Canadian investor Clearco launches in Australia with $100 million war chest to disrupt startup capital investment

Canadian capital investor Clearco has launched in Australia with a promise of $100 million on the table to back digital-first ecommerce businesses.

Co-founded by Canadian tech entrepreneur and Dragon’s Den (aka Shark Tank) star Michele Romanow, Clearco has already invested in niche B2C brands Beard Market, Vegan Grocery Store and Jolyn swimwear, and offers between $10,000 and $10 million to companies seeking working capital for inventory and other cash-flow needs.

She’s hoping to disrupt the existing model for B2C startup founders seeking investment.

“Clearco has chosen Australia for our first Southern Hemisphere launch market because it has a dynamic startup sector which is underserved in the revenue-based finance space,” she said.

The Clearco president, who built her own e-commerce business, as well as an app she sold to Groupon, came up with the idea when she was just 20 and on Dragon’s Den as “the poorest one and the youngest one on the panel”.

“I think I saw being an investor a little bit differently,” she said.

“What I was seeing was all these e-commerce companies that would come on the show and they would say: ‘Look, I’m willing to give up 10% of my company for $100,000’.”

When Romanow asked them what the money was for, it was predominantly for two key reasons: marketing for user acquisition and growth, and to buy inventory. While it was a good deal for investors to take a 10% stake for $100k, she saw it as founders “using the most expensive capital of the world”.

Her solution was the Clearco prototype, which she revealed on Dragon’s Den saying: “I’m gonna throw out a different deal. Instead of giving you the $100,000 I’m taking 10% of your business that I would own forever. Why don’t I give you that $100,000 and instead I just want 10% of your revenue, and so you pay me back my capital, plus 6% so, you know it was $106,000.”

Romanow said the founder was initially confused, because it wasn’t debt, there was no personal guarantee or timeline and if you don’t pay me back, I’m not going to put your business into bankruptcy”. The only thing she wanted to see was their Facebook ad account to understand the startup’s unit economics.

“So, the founder on the day on the show that day was like ‘Yeah, I’ll take your deal’, and the rest is a little bit of history so that became the basis of what Clearco is today, we invented the category of revenue-based financing and looking at different sources of data to make these decisions.

Backing female founders

Clearco has now invested more than US$2.5 billion in the last two years, backing more than 5500 companies in markets around the world, having launched in 2015. The company currently has operations in the US, Canada, the UK, and the Netherlands, with Australia now joining the list amid plans to expand across Europe by the end of this year.

Romanow is proud of the fact that that Clearco’s AI-based investing model is agnostic of age, gender, race, and region. In the UK, the business has funded plenty of companies outside of London and there’s been a notable uptick in the number of female founders backed.

In 2020, Clearco funded eight times as many companies headed by female founders, while 13% of Clearco’s funding went to companies headed by founders of colour, compared to 2.6% for traditional VC firms.

Former Google executive and Limepay co-founder Dan Peters, has been appointed Clearco’s Australian managing director, charged with building out a 20-strong team by the end of 2021. He’s also hoping the company will replicate the international experience and “spread the wealth” geographically. In the UK, 70% of businesses funded by Clearco located outside of London while in the US, more than half of the funding goes to businesses outside of the four major states that are traditional funding hot spots.

Peters said online spending had grown exponentially, along with interest in new direct-to-consumer brands such as Beard Market.

A fiercely competitive option

The move into Australia for Toronto-based Clearco, follows a US$215 million funding round led by Softbank’s Vision Fund 2 in July, having been valued at more than US$2 billion earlier this year.