Why Venture Capital Is Not for All Entrepreneurs
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“Growth capital” provider Clearbanc, which recently raised $250 million in “Fund 3” and $50 million in “Series B,” has invested in more than 1,000 brands including Public Goods, Le Tote and Leesa Sleep, among others – brands that are on track to collectively generate $1 billion in sales this year.
Here, Michele Romanow, cofounder and president of Clearbanc as well as a TV personality, shares her insights on what it takes to succeed as an entrepreneur in today’s highly competitive market.
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WWD: What was the impetus behind launching Clearbanc? What was the motivation?
Michele Romanow: As a Dragon on “Dragons’ Den,” the Canadian version of “Shark Tank,” I saw so many founders giving up equity in their company in exchange for capital to fund things like ad spend and inventory. I’m a founder myself and I’ve been through fund-raising and an acquisition, so I know how important ownership is for founders.
See related story: Clearbanc Raises $300 Million in Series B, Eyes Expanding ‘Flat Fee’ Model
Clearbanc is built by founders, for founders. I bootstrapped all five of my companies — and sold one to Groupon — before founding Clearbanc, and many of the employees at Clearbanc are previous founders themselves. I wanted to give entrepreneurs a fast, affordable way to fund their growth without sacrificing equity or taking a loan that carries a lot of risk.
WWD: Why isn’t venture capital for everyone? What are the drawbacks?
M.R.: Venture capital is all about your network, which means many founders with growing, successful companies don’t get VC funding because they don’t live in the right part of the country, know the right people or go to the right schools.
We use data science to drive our investment decisions, and it’s helped Clearbanc fund 8-times more female-founded companies than traditional VC. It also means we’re funding companies outside of the tech hot spots. Last year, Bloomberg reported that 80 percent of VC dollars were invested in only four states and nine states didn’t receive any funding at all. At Clearbanc, we’ve already funded companies in 43 states in 2019.
Going the equity route also isn’t the best solution for every business — especially for brands who have product-market fit and just need access to capital to acquire new customers. Pitching to investors is a long and drawn-out process that takes an average of 18 months to secure a single round. That’s a huge amount of time to be away from your business.
WWD: As a “Dragon,” what do you look for in entrepreneurs? What personality traits? What does it take to win?
M.R.: The best thing I ever did as an entrepreneur was to take a job selling water heaters door-to-door. If you can help people feel comfortable enough to invite you into their homes and make a sale for something like water heaters, you learn so much about talking to people.
You can’t undervalue good sales skills. An entrepreneur sells every day — to customers, investors, employees, vendors, partners. The sooner you get comfortable with a sales mind-set, the better you’ll be at growing the business and talking about the problem you’re fixing.
WWD: Where do good business ideas come from?
M.R.: So many of the incredible businesses operating today were created where a founder has a frustrating experience in their own and figures there has to be a better way. Clearbanc is a great example of just that.
But building a business is never a straight and easy path, so it’s up to the entrepreneur to navigate wins and failures and adjust when they make mistakes. Having founded five companies, I’ve had a ton of failures, and I’ve learned from everyone.
Our hope with Clearbanc is that more founders with great ideas can have one less thing to worry about.
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