A company looking to convince startups to ditch VC funding in favor of taking out a loan just raised $1 billion

Screen Shot 2019 04 03 at 1.43.41 PMAxios/Lazaro Gamio

  • Clearbanc has now raised a total of $1 billion in capital to fund startups.
  • The company offers startups an alernative to raising funds through a venture capital firm, giving loans (that don't require an equity stake) with 6% interest that are repaid by taking a portion of the startup's revenue.

Clearbanc, a company that provides non-dilutive funding to startups as an alternative to VC funding, has closed $1 billion in capital (including the $120 million it disclosed last year).

The bottom line: "Today, 40% of VC dollars in companies are spent on Google and Facebook ads," Michele Romanow, co-founder of Clearbanc and an investor, tells Axios. "Founders are using the most expensive capital for this."

  • Instead of buying equity in a startup, Clearbanc simply charges a 6% fee for a loan. The startup shares a percentage of its revenue with Clearbanc until it's paid back.
  • Clearbanc uses data like a company's Stripe transactions and Facebook ad conversions to vet potential investments. It mostly funds e-commerce startups with consistent revenue.
  • Investors in Clearbanc's funds include CoVenture, Upper90 and Social Capital (which debuted its own similar program in 2017 called "Capital-as-a-Service").

Go deeper: Venture capital may not be a one-size fits all system

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