Clearco Raises $215M From SoftBank To Provide Startups With Alternatives To VC Funding

Toronto-based Clearco — formerly Clearbanc — raised a new $215 million growth equity round led by SoftBank Vision Fund 2 as the company eyes further international expansion.

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Founded in 2015, the company has now raised more than $681 million, according to Crunchbase data. Just this April, the company raised $100 million in equity and $250 million in debt that valued it at almost $2 billion, while also announcing its rebrand to Clearco.

Clearco was one of the first companies in what has become an emerging alternative finance space, offering revenue-based advances to startups mainly in the e-commerce, SaaS and mobile apps market.

Co-founder and CEO Andrew D’Souza got the idea after moving from Canada to Silicon Valley more than a decade ago. He realized the opportunity to raise venture capital was very different in the Valley compared to other areas — so he started to cultivate some ideas to help entrepreneurs whose companies were viable but not likely to attract venture interest.

“I realized venture capital was not going to serve the vast majority of entrepreneurs out there,” D’Souza said.

Looking at Europe

Clearco will use the new cash to expand abroad — something many in the space are doing. The company opened offices in the U.K. in early 2020 and expanded into the Netherlands earlier this year. Clearco now will look at the rest of Europe, as well as Asia, D’Souza said.

The company offers advances — which can range from $10,000 to $10 million — to companies with repeatable revenue. Clearco receives a 6 percent fee from the advance when repaid. While there is no maturity date to repay the financing, most companies pay back the amount within a year, D’Souza said.

The financing allows startups to infuse needed cash into their operations without losing an equity stake in their company.

“Why are founders using the most expensive asset in the world — which is equity?” asked co-founder and President Michele Romanow.

While newer players like Capchase have emerged in the alternative finance space, D’Souza said he still looks at venture capital firms and the likes of Sequoia Capital and Y Combinator as part of the larger market it seeks to disrupt.

In fact, earlier this year the company started its ClearAngel platform to help finance early-stage companies and give them resources to grow without taking an investment stake in the young companies. Instead Clearco receives 2 percent of the company’s revenue for four years.

Clearco does not offer detailed financials, but the company has advanced more than $2.4 billion in total to more than 5,500 companies, Romanow said.

The money for such financings come from several different funds made available to the company from institutional investors and banks, D’Souza said. While he declined to say exactly how much capital was available for advances, D’Souza did say the company can still advance billions of dollars to founders.

The 378-employee company also did not release a valuation for the new round, but D’Souza admitted the company would not have raised more money if it would have been a down round from its previous Series C.

“We wouldn’t be raising this kind of money if we didn’t think this could be a generational-type company,” he said.

While one of Clearco’s official company missions is to eventually help finance 1 million founders, D’Souza added the company also eyes another lofty goal.

“Our aim is to deploy more money than SoftBank does,” he said.

Illustration: Dom Guzman