“Many founders confuse collecting money with making money.”
This quote, which the founder of Career Karma, Ruben Harris, spontaneously mentioned when he spoke to me on the phone, has crossed my mind for months. Indeed, raising money can cost you money in those sweet, sweet property and equity.
That’s why Clearbanc, a startup I’ve reported on for years, always had a convincing pitch.
The company, co-founded by Michele Romanow and Andrew D’Souza, positions itself as an alternative equity-free capital solution for early stage founders. When starting the “20-minute term sheet”, the startup uses an algorithm to search through a startup’s data. When it has positive ad spend and positive unit economics, it makes an investment ranging from $ 10,000 to over $ 10 million. It makes money through a revenue sharing arrangement versus a stake.
“While we’ve invested in over 4,000 companies with this model, we’ve also turned down over 50,000 that weren’t on this scale or repeatability,” D’Souza told .. The startup announced this week that they have raised $ 10 million to develop a new product: ClearAngel.
The startup tries to help anyone with an online business that generates early revenue but has broad traction. Clearbanc aims to replace the money from friends and family, a concept that D’Souza says is “quite elitist” with its own version of an angel’s check, while also offering start-up services such as supply chain analysis, networking and competitive landscape analysis .
The startup only needs to generate around $ 1,000 monthly income to qualify for cash. In return for an investment between 10,000 and 50,000 US dollars, founders must pay up to 2% of their sales within four years.
Clearbanc’s repayment works for some startups, a traditional bank loan might work better for others. I would argue that the biggest hurdle is that if a startup is already making large revenues, you may not want to take out a revenue sharing loan.
What if a startup takes ClearAngel capital and doesn’t make the minimum sales?
“Then the ClearAngel product won’t work,” he said. “There will definitely be some companies that still don’t make it, that’s the risk we’re taking.”
Alternative capital has advantages and disadvantages, just as venture capital has advantages and disadvantages. If the end goal is to become a billion dollar business, what is the best way to do it? Will a revenue-sharing agreement affect your chances as a pre-seed startup trying to raise capital? Does YC even care?
These are some of my biggest questions, and we’ll be investigating all of them (and more!) In my alternate funding panel for TC Sessions: Justice next week. Attendance at the entire conference costs $ 5. Speakers include Backstage Capital’s Arlan Hamilton and Congresswoman Barbara Lee.
Remember, if you sign up, you can get Startups Weekly in your inbox before anyone else. It’s free! As always, you can find me on Twitter at @nmasc_ or email me at [email protected] It’s free too!
Coinbase files are published
After being valued at $ 100 billion in the secondary markets, Coinbase has finally filed for an IPO. The S-1 is, as Winnie founder Sara Mauskopf tweeted, #goals. The crypto unicorn, as my colleague Alex Wilhelm notes, grew a little more than 139% in 2020, which is a massive improvement over 2019 results.
Here’s what you should know:
Mobility as a service
I briefed Eric Eldon, editor-in-chief at . and former author of Startups Weekly, about the latest work with Kirsten Korosec, our transportation editor.
This is what he had to say: Startup workers may not go to the office as often or never again. But everyone still has to go to places or at least wants to! How are you going to do it? What we gonna do? How will our changing needs and desires reshape cities, since new technologies also fundamentally change traffic? We’ll cover this topic in depth this year as we all figure out how to get back to work.
Spain wants startups to be successful on its soil
The Spanish government, led by Prime Minister Pedro Sanchez, has announced plans to transform itself into an entrepreneurial nation. The Startup Act is the first law designed to help create technical innovations in Spain. The aim is to promote innovation and new capital through domestic and foreign investment and to determine the future of Spain as a hub for new businesses.
Here’s what you should know: Driving innovation can start with easing regulatory concerns.
Under a package of around 50 support measures, the corporate strategy refers to “Smart Regulation” and expresses the idea of sandboxing for public testing of products (ie without first having to worry about compliance with legal regulations).
More news this week:
Some personal news
As loyal Equity listeners may have noticed, we were quietly experimenting with the concept of adding a third show to our weekly production. This week we told the world! Along with our current shows to help listeners start and end the week with technical news, on Wednesday we will provide an in-depth look at a topic, area or person. Our first midweek episode went online this week and it was all about space (so yeah, expect lots of puns and Elon jokes).
The show is celebrating its four year anniversary and I will be celebrating my one year anniversary as a co-host. We are all so grateful for your support and can’t wait to bring you more laughs and learning.
Our latest episodes:
In the course of the week
Seen on .
The launch boot camp that you always needed is finally here
Scoop: VCs track hopin valued at $ 5 billion to $ 6 billion
The startup scene in Lisbon is rising as Portugal turns into a European tech tiger
Sources: Lightspeed Venture Partners is about to hire a London-based partner to break into Europe
Contra wants to be a community for independent workers
Seen on Extra Crunch
Jason Boehmig of Ironclad: The goal of pricing is to get less wrong over time
When the BNPL startups rise, take a look at Klarna, Affirm, and Afterpay profits
4 essential truths about venture investing
And that’s the packed week! As an insider tip for subscribers, I’m starting to cover Health Tech (along with Edtech) for the TC team. So throw me the smartest person you know on this subject and extra points if you are.