Clearbanc to rebrand as Clearco after $100M fundraising round.

Fintech darling largely finances e-commerce startups

A Canadian fintech darling co-led by Dragons' Den star Michele Romanow announced Tuesday a major rebranding on the heels of a US$100-million series C raise.

Clear Finance Technology Corp., which operates Clearbanc, announced that Connecticut-based venture capital firm Oak HC/FT was leading the third round of funding. The Toronto-based company also raised US$250 million of debt from National Bank subsidiary Credigy. Combined, the two funding vehicles raise the company's valuation to nearly US$2 billion, according to a press release.

In the wake of the fundraising round, the AI-based lending firm, which largely finances e-commerce startups, is rebranding from Clearbanc to Clearco in a move meant to signal that it's much more than a disruptive financier.

“I think that people when they see the word bank, they think about just capital,” president and co-founder Romanow told the Financial Post. “For us, given that we had spent the last year building all of these other products ... it was very clear to us that we were growing way beyond capital.”

The pandemic, which kicked off a boom in e-commerce, meant more businesses, and even new founders, began populating the online space in an effort to meet demand, co-founder and CEO Andrew D'Souza said. Those businesses and founders also discovered they needed help with more than just capital.

“We realized we are well positioned to do that,” said D'Souza.

And thus, over the course of more than a year, Clearco began developing a suite of products and services designed to provide non-traditional funding and assistance.

Included is the company's signature product — that had already launched in 2019 — which is its 20-minute term sheet. It uses machine learning algorithms for the underwriting process and can get companies anywhere from $10,000 to $10 million in funding. Usually, Romanow said, it can take a venture capital firm three to six months to deliver a term sheet in Silicon Valley.

The company relies on data science and machine learning to help finance companies, and several other products and services use those algorithms.

ClearRunway gives SaaS businesses — software companies which sell subscriptions instead of licences — up to 24 months of future revenue at a discounted rate. ClearValuation provides free valuations, plus ways to increase the company's values. ClearAngel is the company's new angel investing arm.

“So now with just $1,000 or $2,000 is revenue, we can give you your first angel cheque which can be $25,000 to $50,000,” Romanow said of the angel investing arm. “Instead of taking seven per cent of your company, the way an accelerator does, we just take a percentage of your revenue for four years.” Lamont, whose firm is focused on funding health care and fintech startups, said the refocus of Clearco could be a game changer for the CFO office.

“When you think about the entirety of what a CFO does — AR, AP, payments, funding their infrastructure and funding their growth — we see Clearco as basically supplying all the needs of the CFO suite,” she said. “That's the sort of very long-term vision of what this could be.”

Annie Lamont, co-founder and managing partner of Oak HC/FT, will join the board of directors following the deal.

“We're excited about the 10- and 20-year vision of this company, (which solves) a huge need in the marketplace,” Lamont said.

What further piques Lamont's interest in the company is Clearco's pursuit of startups outside traditional tech hubs and founders from marginalized backgrounds.

Romanow highlighted the figures: 70 per cent of Clearco's U.K. founders are outside London, while 13 per cent of their portfolio of startups are helmed by founders who are Black and Latinx (an inclusive term for people from Latin America) — this is “versus a traditional VC portfolio with 2.5 per cent,” she said.

Both Romanow and D'Souza expect to double up on their funding for startups after this latest funding round and expansion. The company in the last two years invested US$2 billion in more than 4,500 enterprises.

Clearco's series C funding comes from both existing and new investors, which include executives from Stripe, Square, Affirm, Adyen, Robinhood, Betterment, Airbnb, HubSpot, AirWallex and Apple.

MICHAEL NAGLE / BLOOMBERG FILES It was quite clear to president and co-founder Michele Romanow that a major rebranding was needed at her fintech company.