Clearbanc, the Canadian alternative funder, aims to provide £500m to British online businesses over the next year in its first push outside North America.
The money must be spent on digital marketing, which can demonstrate a clear ROI to Clearbanc.
The alternative funder, which has funded £1bn to 3,300 North American start-ups since 2015, has run a UK beta trial of its revenue share model, providing £30m to over 250 British small businesses.
Firms connect their bank and social media ad accounts to Clearbanc’s APIs and are offered anything between £10,000 and £10m within 48 hours. Funding decisions are made within 20 minutes. This is because Clearbanc can see advertising ROI and revenue coming into a business.
What Clearbanc looks for
Offers range with a flat fee of between 6 per cent and 12 per cent.
Business owners decide on the level of revenue share, ranging from 1 per cent to 20 per cent until the capital is repaid at 106-112 per cent.
Typically, Clearbanc’s funding is repaid within eight to 12 months.
However, Clearbanc co-founder Michele Romanow admits that the risk is all hers if an e-commerce business suddenly goes bust and is unable to repay.
>See also: Just Capital on track to lend £20m to online businesses
Clearbanc is targeting e-commerce start-ups, online retailers, mobile apps with in-app purchases and anything subscription based.
The alternative funder stresses that its cash is not a loan, as business owners do not have to put up personal guarantees and no interest is charged.
The company claims that because its lending decisions are computer-driven, this removes bias. Its AI-predicated lending decisions mean it has backed eight-times more female founders than traditional VCs, says Clearbanc.
Clearbanc says that e-commerce start-ups spend 40 per cent of their funding on digital marketing and online ads. Indeed, the company says that founders spend half of all venture capital raised on digital ad platforms. Clearbanc represents a way to fund growth without having to give up equity, the company says.
>See also: Uncapped closes first deals ahead of second fundraise next year
According to Edge by Ascential, the surge in online shopping caused by the Covid-19 pandemic is expected to add £5.3bn to UK e-commerce sales this year — bringing the total market up to an estimated £78.9bn.
Michele Romanow, co-founder of Clearbanc, is a dragon on the Canadian version of TV show Dragon’s Den, who has long experience in e-commerce.
UK-based revenue-share platforms already in this space include Uncapped and Outfund.
Romanow said that although she was pleased there were other alternative funders in the UK market, Clearbanc invented the concept and has deeper resources.
Romanow said: “We’re very excited about the UK market. Of course, it’s good for founders to have these opportunities but we are the biggest funder in this space. We’ve got a real opportunity to build a new asset class here.”
In addition to funding, Clearbanc provides insights to business owners on how their business is performing and has a network of external investors, which has both venture capital firms and 300 individual investors in e-commerce businesses.
The Toronto-based alternative funder employs 250 staff and is looking to recruit in Britain, with plans to open a UK office once the Covid-19 crisis is over.
Romanow said: “Covid has accelerated the growth of e-commerce by about 10 years.”
Meanwhile, Clearbanc has launched an inventory finance arm to buy stock from suppliers on your behalf. As soon as stock sells, you repay Clearbanc with a 6 per cent premium. It’s a way of buying stock but keeping it off your balance sheet.
Romanow said: “The two biggest expenses for any e-commerce business are buying digital ads and inventory.”
Further reading
Supply@ME brings its inventory monetization solution to UK manufacturers
