Michele Romanow’s Clearco scores significant endorsement from global tech investor SoftBank

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Japanese goliath SoftBank has backed its first Canadian startup, leading a US$215 million raise for Michele Romanow’s Clearco as the Toronto company looks to expand globally and launch new products to help fund entrepreneurs.

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SoftBank Vision Fund 2, launched in 2017 to focus on late-stage venture capital investments, is being joined in the round by investors including Intuit, Bow Capital and Park West. The raise comes on the heels of a US$100 million round in April, which catapulted the e-commerce merchant-financing company to “unicorn” status, a milestone for tech startups that reach a US$1 billion valuation.

“When Softbank first started with the Vision Fund, they reimagined venture capital and shook up the space in a meaningful way,” Clearco co-founder and chief executive officer Andrew D’Souza said in an interview.

D’Souza added that both Clearco and SoftBank share “the same view that access to capital for most entrepreneurs is inadequate, with a very small percentage of founders who are overfunded, where every investor is chasing them, but 99 per cent of founders around the world have struggled to raise the capital they need to achieve their potential.”

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The Japanese tech and telecommunications giant reached out to Clearco, formerly known as Clearbanc, shortly after the startup became a unicorn. Led by chief executive officer Masayoshi Son, SoftBank has backed some of the world’s most successful startups, including Chinese ride-sharing app Didi Chuxing Technology Co., DoorDash Inc., WeWork, Uber Technologies Inc. and Canadian-led Slack Technologies Inc., most of which went on to list on public markets.

“Clearco is a market leader who has created an entire industry that is fiercely dedicated to democratizing access to capital and a full suite of services that serve the founder journey,” SoftBank Investment Advisers director Kristin Bannon said in a statement.

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Clearco is a market leader who has created an entire industry that is fiercely dedicated to democratizing access to capital

SoftBank Investment Advisers

The investment in Clearco marks a significant shift in Softbank’s outlook on Canada. In 2019, Yoshiaki Tanaka, a senior director at SoftBank Telecom America Corp., told the Financial post that unicorns were rare in Canada, and domestic startups were too small to be considered by the fund.

Since then, a parade of Canadian startups have reached unicorn status, including Visier, Clio, Thinkific, Wealthsimple and Trulioo, as well as Clearco.

“This is a great celebration for Canada and we’re showing that you can build a great, local company from Canada,” said Romanow, Clearco’s co-founder and president. “We’ve shown that we have the Silicon Valley ambition.”

Clearco funds e-commerce companies looking to boost their marketing budgets, and has invested $2.2 billion in more than 5,000 businesses across seven countries since it was founded in 2015 by D’Souza and Romanow, who that year also became a star on TV’s Dragons’ Den.

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The company also says it has backed eight times more female entrepreneurs than traditional VCs (at a time when global VC funding for female founders dropped by 27 per cent in 2020) and that 13 per cent of its funding last year went to BIPOC founders. Romanow said Clearco’s model avoids basing funding decisions off a founder’s network or education background.

“If you’re a single mom, a military veteran or a founder from any other pocket of the country, it’s really hard for you to get in front (venture capital firms),” Romanow said. “We care about your revenue growth, your unit economics, and we care about if you’ve penetrated your audience on digital apps. And those are fundamentally very different criteria than, ‘Do I like this founder?’ and ‘Would I use this product personally?’ — which I would say the vast majority of venture capital is based on.”

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The financial technology — fintech — company uses bank and online advertising account data to decide which businesses to finance, addressing holes in the financing available to startups, which often struggle to borrow from traditional lenders since they have few tangible assets.

Clearco provides cash advances in exchange for a percentage of the revenues, plus a six-per-cent premium. It claims that the funding model is less challenging to access than venture capital as it does not require entrepreneurs to give up equity in their companies.

With Softbank’s capital injection, Clearco says it could expand its products, including its ClearAngel program for early-stage startups, which launched in February, and grow its team of 380 employees, which has doubled in size over the past year. It is also setting its sights on extending its reach into international markets.

The fintech launched in the United Kingdom in October and the Netherlands in May. Clearco plans move into the rest of Europe, as well as select markets in Asia.

“Softbank has a track record of funding companies that have had success in one region and supporting them globally,” D’Souza said. “There’s probably even more of a need and opportunity internationally because across Europe and Asia, venture capital is less developed and banks are more conservative, but there’s still the same entrepreneurial energy and lots of problems to solve and talent out there.”