Jul 31, 2019

VC alternative Clearbanc raises new $250 million fund

Illustration of wallet with binary code coming out of it.

Illustration: Rebecca Zisser/Axios

Clearbanc, which lends money primarily to e-commerce startups for a flat fee, has raised a $50 million Series B round led by Highland Capital, and closed a new $250 million to finance companies.

Why it matters: Venture capital financing is not the right fit for every business, and it's an expensive way to finance recurring expenses like online ads.

  • While the fund is structured similarly to a venture capital fund (with limited and general partners), Clearbanc's funds only last 2 years instead of the common 10-year lifespan.
  • It's also much more similar to a fixed-income fund given its underlying model, says Clearbanc co-founder Andrew D'Souza.
  • "The other nice thing about being in the fixed-income category is that we don’t have the same incentives to grow," says co-founder Michele Romanow. "We’re not picking lottery tickets... We need all of them to grow, but we’re also not putting undue stress on the companies.”
  • Still, if a company fails, Clearbanc has to swallow the loss, says Romanow, adding that it's already happened to a number of businesses Clearbanc has underwritten.

By the numbers:

  • Most of Clearbanc's portfolio companies get more funds every one to three months.
  • More than 90% of companies have taken capital from Clearbanc more than once.
  • About 20% of companies have raised venture capital.
  • Companies can choose to repay back the capital via 1% to 20% of daily revenue — most choose 5% (Clearbanc charges a flat 6% fee).
  • On average, Clearbanc's portfolio companies generate $121 million in monthly aggregate revenue.

What's next: Clearbanc started by financing small-but-growing e-commerce companies, and says its new and larger fund will help it expand in multiple ways.

  • Internationally: Currently Clearbanc finances companies in the U.S. and Canada, but it has begun to test the waters in other parts of the world.
  • Bigger companies: Clearbanc has already started to lend to bigger businesses, like the mattress companies Leesa and Nectar and the fashion subscription box Le Tote.
  • New verticals: Next, it will focus on mobile apps with recurring revenue (a category that New York-based Braavo has been financing for a few years).
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