Venture Capital: Clearbanc Founder on the Funding Slowdown at Startups

May 18, 2020 | News, Venture Capital

Michele Romanow, the co-founder and president of venture capitalist firm Clearbanc, says VCs are in “triage mode.”

Triage: “Decide the order of treatment of patients of casualties.” That’s a comment on the grim funding conditions that start-ups face in the current environment. Venture capitalists are “thinking about triage mode, and how to save certain companies within their portfolio,” said Romanow. She was speaking in an interview with “On the Move.” (Yahoo Finance)

Why founders are in dire straits

Romanow was the youngest competitor to win the “dragon” status on Dragon’s Den, Canada’s TV pitch competition. Her VC firm, Clearbanc, wants startups to focus on building products rather than just customer acquisition at exorbitant costs.

It innovatively offers venture capital to startups using AI and basing the amount of investment on unit economics and repayment through revenue share.

So, what’s broken?

Two things – Founders can no longer make their pitches in person to VCs, a key requirement to establish trust and win funding; second, the inability to create bidding interest by meeting a larger circle of prospective VCs.

These factors compound the already tight state of funding availability as VCs put a brake on fresh investing given the uncertainty about the pandemic and its ultimate economic toll.

Notably, Clearbanc last month laid off 17 employees in a move to extend its own cash resources.

Runway, from ClearBanc

Last month, ClearBanc, now often referred to as “revenue share investor” rather than venture investor, launched Runway.

It is an AI-enabled tool that helps cash-strapped founders struggling from the COVID-19. It calculates the cash availability ‘runway’ of the business by calculating its cash burn rate and the available cash on hand.

Running on ClearBanc’s proprietary platform, Runway creates an equity-free, custom funding plan that will allow the startup to remain in business.

Romanow has stepped beyond her comfort zone of investing in consumer companies and ventured into B2B and SaaS companies.

Companies in the e-commerce, direct to consumer, and enterprise SaaS sectors may avail of Runway. The eligibility threshold is $10,000 monthly revenue and at least six months of consistent revenue history.

“Capital is the most important tool to sustain and grow a business and is now needed more than ever. Clearbanc Runway fills a huge need in the market.”

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