Michele Romanow knew she had to do something to help entrepreneurs better market themselves — and keep control over the companies they create — when she first saw the wooden iPhone cases.
As a judge on CBC’s Dragon’s Den — a sort of Canadian alternative to the U.S. hit show Shark Tank — Romanow regularly hears more than 250 pitches from budding founders in as little as 17 days. One of those pitches stood out, however: a father-son team making the wooden iPhone cases who were offering up 25 per cent equity in their company in exchange for an investment of only $100,000. For Romanow — co-founder of financial services platform Clearbanc — a light bulb went off.
“Equity just isn’t’ the right fit for these businesses,” Romanow (pictured above with her co-founder Andrew D’Souza) told B2B News Network in a phone call on Monday. “There are lots of startups that are never going to be a billion-dollar company, but they might still have great unit economics and so I thought, ‘Why not pay me five per cent of revenue and you pay me back $106,000?”
Clearbanc is automating that model with the launch of the 20-Min Term Sheet, an online questionnaire entrepreneurs can fill out to see if they quality for an investment of between$10,000 to $10 million that will fund their paid marketing initiatives.
The company has set a goal of spending $1 billion to fund 2,000 startups through the tool this year.
The 20-Min Term Sheet is powered by artificial intelligence (AI) tools that will assess the results of the questionnaires by connecting with advertising tools like Adwords and Twitter, as well as e-commerce services like Shopify and payment systems such as Stripe.
The 20-Min Term sheet requires startup drive a minimum of $10,000 in monthly revenue and that they are demonstrating success by marketing through at least one paid channel.
“You can’t be brand, brand new to marketing,” Romanow said, laughing, adding that Clearbanc will not direct the marketing initiatives but can offer guidance. “Everyone on our team that you’ll talk to are ex-founders, so they’ve all done this process before. We can give tons of recommendations on how to improve your business with marketing, the media mixes you could consider.”
Companies can use the funding to underwrite content marketing or even earned media opportunities through PR as well, Romanow said, but the company would apply higher fees of up to 12 per cent. The six per cent fee for paid marketing funding will not compound or increase with time, she added.
Clearbanc sees the 20-Min Term Sheet as an alternative to entrepreneurs who feel frustrated with getting rejected or losing a major stake in their firm by approaching venture capitalists. Romanow, who co-founded several firms before ClearBanc, knows this frustration first-hand.
“That is certainly the old model — this incredibly subjective, personalized process where your’e using a ton of Stanford MBAs to determine if this is the right business to invest in or not,” she said.
While early adopters of the 20-Min Term Sheet include consumer-oriented firms like music discovery service VNYL, Romanow said she sees considerable opportunities to help those selling to other businesses boost their sales and marketing capabilities.
“We’re doing some experiments in that space,” she said. “I think there’s a lot og the B2B process we could build products into.”