For young businesses, raising capital can be a challenge and the economic impact of COVID-19 has only piled on the pressure. One of the traditional ways for businesses to receive investment is through bank loans, but qualifying for these as a startup can be a fatal struggle. Equity financing is another option for businesses who are looking to raise capital, which involves the sale of shares. However, understandably, many early stage founders are not wanting to sacrifice full ownership of their business. Fortunately, recent advances in fintech have opened the doors to a plethora of innovative new ways businesses can raise money and grow, to suit their unique circumstances and goals.
This type of business model executed by non-traditional funding platforms, has helped open up financing and growth opportunities for startups that otherwise would not be able to survive.
ClearCo (previously Clearbanc) is one of many fintech platforms challenging the norm, as the world’s largest ecommerce investor. They have a clear and simple mission ‘to remove the barriers between brilliant ideas, and brilliant businesses’. How? ClearCo offers equity-free capital products, which are curated for founders at different stages of growth. ClearCo gives founders investments, which can range from £10k to £10m, and are repaid via a revenue share agreement and a flat fee. As a result, founders can scale up their businesses while still holding on to full ownership. For ClearCo, the numbers speak for themselves. Since launching, it has invested over £2bn across more than 4,500 businesses and investors are latching on. Just this week ClearCo announced a $100m Series C funding round, with investors that include founders and executives from Circle, Stripe, Square, Affirm, Adyen, Robinhood, Betterment, Airbnb, Hubspot, AirWallex and Apple.
Through its investments, ClearCo has also proven to be leading the way in creating a more diverse and inclusive community for young businesses. In 2020, it funded eight times more female-founded businesses than the industry average, while funding in Black and LatinX founders was five times more than traditional venture capital funds.
ClearAngel is ClearCo’s bespoke offering for early-stage founders, providing automated angel investments and advice. As well as access to equity-free capital, ClearAngel uses AI to create automated objectives to scale and increase revenue, tailored to the individual business. Through ClearAngel, early-stage founders also become part of a network of over 500 investors, growth teams, lawyers, buyers, and more. In the UK, ClearAngel was temporarily put on hold due to Covid-19. However, Erly Stage spoke to a company representative who confirmed the program will be making a comeback. ClearCo itself has been backed by leading venture capital firm Emergence Capital. In an article on EmCap’s website written by General Partner Santi Subotovsky, Santi outlines the story and reasons EmCap invested in ClearCo. He explains “The demand for financing alternatives like Clearbanc is large and growing. In fact, the company is on track to provide more than $100M in funding to startups this year, and has financed 500+ high-growth online businesses in the past 12 months.” He goes on to say “Startups play a huge role in our economy, driving innovation, fueling growth, and providing jobs to hundreds of thousands. Entrepreneurs can only succeed with financing options that work for their business.”
Several other businesses have found success in this model of alternative funding. One great example is Pollen VC. Founded in 2014, Pollen VC provides flexible credit lines for mobile apps and publishers. The credit lines are simply secured by integrating directly with the app stores and ad networks, making it very straightforward for businesses to access funding. As the business grows, so does the credit line.
This type of business model executed by non-traditional funding platforms, such as ClearCo and Pollen, has helped open up financing and growth opportunities for startups that otherwise would not be able to survive, through their straightforward, flexible, user-friendly tech platforms. It is a leading example of just one of the ways technology is making entrepreneurship more accessible.
