This funding method is shaking up the VC world

Clearbanc's Michele Romanow shares her way to make funding more accessible for founders from all sorts of backgrounds at #bits20

Founder, investor, TV personality and role model Michele Romanow is definitely shaking up the Venture Capital scene and challenging the traditional methods that have been known and established for decades. At this year’s Bits & Pretzels Networking Week, she recounted how she came up with the innovative funding model of Clearbanc and gave some insights about how founders can benefit.

Michele's VC firm Clearbanc follows a very founder friendly approach as they don’t take equity from the founders and instead take a certain amount of the revenue until the loan is paid back. A model that is especially profitable for e-commerce startups. And the success proves them right with investments in over 3.300 companies over the last five years, as she said in the interview with Bits & Pretzels Editor-In-Chief Britta Weddeling.

But the business was not the only reason for Michele to expand her alternative funding method. She wants to challenge the unfairness the traditional equity model holds, especially towards founders who might not have connections and insights into the scene as “Venture Capital is a human-based industry [...]. It’s extremely biased to people who are already in these circles.” 

She stresses that “over 50% of Venture Capitalists in America went to Harvard or Stanford. You can not tell me you have diversity of thought if you went to one of two schools that taught you how to think in a certain way”. But according to Michele, “great founders come from all sorts of backgrounds”. Clearbanc is a prime example of that as the company has funded eight times more women than the Venture Capital industry average and has founders in all 50 states of America. 

Every beginning is difficult 

When we first started doing this, it didn’t work very well”, tells Michele Romanow, as at times they lost up to 20% to 30% of the money they were investing. But it was just a matter of time until they saw promising results because “the magic of Big Data is that you get bigger and bigger. You start seeing what you are looking for.“

And Big Data plays a huge role in another important topic that is dear to Michele's heart: for startups to know their worth. That’s the reason why they launched a new valuation tool over this summer to help entrepreneurs figure out what their company is worth, because “if you are a founder, you might get this information two or three times in your life, maybe when you get a VC deal done.”

Her experience as a serial founder showed Michele the importance of handling the valuable data of her founders with much care and to use it in a meaningful way. It’s important to her to give back valuable information in exchange for the trust that is put towards her and Clearbanc, and not to waste time because that’s a founder’s most valuable asset as she learned herself.