Just a month after courting a $70m round, Clearbanc, a startup that funds other startups, has raised another $50m.
Unlike VC funding, which requires startups to give up equity, Clearbanc requires startups to share revenue.
An alternative to equity
The team at Clearbanc thinks it’s stupid that most startups are forced to give up equity to pay for Facebook and Google ads. So, Clearbanc offers between $5k and $10m in funding in exchange for a steady share of revenue (in addition to a 6% fee on the back end).
The model is so attractive to startup owners that 1k companies have approached Clearbanc looking for funding since it raised its $70m fund just a month ago.
For Clearbanc and its investors, it’s a high-risk, high-reward proposition. VCs want big winners down the road, and they accept a few flops along the way. But Clearbanc wants reliable businesses that earn revenue immediately — and if they don’t pan out, Clearbanc loses its money.
The rev-share-olution
Clearbanc vets all of its clients by dissecting their Facebook and Stripe data to ensure their revenue projections are the real deal.
But other companies are also finding ways to capitalize on the growth of startups without waiting years to see an ROI — and they’re making smaller, more immediate returns than VCs.
Corl, a competitor to Clearbanc, offers what it calls ‘capital-as-a-service,’ and many startup accelerators are switching to revenue-based models so they don’t have to wait years for companies to exit before they get paid.
