Dec 19, 2018

Venture capital may not be a one-size fits all system

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.

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The race to catch Nike's Vaporfly shoe before the 2020 Olympics

Illustration: Aïda Amer/Axios

Four months ago, on the very same weekend, Eliud Kipchoge became the first human to run a marathon in under two hours, and fellow Kenyan Brigid Kosgei shattered the women's marathon record.

Why it matters: Kipchoge and Kosgei were both wearing Nike's controversial Vaporfly sneakers, which many believed would be banned because of the performance boost provided by a carbon-fiber plate in the midsole that acted as a spring and saved the runner energy.

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Reassessing the global impact of the coronavirus

Illustration: Aïda Amer/Axios

Economists are rethinking projections about the broader economic consequences of the coronavirus outbreak after a surge of diagnoses and deaths outside Asia and an announcement from a top CDC official that Americans should be prepared for the virus to spread here.

What's happening: The coronavirus quickly went from an also-ran concern to the most talked-about issue at the National Association for Business Economics policy conference in Washington, D.C.

Tech can't remember what to do in a down market

Illustration: Rebecca Zisser/Axios

Wall Street's two-day-old coronavirus crash is a wakeup alarm for Silicon Valley.

The big picture: Tech has been booming for so long the industry barely remembers what a down market feels like — and most companies are ill-prepared for one.