Fintech/Interview/

Clearco launches European scout programme for ecommerce startups

Revenue-based financing giant Clearco thinks scout programmes shouldn’t be just for VCs

By Amy O'Brien

Clearco cofounders Michele Romanow and Andrew D'Souza

If you’re a VC without a scout programme, are you even a VC? 

These programmes — where VCs give cash to founders and operators to invest in early-stage startups — have become ubiquitous at all the brandname firms, from Accel to Atomico to Sequoia

But revenue-based financing giant Clearco thinks scout programmes shouldn’t just be for VCs. 

The Canadian scaleup is launching its Founders Fund in the UK today that selects Clearco customers and some non-Clearco customers to scout investments and receive a share of revenue of those investments. Sifted caught up with the new programme’s managing partner, Michelle Finizio, in this week’s Fintech newsletter.

Is the founders fund a pot of money that will go towards investing in ‘scouted’ companies? How does scouting work?

We’re working in direct partnership with Clearco on our traditional capital offering — it’s part of Clearco’s overall debt capital button, which is multi billions of dollars. We have built that globally, but it is manually underwritten by a debt facility that’s based in the UK. 

We want to elevate this above the traditional scouts ecosystem, where it was more a private network that was very selective, and based on founders the firm had backed. The differentiation here is you could be a founder or a founder that we’ve invested in, but you can also just be a leader in the ecommerce space that we’ve not come across before. Those leaders come in different shapes and sizes, and from all different walks of life. For example, we have one prospective scout who recently took funding from us who didn’t go beyond an eighth grade education and was homeless at 14. 

The entire mission of Clearco has always been to take down the walls of traditional VC and get founders access to the funding that they need because their business is performing well. It’s all based on upside and merit-based rewards.

We’re not giving you carry for this amount in an equity transaction, but you are getting revenue share. And that revenue share is going to pay you out upfront and de-risk your position, not only because you’re not putting the dollar in but also you’re getting payout upfront, and you’re going to be compensated for the lifetime of the funding that that brand takes. Scouts will also gain access to growth metrics and insights for companies on the programme’s radar. 

How much can a scout invest through the programme? And how much revenue share do they get? 

The amount of capital that goes into the company is merit-based. We have an AI platform that integrates with Shopify, with a company’s ad platform and their bank account. So in the same way as a VC might take alliances and do that scout affiliation and build diligence by company, we run our own diligence process, based on the performance of their ecommerce channel. The amount that we can invest on behalf of a scout or that a scout can invest will largely be determined by the company’s performance. The revenue share is 1% on the origination funding, and 0.12% on any follow-on rounds of funding.

What else will the scout programme involve? 

It’s going to be an ecommerce leadership programme that will cover everything from the funding landscape to an education on how to invest. Then we’re building a network through things like dinners, get togethers, and we even have a Slack channel that the community has constant access to.

How are the scouts selected?

They’re either directly referred, as there’s a bit of a recognition and understanding of who’s out there in the ecommerce world. Or they can apply online — we have applications coming in from around the world, and they’re reviewed on a rolling basis.

Why the UK? 

Our motivation behind entering the European market is because we see ecommerce here is booming. Our debt facility is located in the UK, and it’s a particularly interesting starting point for us because ecommerce has been exploding — growing close to 50% year-on-year. Clearco’s portfolio of companies is 50% female — 25 times more than the VC industry average, and a third BIPOC [Black, indigenous and people of colour]. We see the scout programme as a tool to continue that diversity of funding in Europe. 

Sign up to our fintech newsletter, where we interview someone from Europe’s financial tech ecosystem every week. 

Join the conversation

avatar
  Subscribe  
Notify of