With ecommerce booming during the pandemic, dedicated ecommerce investor firm Clearbanc is looking to help fuel growth across the sector with a £500 million investment fund for online start-ups.
The investment firm is also looking to shake up inventory supply for these start-ups, with Clearbanc directly purchasing from inventory suppliers and the company only pays Clearbanc after customers buy their products.
The alternative capital platform – founded by Canadian Dragons’ Den star Michele Romanow and her partner Andrew D’Souza – has invested more than $1 billion into 3,300 start-ups, £30 million of which has gone into British start-ups during beta.
Combining data and machine learning technology, Clearbanc offers UK start-ups an alternative to venture capital in the form of non-dilutive revenue-share agreements. Users connect their revenue and marketing accounts with Clearbanc’s APIs that shows founders their investment offers. Offers range between £10,000 to £10 million with a 6-12% flat fee.
This intelligent algorithm also removes bias from the funding process and as a result Clearbanc has invested in eight-times more female founders than traditional VC firms.
The new injection of capital comes at a critical time for UK start-ups, with the surge in online shopping caused by the COVID-19 pandemic expected to add £5.3bn to UK eCommerce sales this year — bringing the total market up to an estimated £78.9 billion.
Clearbanc’s first-of-its-kind inventory funding will buy inventory upfront and companies only pay back the financing with a 6% fee, so founders never have to worry about being on the hook for buying too much inventory and they can spend their money in more efficient ways.
Upfront Inventory is aimed at freeing up cash flow and clearing the barriers founders face in scaling their business. Today’s inventory system is a broken one that works against founders. Ecommerce companies today use upward of 50% in savings to buy the products from suppliers to sell, which means they have to make tough decisions about where cash is spent.
Already one of the most stressful times of the year, firms are scrambling to capitalise on the accelerated shift to e-commerce and prepare for an unpredictable shopping season, all while ensuring product availability and avoiding “out of stock” scenarios.
Michele Romanow, co-founder, and president of Clearbanc, explains: “2020 has been incredibly hard for founders, but it’s also brought a ton of opportunities for online businesses. Consumer behaviour has completely adapted to this new way of life, and for companies to succeed in this new wave of shutdowns, it’s critical to capitalise on the rise of online traffic. It’s not as easy as building an online store — founders need the funding, data insights, and global network to grow. Clearbanc is the pioneer of alternative capital, backing more than 3,300 businesses, and the best partner to help UK founders reach new customers both at home and globally.”
During Beta testing in the UK, Clearbanc funded more than 250 companies, 70% of which are based outside of London.
Beyond funding, the launch means UK ecommerce entrepreneurs can now connect to the Clearbanc platform to receive a free weekly valuation of their business, meet reputable investors or buyers, see how their businesses compare to competition in their category, and access funding options.
The platform also identifies areas of growth that may have been previously overlooked, as well as ideas about where digital marketing spend is not as effective as it could be when compared to the performance of peer companies, making data-led recommendations on what to improve to reach new customers.
Clearbanc’s model has proved incredibly impactful for the start-ups who have used it so far. Piglet, a direct-to-consumer bedding and linen business, grew revenue seven-fold after just two months of using Clearbanc funding to scale. Their ROI to date stands at a staggering 6,900%.
Jessica Mason, Piglet founder, says: “We love that Clearbanc really understands what it means to run an ecommerce business. There’s room to continuously scale without worrying about limitations on their side to provide the funding we need. We had the confidence to expand and know that we could continue what we were doing with Clearbanc’s full support.”
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