A new $100 million angel fund is being launched for Black Americans and other early-stage founders as an alternative way to secure financing. Clearbanc, which calls itself the world’s largest e-commerce investor, announced it will offer the funding through a new fund called ClearAngel.
Targeting entrepreneurs with strong growth potential, the firm uses AI (artificial intelligence) to determine funding terms and a revenue-share repayment option among ways to provide founders capital access to help grow their firms.
With the launch, Clearbanc aims to invest the $100 million across 5,000 companies within the next two years. It aims to invest $10,000 to 50,000 in exchange for 2% of a company’s revenue over four years.
Businesses must generate at least $1,000 in monthly revenue and be willing operate full time. Firms unable get traditional small business funding or those without angel investors will be targeted.
Black founders often fall short in the VC funding space. And Clearbanc claims over 50% of businesses fail in their first five years. But the firm swears businesses it has worked with have grown two times faster than those who didn’t use its capital and approach.
“We’ve invested $1.6 billion in more than 4,000 companies, but had to turn down 10 times more founders than we funded because they didn’t meet our revenue threshold,” stated Andrew D’Souza, Clearbanc’s co-founder and CEO. “ClearAngel is our first product for early-stage founders from all walks of life who are seeing initial traction, but don’t have the experience or network to raise an angel round or get into Y Combinator.”
Clearbanc reports it has already helped several Black startup founders. Among them: Tracey Pickett of Hairbrella, Brandon Deyo of TFIOM, Patrick Robinson of Paskho, Marc Lafleur of Tru Local, and Olubukola Adeyeri of BYFNE Swim.
D’Souza says ClearAngel uses AI to answer the most common questions that early-stage founders ask. Those questions include how is my business doing? How am I doing compared to others in my space? What’s the one thing I need to do this week to improve my margins and move my business forward?
ClearAngel offers founders data insights and advice to help them to reach new milestones in revenues and customer acquisition. It also offers firms it works with access to Clearbanc’s network of partners, VCs, and vendors to help accelerate their business.
Xiomara Rosa-Tedla, founder and co-owner of UnoEth, shared how her firm that sells leather bags and accessories worked with Clearbanc. As a small business, she says it’s incredibly difficult to obtain capital to help grow the business, scale, and still maintain 100% ownership. She says big banks wouldn’t consider her firm because it was in its first years of starting and some lenders wanted to charge super high interest rates.
After a couple of phone calls and running the numbers, UnoEth decided to work with Clearbanc to fund its advertising budget. “As an ecommerce brand, it’s super important to advertise online to reach new audiences to UnoEth and retarget existing customers,” Rosa-Tedla says. “With the help of Clearbanc, we were able to do just that, which in turn, helped grow our online business tremendously.”
Black Enterprise connected with D’Souza by email to talk about his firm and its new fund.
Why do founders of emerging Black businesses make good candidates—particularly with COVID-19 lingering—for this new capital funding option your firm is offering?
It’s never been easier to start a business but it’s still insanely hard to build a successful one. Unfortunately, the color of your skin makes it that much harder. This isn’t a new trend, Black founders face discrimination daily. ClearAngel was created to open doors and provide the resources founders need, no matter where they’re from. And this is more important than ever so we don’t lose the progress Black founders have made in the last few years. During lockdowns only 8.8% of Black-owned businesses reported profitability, compared to 23% pre-COVID. We want to level the playing field.
How much of the $100 million has already been raised and what type of investors is the money coming from? When do you expect the fundraising to be completed?
This is a new fund and Clearbanc is raising rolling capital for this launch with $10 million already secured from angel and institutional investors. This is a first close of a fund that will grow quickly as we expand the program and build it into our core product. We had immense demand for the first fund and wanted to ensure we could onboard enough companies before expanding the size of the initial close, but we are set up with scalable capital to fund as many founders as want into the program.
Your firm offers founders a revenue-share repayment plan as an alternative way to gain funding. Why strategically would your option make more sense for Black founders than other types of funding such as venture capital funding or bank loans?
The reality is, Black founders receive less than 3% of VC dollars. VC is a relationship business, the only way to truly remove unconscious bias is to leave the decision making up to the data. ClearAngel is literally invested in a founder’s success. There are no personal guarantees, fixed payment timelines, and compounding interest.
If I am a Black founder interested in seeking funds from your new product, ClearAngel, what do I need to do to apply?
For early-stage founders interested in learning more information about seeking funds from ClearAngel, founders can visit angel.clearbanc.com to join the waitlist to be part of the public beta.