohibitively expensive. Average CAC for retail brands in the beauty and apparel space are estimated around $10, with costs much higher in other competitive markets like technology and consumer goods. It’s notable that almost 40% of venture capital dollars invested in startups goes directly to Google and Facebook for advertising.
Through close partnerships with social media platforms and payment processors to offer lower ad rates, Clearbanc is removing friction and truly clearing the way for fast growth in the e-commerce sector. Through its unique new take on assessing risk and providing funding, Clearbanc is poised to fill the gap for founders across North America.