In the current environment, some small companies have found it extremely difficult to receive the funding they need, something that Clearbanc — which offers venture capital for startups using artificial intelligence (AI) — says has put venture firms in “triage mode.”
The Toronto-based firm uses data-driven processes to make funding decisions, and set the terms of repayment. Co-founder and president Michele Romanow attributed the reason for the funding slow down to two key tools in the investing process.
“The ability to go in person, and to really share your own story on why you're the right person to build this business,” are critical components to winning trust — and money, she explained to “On the Move” in an interview on Friday.
“Then by going to see a lot of people in a short period, you can get a bidding war going, which increases your valuation,” she added. With startups having lost the ability to score in-person meetings during the COVID-19 crisis, its put them at a disadvantage.
The worldwide turmoil has added pressure on founders, given that most VC’s are not investing right now, according to Romanow. She noted financial technology deals have hit their lowest in over 3 years.
Venture capitalists are “thinking about triage mode, and how to save certain companies within their portfolio,” she added.
Romanow and her co-founders started Clearbanc in 2015, and to date have invested $1 billion in 2,200 companies in the last year alone. The company’s portfolio spans across the United States, Canada, and the UK.
One of the company’s key focuses is getting funding to those who are traditionally cut out.
“We've been able to fund eight times more women than the venture capital industry average, and to founders across, you know, every single state,” Romanow said. According to the executive, 80% of venture dollars typically go to only four states in America: California, New York, Massachusetts, and Texas.
Because of where the world is economically, Romanow says “we're in 2030, instead of 2020” thanks to booming online commerce. She doesn’t see that slowing down anytime soon.
“Every business today is going to think about building digital first,” she told Yahoo Finance.
“After this has happened, you won't forget this,” she adds.
McKenzie DeGroot is a producer at Yahoo Finance. Follow her on Twitter: @degrootmckenzie