Clearbanc taps into AI to level playing field in startup funding

Alternative funding provider Clearbanc gives online brands access to affordable capital. Clearbanc Co-Founder and President Michele Romanow joins Yahoo Finance’s On The Move panel to discuss how startups are faring during the coronavirus crisis.

Video Transcript

JULIE HYMAN: We have been tracking whether private funding has been as robust during this crisis, and it seems in some cases maybe not as robust, but it hasn't slowed to a trickle.

Michelle Romanow is joining us now. She is Clearbanc cofounder and president, and she's joining us as part of our Women and Money segment brought to you by USAA. She is in Toronto. Michelle, thanks for joining us.

So we have heard at least some anecdotal examples of people coming on the show who have said they've been able to get funding right now, but give us the big picture of what it has been like for startups and VCs and that relationship at a time when you can't fly and see them, and people are perhaps more constrained in their ability to fund than they were before.

MICHELLE ROMANOW: Totally. I think you're 100% right is that the tools that are typically given to founders are the ability to go in person and to really share your own story on why you're the right person to build this business. And then by going to see a lot of people in a short period you can get a bidding war going, which increases your valuation.

Founders have basically lost both of those tools in addition to facing all of this pressure because most VCs right now are not thinking about new investing. They're thinking about triage mode and how to save certain companies within their portfolio.

And so, you know, their LPs are sensitive too. As markets have been really uncertain, everyone's looking at different environments.

And so, you know, there has been deals. I mean, I think we're at a 13-quarter low on just the fintech space in terms of, you know, venture capital deals getting done. There was, you know, government funding in some of these PPP loans, but they really weren't suited or designed or even for startups.

And so then there's alternatives like Clearbanc, we have continued to fund and grow largely because we fund e-commerce and B2B SaaS companies with nondilutive capital.

ADAM SHAPIRO: Hey, it's Adam. Thank you for joining us. There was an effort prior to COVID-19 for several years to help people get funding who had traditionally been cut out of that-- women, people of color. What are you doing now, especially-- because you just said there's this effort to protect what's already in the portfolio. What's being done now to make sure that the people who got left behind in the past don't get left out now?

MICHELLE ROMANOW: Yeah, I think it's an incredibly important question. You know, today women receive a tiny fraction of venture-capital funding. And one of the things we're really proud of at Clearbanc is that 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, all 50 states of America versus the stat which is 80% of venture dollars typically gets deployed in four states in America-- New York, California, Massachusetts, and Texas.

And so I think we've got to be careful at this time because we made, you know, strides forward. And if we're just now in protection mode, we are not getting, you know, diverse founders more funding.

DAN HOWLEY: Michelle, in this kind of climate, where are you seeing the most VC money going as far as product categories or services categories?

MICHELLE ROMANOW: You know, I think that, you know, certainly we're the biggest investor in e-commerce, and so we have seen, you know, crazy segmentation. Anything that's in the food and fitness category is doing exceptionally well today, obviously because we're all at home.

I really think e-commerce has accelerated. You know, we're in 2030 instead of 2020. We've gone 10 years forward because if you think about it, the way we're going to rebuild this economy is that every single small brick-and-mortar business is going to be thinking e-commerce first. And so we've seen e-commerce and cloud do really well. And then I think the rest, it's hard to be seen because the numbers are too soon, depending on what sectors.

Certainly in fintech, which is, you know, the sector that we're in, I think this is also really accelerating things. You know, banks had traditionally thought that it was a huge competitive advantage that there were these [AUDIO OUT]. Now we again accelerated everyone online as a part of this process.

JULIE HYMAN: Michelle, when it comes to e-commerce, what are you most excited about that you're seeing out there? What do you think-- I mean, if we're being pushed to 2030 from 2020, is that a matter just of penetration, or are we going to see some real technological changes and leaps as a result of what's going on?

MICHELLE ROMANOW: I think it's both. So the first is that the penetration is driving this. Everyone-- my parent's generation has bought groceries probably for the first time online, although I've been telling them that they can do this for years. And so we're seeing penetration throughout the stack of probably items that were never purchased before. I think my funniest purchase is I bought a 50-pound kettlebell to arrive to my house, which is something I never would have even thought of shipping before.

And so that is going to drive an incredible amount of innovation around that because, you know, all the postal carriers are saying it's basically as if we're in Christmas mode right now. We need better forms of 3PLs. You know, advertising prices are down because so many other categories are down.

So today, you know, Facebook and Google ads are down in prices, and so it's given these e-commerce companies an incredible time to build habits with customers, to build new subscriptions, and I think we're going to see a lot of innovation come out of that.

DAN HOWLEY: Michelle, I got to point out that it's amazing that you managed to get a kettlebell. I've been looking for dumbbell weights online everywhere.

MICHELLE ROMANOW: These were hard to find online.

DAN HOWLEY: They're sold out. It's ridiculous.

I guess, you know, I want to ask as far as the e-commerce goes, do you think that that's going to be something-- you know, obviously it's a trend that's going to continue forward. It's already been a trend. But do you think it's going to be continuing at such a pace as it is right now, or do you think when brick-and-mortar retail opens up again we'll see it slide back?

MICHELLE ROMANOW: You know, that's a really good question. And what I think is going to happen is every business today is going to think about building digital first. And what I mean by that is even if you are a shoe store in a local community, after this has happened, you won't forget this. And so you're going to be thinking, you know, I need both a physical location, but I also need to be [AUDIO OUT] right away.

And so I think that's, you know, the shift we're going to have. Gyms are going to think about, well, you know, there needs to be a workout remotely component to my business because I do think that this change is going to produce, you know, really secular changes around what we are doing.

JULIE HYMAN: Michelle, thank you. Thanks for your perspective on all of this. And good luck to Dan Howley and to Michelle getting more workout equipment. Michelle Romanow is Clearbanc cofounder and president. Thanks again.