In this engaging episode of "20 Minutes VC," host Harry Stebbings interviews Michelle Romano, founder and CEO of Clearbank, which provides non-dilutive capital to entrepreneurs. Romano shares her entrepreneurial journey from starting a sustainable coffee shop to creating Clearbank, which plans to invest $1 billion in 2,000 companies in 2019 alone. She discusses the inefficiencies of venture capital for customer acquisition, detailing how Clearbank's revenue share deals allow founders to retain equity while growing their businesses. Romano emphasizes the importance of data in removing bias from funding decisions, highlighting Clearbank's impact on funding more diverse founders and businesses outside traditional VC hubs. The conversation also touches on the evolution of customer acquisition and the benefits of alternative funding sources over traditional VC investment.
"Now, I've done over 2500 interviews and I'm not sure I've ever had so much fun on an episode as I did with today's guest."
This quote expresses Harry's enthusiasm for the interview with Michelle Romanow and sets the tone for an engaging conversation.
"Clearbank plans to invest $1 billion in 2000 companies to fund these ambitious plans."
This quote highlights Clearbank's significant investment plans and the scale of their operations.
"Michelle's also a prolific angel as a dragon on Dragons den Canada, the youngest dragon there."
This quote underscores Michelle's role as an influential investor and her status as the youngest dragon on Dragons' Den Canada.
"I was engineering, started a little sustainable coffee shop on campus, and started brainstorming with a bunch of friends."
This quote provides insight into Michelle's early entrepreneurial activities and her background in engineering.
"I figured out that worldwide supply of sturgeon, caviar, of all things supply, was down by 95% because we had overfished the Caspian Sea."
This quote explains the environmental issue that led Michelle to start a fishery and highlights her ability to identify market opportunities.
"Became one of the fastest growing companies in Canada just through low cost user acquisition, and then over the next five years, bought ten of our competitors."
This quote demonstrates Michelle's success with Bitopia and her strategic approach to growth and acquisition.
"Equity might not be the best fit for what these founders are doing because these guys are going to take the 100 grand that they get, they're going to dump it right into Facebook ads, which is exactly what they should do."
This quote captures the realization that led to the founding of Clearbank, recognizing that equity investment may not be suitable for all types of businesses, particularly those needing capital for online marketing.
"I'll give you the $100,000. You pay me back 5% of your revenue until you pay me back $106,000, and that's it."
This quote details the innovative deal structure Michelle proposed, which became the basis for Clearbank's funding model. It also emphasizes the non-equity, revenue-based repayment approach.
"And that kind of became the core of what Clearbank is today. I mean, last year on this same model, these revenue share deals where founders keep their companies, but they get the capital really quickly."
The quote explains the fundamental service Clearbank offers, which is providing quick capital to founders while allowing them to maintain ownership of their companies.
"This works for anyone who has positive unit economics and is spending a lot on customer acquisition."
Michele Romanow identifies the types of businesses that are ideal for Clearbank's services, emphasizing those with strong unit economics and significant customer acquisition expenses.
"And ultimately, that means that founders will be able to keep way more of their companies by the time they go public."
Michele Romanow highlights the benefit of Clearbank's funding model, which helps founders retain a larger portion of their company's equity when they go public.
"We do a lot of monitoring, actually, even on a daily basis, to make sure that if things are changing, we can help founders react quickly to that."
Michele Romanow discusses how Clearbank manages the volatility of customer acquisition costs, stressing the importance of real-time monitoring and founder support.
"People take binary approaches. People like there's untapped opportunities and it's very negative to say that there's saturated platforms to the extreme."
Harry Stebbings presents the differing viewpoints on the saturation of ad platforms, indicating a debate on the accessibility of customer acquisition channels for startups.
"I would still argue today the opposite, that you can go on Facebook and you can test for $20 and see if someone buys your product."
Michele Romanow provides a counterargument to the criticism of ad platform saturation, pointing out the benefits of modern digital advertising over historical advertising methods.
"VC is true risk capital. This zero to one risk that we describe. If you are building a crazy piece of AI and need 50 engineers or solving a disease, VC is the perfect fit for you."
Michele Romanow differentiates between the roles of VC funding and Clearbank's capital, explaining that VC is ideal for high-risk, innovative ventures.
"When you chatted before, you said that we need to stop celebrating funding."
Harry Stebbings references a previous conversation with Michele Romanow about the overemphasis on celebrating funding rounds, but her detailed perspective on this topic is not provided in the transcript provided.
"It's actually celebrating founders giving up a piece of their company, often a very large piece, 20% to 30% around, and giving up control of their companies."
This quote highlights the concern that celebrating funding rounds overshadows the significant equity and control founders lose in the process.
"When Microsoft went public, Bill Gates owned half of that company."
This quote is used to contrast the significant ownership Bill Gates retained in Microsoft at IPO compared to more recent examples like Lyft's founders, emphasizing the benefits of maintaining ownership.
"But I want to live in a world where founders can own more of their company."
Michele expresses her desire for a startup ecosystem where founders retain greater ownership over their companies.
"Last year, 80% of the venture capital dollars went to four states in America. California, New York, Massachusetts, and Texas."
This quote presents a statistic that underscores the centralization of venture capital in the United States.
"We've funded eight times more women than industry average. That's just what happened when we made those decisions just based on the data."
Michele explains how Clearbank's data-driven approach has resulted in funding a more diverse group of entrepreneurs than the industry average.
"This guy has a massive multimillion-dollar business that he owns 100% of himself."
This success story is used to illustrate the potential of businesses that grow outside the traditional VC model, emphasizing the value of alternative funding models like Clearbank's.
"Michelle, there's no question that 20 minutes has a ring. And I think that was 100% inspired and probably even subliminally inspired by you."
Michele confirms that the branding of Clearbank's 20-minute term sheet was inspired by Harry Stebbings' team, acknowledging their influence.
"The only way that we could do this in 20 minutes is we totally had to change the model."
This quote explains that Clearbank's innovative funding approach is a departure from traditional VC models, relying on technology to speed up the process.
"I'm ready to rock and roll."
Michele shows her enthusiasm for the quickfire round, indicating her willingness to engage with Harry's rapid-fire questions.
"Even if you build the best brand in the world, financial institutions have been so fair, unfair for so long, and just inspired me even more to keep going on our mission."
The quote highlights Michele's motivation to persevere in her mission, driven by the inequities she perceives in the financial industry's treatment of successful brands.
"The thinking that's been so extraordinary should not just apply to people that are in the Bay area. It should apply to every corner of America and frankly, every corner of the world."
Michele emphasizes the need to democratize the innovative mindset of Silicon Valley so that it can benefit people everywhere, not just those in the tech hub.
"All the moments that make you think are incredible places where you failed."
This quote underlines the importance Michele places on failure as a learning opportunity and a catalyst for critical thinking and improvement.
"I needed that early setback to realize that the world owes me nothing, man."
The quote conveys Michele's realization that success is not guaranteed and that setbacks are part of the entrepreneurial journey.
"It was a lot of those early experiences that inspired me to build better products for founders."
The quote explains how Michele's personal struggles with the traditional financial system motivated her to create solutions that would benefit other entrepreneurs.
"Stay calm. You have a circle of largely other founders around you that you can kind of figure out a strategy and a plan."
The quote suggests that Michele values a support system and strategic planning when dealing with difficult situations in business.
"I think we win when five years from now, standards are going public and they're back to owning half their companies again."
Michele shares her ambitious goal for Clearbank, which involves changing the landscape of company ownership during public offerings.
"Class of Zool is the best. Harry, I discovered this new tequila, like, six months ago. I'm going to send you some."
This quote illustrates Michele's personal interest in a product and her intent to share it with Harry, highlighting a lighter, personal side of the conversation.