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Illustration: Axios/Lazaro Gamio

Venture capital has certainly fueled some truly impactful companies over the years (Apple and Google, for instance) — but what if it's not the right funding mechanism for all companies?

The backdrop: Clearbanc, a San Francisco- and Toronto-based startup, just raised a fresh $50 million (in addition to the $70 million it raised last month) to be an alternative to equity investing for certain companies, mostly e-commerce businesses. The idea is that these companies shouldn't be giving up precious equity just to fund their proven customer acquisition activities.

How it works: After Clearbanc's proprietary tools analyze a company's internal data, such as its Stripe transactions and Facebook advertising campaigns, Clearbanc disburses funds to the company, which then has to repay it back, plus about a 6% fee.

  • "Equity is ultimately risk capital" that should be used to research and develop new tech or businesses, Clearbanc co-founder and CEO Andrew D'Souza told me. And for e-commerce businesses that won't ever provide the type of returns that VCs expect, it's better they keep their equity and build their businesses.
  • Emergence Capital partner Santiago Subotovsky, who led the firm's investment in Clearbanc and sits on its board, agrees, which is why he doesn't see this as being competitive with his own industry.
  • On the other hand, Hustle Fund partner Elizabeth Yin wonders if eventually it'll mean that such alternatives will lead to adverse selection — early companies still searching for a business model or marketing strategy will be the ones asking for VC investments while their peers with cashflow avoid it.
  • This year, Clearbanc has doled out more than $100 million to over 500 companies, D'Souza says. Most of the funding it's raised went into two funds it manages to finance its customers, and a small portion has been invested into its own operations.

Go deeper

29 mins ago - World

Jimmy Lai among Hong Kong pro-democracy leaders sentenced to prison

Students standing under a banner during a flag raising ceremony on the first annual National Security Education Day in Hong Kong. Photo: Vernon Yuen/NurPhoto via Getty Images

A Hong Kong court sentenced a group of pro-democracy activists to up to 18 months in prison Friday for organizing a massive unauthorized protest in August 2019 that drew an estimated 1.7 million people, AP reports.

Why it matters: Critics say the sentences send the message that even peaceful pro-democracy activism will be severely punished. They mark a continuation of Beijing's overhaul of Hong Kong's political structure, designed to crack down opposition to the Chinese Communist Party.

Local news moves to the inbox

Illustration: Annelise Capossela/Axios

A slew of new companies are launching platforms for local newsletters, a shift that could help finally bring the local news industry into the digital era.

Driving the news: Substack, the email publishing platform for independent journalists, on Thursday announced a new local news platform.

J&J vaccine pause hurts its reputation

Reproduced from Economist/YouGov poll; Chart: Axios Visuals

Americans' confidence in the safety of Johnson & Johnson's coronavirus vaccine took a big dip this week after the pause in its use, per new YouGov polling, even though the risk of blood clots following the shot is extremely low, if it exists at all.

Why it matters: For the majority of people, particularly high-risk Americans, getting the J&J shot is almost certainly less dangerous than remaining vulnerable to the coronavirus.