Clearbanc Intends To Provide Another $1B, This Time In D2C Inventory

Toronto investment firm Clearbanc, known for its ‘20-minute term sheet’ that offers growth capital to e-commerce companies, is poised to inject a lot of capital into direct-to-consumer startups.

Subscribe to the Crunchbase Daily

The firm charges a flat fee on its capital that ranges from 6 to 12 percent depending on how the entrepreneur spends the funds.

The last time we checked in on Clearbanc, the firm had raised a $50 million Series B round of funding, led by Highland Capital, to build out its international presence and hire more data scientists. To date, the company has raised $65 million in equity.

It also created its third fund, $250 million to scale growth capital made available to portfolio companies, through limited partners Arcadia and Upper90. That enabled the firm to lend $1 billion to 3,300 companies in 2019, Jaime Moreno de los Rios, Clearbanc’s general manager and vice president of strategic initiatives, told Crunchbase News.

Over the next year the company intends to lend another $1 billion to direct-to-consumer founders who need capital to pay for inventory expenses, he said. The capital will come from the general partner and limited partner funds raised over the last few years, and because of the nature of the returns, Clearbanc reinvests the capital as it’s repaid, Clearbanc co-founder Michele Romanow said via email.

To facilitate that, Clearbanc brought in Moreno de los Rios to spearhead the new inventory product. Moreno has spent 15 years in financial services and technology startups, including as vice president in the internet and digital media team at JP Morgan, and most recently at Flexport leading its lending business.

“One of the things that we were seeing was e-commerce companies have a large amount of capital tied to inventory—roughly 50 percent,” Moreno de los Rios said. “Then they need to get the goods to their warehouses, which can take two months, and then they have to sell it.”

Rather than have the D2C company pay upfront, Clearbanc is offering a new inventory financing option in which Clearbanc accepts the risk of financing the purchase of the goods and gets paid when the goods are sold, he added.

Clearbanc recently launched the product and already has hundreds of companies that want to tap in, he added. Among them, 50 percent are existing customers and 50 percent are new customers.

“It’s risk-free for them,” Moreno de los Rios said. “Our success is their success, and as we study their data, we will lend the money. This will help, especially as the holiday season starts, because the last thing they want to do is be out of stock.”

Illustration: Li-Anne Dias