The Secret to Raising Capital When No One Wants to Invest

Jun 7, 2022 1:30 pm2:30 PM EDT

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Key Discussion Takeaways

Many high-growth direct-to-consumer eCommerce businesses needed funding to succeed and become what they are today. But there is not one funding solution that fits every business’ needs. How do you decide what the right approach is for your business?

Today, the need for capital is increasing while the cost of capital is also climbing. Rising capital costs are impacting access to cash flow for scaling brands while the demand for finances is steadily growing. Options for funding are becoming more expensive as VCs are tightening their portfolios. As a long-time venture capitalist, Sumeet Shah reviews revenue-based funding (RBF) and explains how it works and its requirements. There are factors to consider when pursuing the equity funding path. Sumeet discusses the ways to secure funding. He also discusses trending industries that excite him and how Clearco, the company he works for, is helping provide funding to LGBTQ, BIPOC, and women founders.

In this virtual event, Aaron Conant sits down with Sumeet Shah, Venture Partnerships Manager at Clearco, to discuss the state of the market, revenue-based funding, and how to deploy capital effectively. Sumeet talks about market trends, venture debt, funding, the cost of capital, and much more.

Here’s a glimpse of what you’ll learn:

 

  • Sumeet Shah speaks about Clearco and his history in venture capital
  • Sumeet discusses the state of the market and reviews funding trends
  • Why founders have to be more tactical when it comes to effectively deploying and investing capital
  • Three key things to look for in the VC space: healthy deal flow, healthy portfolio companies, and happy investors
  • How Revenue Based Funding (RBF) works
  • Clearco’s buy now pay later tool and the advantages it offers
  • What factors to consider when pursuing the equity funding path
  • Sumeet discusses three exciting industries equity investors are spending a lot of their time on
  • How to deploy capital effectively
  • How Clearco is helping to close funding gaps for LGBTQ, BIPOC, and women founders
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Event Partners

Clearco

Clearco is the world's largest eCommerce investor providing equity free capital solutions to e-commerce businesses. Clearco's gives founders real-time access to a global network of partners in addition to insights and data tools to help support them scale their business.

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Guest Speaker

Aaron Conant

Co-Founder & Managing Director at BWG Connect

Aaron Conant is Co-Founder and Chief Digital Strategist at BWG Connect, a networking and knowledge sharing group of thousands of brands who collectively grow their digital knowledge base and collaborate on partner selection. Speaking 1x1 with over 1200 brands a year and hosting over 250 in-person and virtual events, he has a real time pulse on the newest trends, strategies and partners shaping growth in the digital space.

Sumeet Shah

Venture Partnerships Manager at Clearco

Sumeet Shah is the Venture Partnerships Manager at Clearco and is half of the New York-based venture partnerships team. Clearco is the world's largest eCommerce investor providing equity-free capital solutions to eCommerce businesses. Managing the growth of the NYC division, Sumeet builds key partnerships with venture firms, accelerators, incubators, and intermediaries.

Sumeet is also the Venture Principal at Swiftarc Ventures, an early-stage venture capital firm. With over 13 years of experience in the startup, tech, venture capital, and private equity industries, Sumeet is passionate about the futures of community, experiences, and human-like touches that brands and companies make to potential and current customers.

Event Moderator

Aaron Conant

Co-Founder & Managing Director at BWG Connect

Aaron Conant is Co-Founder and Chief Digital Strategist at BWG Connect, a networking and knowledge sharing group of thousands of brands who collectively grow their digital knowledge base and collaborate on partner selection. Speaking 1x1 with over 1200 brands a year and hosting over 250 in-person and virtual events, he has a real time pulse on the newest trends, strategies and partners shaping growth in the digital space.

Sumeet Shah

Venture Partnerships Manager at Clearco

Sumeet Shah is the Venture Partnerships Manager at Clearco and is half of the New York-based venture partnerships team. Clearco is the world's largest eCommerce investor providing equity-free capital solutions to eCommerce businesses. Managing the growth of the NYC division, Sumeet builds key partnerships with venture firms, accelerators, incubators, and intermediaries.

Sumeet is also the Venture Principal at Swiftarc Ventures, an early-stage venture capital firm. With over 13 years of experience in the startup, tech, venture capital, and private equity industries, Sumeet is passionate about the futures of community, experiences, and human-like touches that brands and companies make to potential and current customers.

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Aaron Conant

Co-Founder & Managing Director at BWG Connect


BWG Connect provides executive strategy & networking sessions that help brands from any industry with their overall business planning and execution.

Co-Founder & Managing Director Aaron Conant runs the group & connects with dozens of brand executives every week, always for free.


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Discussion Transcription

Aaron Conant  0:18  

Happy Tuesday everybody. My name is Aaron Conant. I'm the co-founder and managing director here at BWG Connect we’re a networking knowledge sharing group of 1000s of brands, and businesses and corporate entities that work together to stay on top of the newest trends, patterns, pain points, whatever it is that shaping digital. Since we kicked this off five years ago, we've hosted over 1000 events and had over 5000 brand conversations just to stay on top of what's happening. They weren't the same topics come up over and over again, we host an event like this. We're also gonna do a lot of in person events this year, we also launched a podcast. So if you're late to learn more about anything that we're doing in the educational space in digital as a whole, don't hesitate to reach out. You can you can connect with me at any point in time, Aaron A-A-R-O-N at B-W-G Connect.com. A couple of housekeeping items as we get started today, we want this to be as educational and informational as possible. At any point in time. If you have any questions, drop into the chat, drop into the q&a, or you can always just email me A-A-R-O-N at B-W-G Connect.com, we'll get those questions answered. That includes you know, an hour after the call, you forgot to ask something tomorrow next week, don't ever hesitate to reach out, we'd love to get answers and just help people in the community out. The other thing is we're starting this four to five minutes after the hour, and we're gonna try to wrap up early as well. Just like to be as timely as possible, know, you guys made a time commitment today and just want to be able to just give any gift of time back that we can. So just you know, as a heads up, we'll give you plenty of time to get on to your next meeting without being late and probably grab a cup of coffee along the way. And so as we kind of jump into this conversation, Sumeet, we're just kind of talking a little bit around, you know, the funding aspect and capital as a whole. And a lot of people have questions in this space, you know, and outside of just the service provider side as well, right? The companies that are out there, looking for capital to raise capital in a time where it's starting to shrink and the available dollars that are out there. And they come highly recommended throughout the network, just being great partners to businesses as a whole. And so, you know, just grateful for them to be on the line today. But Sumeet, if I could get over to you if you want to do a brief intro on yourself. Right, Clearco as a whole that would be awesome what you guys are doing in this space. That'd be great. And then we can kind of get into the conversation. That's some good. 

Sumeet Shah  2:37  

Absolutely, Aaron, and thank you again for having me, Aaron on this incredible conversation. And again, hello from Tribeca everybody. My name is Sumeet Shah. I am one half of the New York based venture partnerships team here at Clearco. We have a team all across the country and actually in the world, as well. So I run the New York arm from here and a little quick background about myself. I'm a longtime venture capitalist, started my career actually in private equity consulting first five years of my career from 2008 to 2013. During that time, which was rising out of the ashes of the financial crisis, came the launches of some very well known consumer startups really the first wave, Warby, Birchbox, Harry's, Peloton, Uber, Lyft, you know, Oscar, Casper, all these ones basically launched in the early 2010s. And with that launch these early stage consumer investors, venture capital firms and angel investors. So in 2011, I met a few of those early investors or during my time in consulting, two years later, one of them an angel investor time, reached out and poached me from my firm to help start an early stage consumer venture capital firm in 2014, called Brand Foundry Managers. We sourced and worked on 20 deals together over my time there at three and a half years. Company as you might know Allbirds the weighing rockets of awesome Koyo with its secrets for companies like the SIL Umi, many of them actually are Clearco clients, including robotics companies as well. We also had early investments in companies like Warby Parker, Birchbox, Harry's and Peloton. Brand country I stepped away in 2017 spent about a year and a half freelancing and working with startups, brands and agencies on partnerships, then help start another venture capital firm early stage consumer in and healthcare in early 2019 called Swift Ark. We have an early and growth fund as well as a BT fund and a telehealth fund. I was there for about two and a half years full time and spent a lot of my time indirectly working with the team at Clearco formerly known as Clearbank. At the end of 2021, the head of venture partnerships rather Kapoor reached out to me and basically made me an offer. I couldn't refuse to join the firm and build out New York. So I joined in January officially. And my role as a venture on the venture partnerships team is to work with the investor community to back their portfolio companies and other great companies in the ecosystem. With Clearco working capital financing, so we provide non dilutive meaning no equity taken working capital financing, to direct consumer consumer brands. So we provide it primarily for inventory and for marketing and ad spent, we have the ability also to fund for other areas, but we use a fixed fee, and we use what's known as revenue based financing to get repaid. So we take a percentage of company's daily sales, that payback level, usually around four to six months that we get paid back. But more importantly, and I can't stress this enough, since its founding in 2015, Clearco, again, formerly known as Clearbank. So for those who may have heard the original name, Clearco has provided over $3.2 billion of capital to over 7000 founders, and has an internal network of 47,000 companies internally, that makes it technically one of the largest eCommerce investors in the world now. Don't quote me on that. But it's also a data point that is incredible to us. On top of that, we are one of the very few investment shops that can achieve parity, on our investment on all kinds of companies we've backed, as well as the fact that we fund up to 25 times more female founders, seven times more LGBTQA founders and 10 times more BIPOC founders than typical venture firms. That all being said, and I say this also, as a former slash current venture capitalist, we have the ability to work alongside equity investors, that because we have non dilutive capital, we can provide both the capital and the resources to venture backed companies as other great companies in the ecosystem that includes a performance and venture towards a data benchmarking metrics platform, that companies, once they connect accounts to Clearco regardless of they take financing from us or not, they get access to that data. For free, mind you, we also get access to the founders also get access to a partner matching tool called Clear Match, which we can connect agency partners, inventory partners, three PL partners, factoring partners, you name it, we most likely have it. We also even help founders, with exit strategies for their companies, they both do. So the goal for us is to work with all stages of a company's lifecycle, as well as providing effective capital spending resources for founders. So as always, we'd like to work directly with founders, of course, with direct with investors, but also with every stakeholder in the consumer ecosystem, because we're Clearco really stands for is to be a linchpin for the global consumer ecosystem, sort of based out of Toronto, and we have the ability to underwrite in over 13 countries. So that's a little bit of myself and Clearco.

Aaron Conant  7:33  

Awesome. So what is the the state of the market? You know, I think everybody has a feeling for what's going on, I would love to hear what you guys are seeing going on, you know, reviewing trends, I don't know if it's public markets venture debt, you know, it can be exit multiples, there's a variety of things. You know, there was so much fervor over the past, you know, two and a half years around digital as a whole. You know, and now it seems like there's a lot of shift in mindset as a whole love to hear, like, you know, stay in the market. What do you see in around, you know, public markets, venture debt and all this fun stuff? 

Sumeet Shah  8:11  

Absolutely. You're looking a lot in terms of the pendulum swing when it comes to valuations. And really, where those valuations and the current market status, current market strategies favor. Over the past couple of years, they've definitely been favoring founders as of late, but it's definitely swung back towards investors, as the market has been very unpredictable and difficult. As we come out of this pandemic, you're starting to see, unfortunately, a lot of venture backed companies starting to basically face the music in terms of down rounds more that they have to face with lower valuations. It has not been kind to direct consumer brands right now, a lot of these iconic direct consumer companies have been facing some impactful financial losses, significant decreases in valuations that exist from here. And what a lot of it is due to the fact that coming out of this pandemic, it's really exposed a lot of companies in terms of the authenticity of their communities that exist right now, if you were really basically surviving on paid ad spend, and really not spending the right actual time to build your communities to work with your spaces from here. And really, they can build that sort of level of just care with your customers. You've been exposed. I could use even more colorful language from it, but I'm not going to do but it's been a very difficult time for everyone involved in the markets right now. 

Aaron Conant  9:33  

It was so easy for so long, right? I mean, even with Facebook ads before the iOS 14.5 update, you know, across the board, even the DTC companies that decided to launch third party on Amazon, you just dump money in and money comes back out. And then you know, a, you know, third party cookies going away. I was 14.5 and everybody hitting ASCAP not to track you now. I agree with you. It's this it was this whole timeframe. At the same time, it seems like valuations are coming, they're coming down. 

Sumeet Shah  10:17  

100% Aaron, and I think it's, again, exposed founders for just who they are like, if you're, if you really don't have your heart into building this company from here, and you've got a real dedication to building it out, it's, you probably shouldn't have been this in the first place. And the other side of the coin, too, is that when you're able to test out all these paid adspend channels earlier on, you have the ability to experiment, right? You just knew that there were gonna be getting returns in various ways. And so founders had to be have to be significantly more tactical as to where they're putting their money and how to effectively spend their capital. Now, this quick shift back on to Clearco on that end, because we care about building those resources, and the resources and the capital to help finance those resources to help finance those campaigns helps be smarter with your money. It's not just the fact that it needs to exist, but it helps everyone really get out of this and provide the stability that companies can get out from here. And it's something that I you know, I do care a lot about our firm pushing from it. But it's also something that every single stakeholder should consider moving forward as we come through this very unpredictable time. 

Aaron Conant  11:31  

So how does it in that case, if people are looking for capital at this point in time? What is what does that look like? Traditionally, what does it look like from a Clearco standpoint? And then, you know, what does it look like, if we want to jump into like venture debt a little bit? And I think it's super interesting that you don't take an equity stake, right?

Sumeet Shah  11:42  

Yes.

Aaron Conant  11:55  

Because that's what's scary right now. Right? As valuations come down in the same amount of money, we give up a bigger stake in the company as a whole. And that has people holding their breath, especially the founders that are in it. They're trying to drive it and they don't, they don't want to give up that share. So what is that? What does that look like as a whole?

Sumeet Shah  12:14  

Yeah, there's a couple of pathways you have to consider from there as well, because and we'll we'll talk about both. One is that if you're explicitly looking at these different debt instruments, compared to me embracing equity for the first time, and the other pathway we've talked about are companies that have already taken equity financing, and they're facing, you know, a deeper level of dilution. So start with the first pathway. There have been a lot of different debt instruments that exist. Now, of course, venture debt is even banks lines of credit. And then of course, revenue based financing on this end, venture debt is great, the turnaround can be quick. There's a lot of great organizations that are providing, you know, strong amounts of capital onto there. But those also still come with covenants. These companies also that provide venture debt are expecting these companies to be venture bankable, they were expecting six, eight times plus return on investment onto the end, and they're expecting their company to take equity financing down the line. Now, I'll be completely frank, and then saying this, even as a former consumer VC, if you don't have to raise capital that will focus you towards venture returns, don't raise it, because it can be very much of a pressure chamber to have to deliver on those returns. Because you've usually even if you're raising equity capital venture, you're expecting a five to three to five year timeframe, sometimes seven on a stretch, that you have to hit that target on a venture space, we look for three basic three key things, healthy deal flow, healthy portfolios, healthy portfolio companies, and happy LPs current and potential limited partners, aka the investors into us. Right? Happy LPs means more capital for future funds. And the ability for us to fund more companies, as venture investors.

Aaron Conant  16:49  

So what is - how does the so it's not necessarily evaluation, then the striving this side of it? Is that right? Is it a monetization on a monthly basis? Like? You know, I just don't know how I do that. So it's commentary. But then what is the available funds? How does it work? Like, how do you know how much is available, you can draw on, we'd love to hear, you know how that side of it because I think a lot of people are saying, you know, I can stick to a multiple based on EBIT da or whatever it is, but we'd love to hear your thoughts on how you're looking at. 

Sumeet Shah  17:43  

Yeah, I can walk a little bit through the process for Clearco so we will request the company to connect accounts, we would connect at least one payment terminal and one marketing terminal, we have, we can source from over a dozen different payment terminals, the stripes, the squares, the Shopifies, the Amazons, even from here, so we can look under the hood into your past and current revenue streams. We are then also able using our internal proprietary tools to forecast your revenue streams. From there, usually within 24 hours, we are able to determine what financing offers that we can provide in usually three different kinds. We charge a fixed fee, which is 6%, again, dedicated to inventory or for marketing and ad spend. We also launched a brand new buy-now-pay-later tool, and I'll get to that one in a second, but with our main Clearco capital advances, we provide again at a 6% fee, three different offers three different what's known as remittance rates, which is as part of our RBF tool are going to be financing tool, it is a percentage of daily sales that we take to get our payback. That is how we work through the process. And it's a very, very general level to the process, I'm going to actually pass to Prabh real quick, if you have the, if you want to enlighten anything else that I missing on to the process, they're probably going to be one of our top sales guys here, as well as if you want to actually even touch the new buy now pay later tool ClearPay.

Prabhjeev  20:54  

Yeah, happy to chime in. The only thing I'd add to that the process is I think that's a good overview. The only thing I would add is that, you know, we can find within 48 hours. And so, you know, even amounts up to 10 million, are probably really quick, and probably one of the few investors that can move that much money that quickly. And then in terms of the buy-now-pay-later, so that's a that's a new product that we're testing. Essentially, rather than doing like sort of a fixed revenue share or a revenue share that we have a variable payback, what we're doing is giving you the option to basically extend any invoice. So it could be a marketing invoice, it could be inventory payments, or any business expense, and basically pay that over a period of anywhere from two to six months. So think about you know, you think about a firm or anything else you used to buy products online and you get get, you can pay this off over six months of equal payments, we're basically doing that same thing, but for your your B2B invoices, and it could be any business expense. So we can help extend the terms that you have, for any expense out to about six months with a flat fee associated with it and a single monthly payments that you would make to pay that back. Yes, that's that's an overview of the Buy Now pay later product. And you know, depending on what your business is looking for, either that could be a good fit or typical revenue share.

Sumeet Shah  22:17  

The buy-now-pay-later tool also was introduced in the past few weeks. That's been really exciting as a lot of companies are also experiencing a lot of non working capital financing areas to be paid for whether it's invoices or financing, including retail whatnot. And what's been really exciting about that is it's been making sure that we can help a lot of businesses that are driven to be dedicated towards really just making sure they build on their various offline channels to here. By the way, I apologize for the background noise from here. I unfortunately wasn't able to find the most private area and I apologize.

Aaron Conant  22:54  

So it's not that bad at all. Yeah, okay, perfect. Yeah. So you know, just a question around the you said, you know, marketing and inventory is what is being funded? Can you define marketing, I think people want to know that. And others if you have questions, drop into the chat the q&a or keep emailing them to me, Aaron A-A-R-O-N at B-W-G Connect.com.

Sumeet Shah  23:18  

Fantastic. In terms of for marketing and ad spend, it's really kind of covering the gamut. From here, it can be used to cover social media campaigns, it can be used to cover an ad agencies campaign that you're working through covering with influencer marketing spend, even paying off influencers on that end. It's a relatively loose term from it, but it basically, you will be getting your money through a virtual card on a Clearco. So kind of the same way that if you're going to your American Express or your credit card website, how things are categorized. But also what's important is that that actually will then go directly into an area was called vendor pay. And that money again, whether it's through a virtual card or if that vendor is already in our network, that money will go right directly to them. And to get at the specifics exclusivity?

Aaron Conant  25:03  

Awesome. The next question that comes in, are there either minimum or maximum thresholds?

Sumeet Shah  25:10  

It's a very good question. So the minimum threshold, the minimum qualification for a company to be qualified for the ICO is $10,000, in recurring monthly online revenue for at least six months. So the reason why we keep it that low, is specifically to bring in as many companies as we can, this ecosystem can accompany connect accounts and not hit that qualification right now and get those resources. The answer is, yes, we want companies basically to come in and get the wealth of resources, so that we can happen here. Because the goal for us is again, going back to the purpose that like we want to be the linchpin for the Global Customer ecosystem. Why wouldn't you? Right, we can provide and I know that Prop actually mentioned up to 10 million, the number actually has gotten higher recently. And we can provide up to $20 million per tranche of capital from here. Now again, assume right, it's quite high. Remember the assuming it's one to 1.5 times monthly revenue from your? So let's just hypothetically say, right, it's, it can be somewhere between up to 20 million in monthly revenue from that exists from there. So it's also why some of the companies that we've been back has happened to also be Fortune 500 level companies.

Aaron Conant  26:25  

So a question comes in over the chat. What's the interest rate per year?

Sumeet Shah  26:31  

Yep. So it's, it's hard to, it's hard to answer that, because it's really more I guess, about cost of capital. That is probably the way that we can describe it. Because we only charge that one flat fee per tranche of capital, we usually expect that 6% Difference specifically, we usually expect the payback around four to six months. And so usually, we've actually experienced a cost of capital of around 20 to 25% maximum. Now, don't 100% quote me on that, because we don't want to be pushing companies to pay at a specific timeframe. And I say that, because the last thing we want to do as an organization is to be predatory with any of our investments on that end, or any of the financing, or providing them here. I'm gonna again, pass it over to Prabh here to make sure that I'm also, uh, if there's anything else, I'm here to add a because this is not the first time I've gotten this question from someone. 

Prabhjeev  27:35  

Yeah, no, it seems like keep in mind, it's on a loan product, it's a revenue share with a flat fee associated with it. And so that's a total cost of capital is that 6% or BI p, that you would get? Now there's a there's an expected payback, but because it's a revenue share, that payback varies, right. And so there could be a scenario where the, you know, the business does not do well, and it takes, you know, a year or maybe longer to pay back the capital, you'd still only be paying back the flat fee of 6%. So you don't get there's only a penalty for being late on that expected payback, because it's a revenue share. So our incentives are aligned, in the sense that if the if the business does not do well, you know, we would we would sort of share that risk with you. On the upside, we can limit that to make sure you don't pay us back too quickly. So the upside can be limited as well. But on the downside, we're also like, I think there's a follow up question on do you get paid monthly or weekly. So we get paid to a percentage of your online sales. And the frequency of that would depend on the frequency of which you get paid from your payment processor. For example, Amazon is typically paid up bi weekly, so there'll be bi weekly payouts from Amazon. In that case, we would take a percentage of those bi weekly payouts. And so the frequency would be bi weekly. In the case of Shopify, it may be daily if that's if we can see what you get paid. So that it does depend on how often you're getting paid.

Aaron Conant  28:20  

Wow, that's awesome. So just to walk through it, you know, I get $100,000. And I'm doing a million dollars in revenue. And it's 6%. Right? It's going to take me a month and a half that it's going to be before it's paid back. Because it's actually taken out of the revenue that comes in a regular recurring basis. But if I have an off month, where sales are down, right, right, then I just pay less, right, because it's 6% of a lower figure. 

Sumeet Shah  29:36  

Exactly. And that's actually a very good thing. And I'm glad you brought that up, Aaron. So we do not expect you to have to pay that same amount from here. It's just all floating as per your industry revenue streams and then grow from there. And to answer the question for David, so the current working capital financing unfortunately cannot apply to wholesale businesses because we have to require you to connect an online payment terminal in order to be able to allow us to provide the best offers. Now for wholesale businesses that exist from here. We, we have potentially explored using the buy-now-pay-later tool from here. But again, I'm not going to push that and quote on that end as well, only just because the the tool itself has only been last launched in the past few weeks.

Aaron Conant  30:38  

So another question that comes in. So is there a one time qualification is there a one time qualification process, and then I can draw as needed from that value that's assigned?

Sumeet Shah  30:51  

Yeah, so as long as as soon as you connect to your account, so basically connected to clear cause portal, we will then start being able to provide those offers that exist from here, now the offers will be real time. So meaning that let's just hypothetically, say, you get offer X, you know, after day one, that you've connected your accounts from here, but you decide not to take that offer, and you're not required to take that off immediately from there. Let's see if your revenue then starts to go up. So instead of now, your, instead of generating 100k, and monthly revenue now, maybe you know, two months later, you're now generating an average of like 250k, we'll have offers as well, that will update as in real time as accordingly. And as a result of that you'll get a higher offer on that end.

Aaron Conant  31:35  

So there's no reason not to at least do an evaluation. 

Sumeet Shah  31:40  

Exactly. 

Aaron Conant  31:41  

There's no  annual or monthly subscription cost to be part, you know, included in the platform, just if I'm going to take cash out. 

Sumeet Shah  31:51  

Exactly. But also, there's no reason not even just to take that valuation, there's no reason not to sign up out like, and I can't stress this enough. And I'm saying just like, as a former investor, on this end, I encourage every investor to work with clear code and send it around. Because the tools that we provide to founders are not tied to financing. So hey, founder, you want access to this 47,000 company performance benchmarking insights platform that you can see in real time in your vertical how you're doing as per CAC, as per LTV, as for your average NOVs, as your growth strategies here that's available to you for free. As long as you connect your accounts. Do you want access to connecting with agency partners and inventory partners and these other three PL partners, manufacturing partners, knitting factories, whatever from there, like that we have connected and in our network, you want access to that? Sure, totally just checked accounts, you know, do you want to figure it out and learn from like some of our Clear Pitch competitions and everything exists from here. And access to some of that counts. Like it is a data play. Use that for it. But it's also so important because then we're able to provide a real time barometer for founders for the consumer ecosystem. That's all pulled into Clearco's portal, it's just, it makes no sense not to connect is basically what I'm saying. And because the fact that we tried to not put pressure on any founder to take financing from us. Yes, we would love for you to it's also let's be honest, it's how we make money. But it's more important for us to also like build that community. Going back to what we talked about earlier, Aaron, with everyone on that right.

Aaron Conant  33:40  

Awesome. So another question comes in, you know, he mentioned, you know, in Amazon Business, is this via Amazon Pay? Or is this actually an Amazon business? So I think what the question here is around is I've got a direct consumer site, and you mentioned payment portals, is that just, you know, through Amazon Pay, or which you know, as a payment portal on a website? Or are you having people who are direct consumer brands that are also selling on Amazon, and you can tie into that Amazon account and see what the dollar figure is to fund paid media and inventory as well. 

Sumeet Shah 34:14

So I'm going to say the latter and probably just going to confirm with you on that as well. I'm just going to list the ones that we actually have the ability to pull sales data from. Shopify, Stripe, PayPal, Square, Amazon, Authorized.net, Big Commerce, Braintree, Great Joy, and both the Google Play and Apple app stores.

Prabhjeev  34:36  

So yeah, that's exactly right to me, and just in case, your payment processor was not listed there. For companies doing more than $150,000 a month in sales we can even manually underwrite your processor if it's not one of those. So if it's under one ticket, unfortunately, it's limited to those processors but over 150 it's an eCommerce processor we will typically find a manual workaround to make it work.

Aaron Conant  35:05  

Awesome. Awesome. Yeah. I mean, I think that was just what if I'm only selling on Amazon, it's a direct consumer brand but it's third party, I'm not selling wholesale to Amazon, I'm using their Amazon as a platform third party to sell on. You know, a lot of brands out there getting the direct to consumer start, you know, via Amazon as a whole, and then using that to feed their own direct consumer site. So awesome. You know, you make an evaluation, that seems like it's real time. Do you have companies running out of capital? Can they come back and request more? Are there special use case use cases, I'm thinking of like a variety of things where, like, I love the idea and I understand now why so many brands connected us to you, which is the non equity stake, but also, is this recurring need for capital? So a couple questions come to mind. So ran out of capital is or is there a way to request more or an increase? And then how many times do you have people coming back a second time for a second tranche? Right. They go through, it helps, they need inventory again. Right? They, they they prime season is coming up, right? The holiday season, Q4. They've got, you know, inventories already here, but they need to move in as paid media. Do you have people doing more than one year over year tranches? Or how does that normally work? 

Sumeet Shah  36:42  

Yeah, so usually companies that are looking to take additional capital, we would probably want to have them payback. First, in terms of just working through that, but we can have what's known as a top up and additional tranches of capital basically launch even when it's usually a week, I know sometimes potentially even sooner and have that ready to go. I'm thinking about some like they've taken dozens of tranches of capital, I think I can think about ones that I've taken maybe the 20, 25 tranches at this point right now. It's, you know, what I look about its success metrics and how it's done well, especially compared to one of the biggest TTC darlings away, they've taken maybe around over $7 million in total tranches of capital from us. And now I've taken some equity funding. But that's also helped them stabilize and just build an incredible global brand in the space, but also, again, against a very heavily well capitalized, venture backed direct consumer darling. It's been able to achieve almost a similar metrics, with less equity taken out or west equity given out.

Aaron Conant  38:02  

No, I love it using it as a tool ahead of time, right? Yeah, it's just awesome. So other things, are there common questions that that pop up all the time? You know, for you? I mean, I can think how long does the vetting process take? You know, how long before I can get a tranche of funding? You know, because, you know, it's that classic, you want to secure funding when you don't really need it. Right, then having to wait to you really needed to go get it. So how long does the funding process take? And you know, how long before first tranche comes around? How quick is that process? 

Sumeet Shah  38:38  

Oh, my God, I think the record so far that I've seen in terms of the first offers has been four minutes. On average, it usually takes around 24 hours, for our first offers to come to come through. And it usually just takes a few maybe an extra day or two, to finalize just getting wires and everything done. So really, really can basically get a company from connecting accounts to funding within maybe even three or four days. That's what I would see on average, and I'm chuckling a little bit when I say that, because in the venture world usually takes around six to eight weeks to get start to finish in terms of a company funded. And it's a little frustrating. I will say I imagine it's incredibly frustrating for some kind of show here, which is why for us because we have that proprietary, I will start with the start with the offers. And then our team, our incredible sales teams, help finalize this with our diligence team, we can run within days and get it done.

Aaron Conant  39:41  

What are the things you're most excited about in this space? Is a whole? And are there any new things that are popping up that people should be aware of? Right because I think there are a lot of people as well that, you know, want to pursue that equity funding path. Maybe it's what are factors for them to consider there as well. So kind of three questions there.  

Sumeet Shah  40:04  

Yeah. So can you just repeat them to make sure I heard them correctly?

Aaron Conant  40:09  

Yeah. So if I start with, what do I still want to go with the equity funding path, what are things I need to consider there. And then the other ones are new things that are popping up and things you're most excited about. 

Sumeet Shah  40:20  

Okay, perfect. Just wanna make sure hear those correctly. So what if you still want to go with equity, we're never gonna stop you from doing that. But what's also again, great about our work because it's non diluted working capital financing, is that we need to worry about the dilution issue. If you're an equity investor, like you would actually probably want to offset the capital that's dedicated towards marketing ad spend, or busy for working capital, and have that come from clear go because you're providing we're providing both the resources and the capital to match on that end. So that money, they basically which equity capital, on average, around 40%, is dedicated towards marketing. And unfortunately, there are not a lot of investors who understand the best ways to spend that money correctly. So for us, because we can help provide help with both, A lot of that money then gets unlocked and can focus towards other areas. Building your products, building your tech or building your team. So that money can be focused towards the future while we find the present on that end. Now, in terms of what's really exciting, I'm going to talk about on the Clearco end, and I'll even just mention on the personal side of things. What's been exciting for us in Clearco is, we actually did a little bit of an internal review on the sector breakdown of where our companies are coming from. A whopping 50%, so the top three, I'll talk about, but a whopping 50%, which was the top one was coming from the world of fashion and apparel. And I'm not surprised when I see this data, but still so much in terms of it. So powerful to it. 50%, coming from fashion apparel, if you're an equity investor, it is incredibly difficult. And it's even more difficult than before, to be able to justify putting capital into a fashion or apparel brand, assuming the 6 to 8x plus return, that you're looking through his venture firm. Now, why is that the case, it's because, you know, the cost of launching and growing and scaling, an apparel brand is getting higher and higher these days. It's becoming incredibly fragmented in this space as well. The ability like you're dealing with incredible creatives, incredible global creatives that exist out there, but the ability to scale, and they're the business case and senses. Unfortunately, they're not as extended out as well. And it's not the founders all, it's just the fact that the industry in the sector has not provided enough resources to make sure that they can scale up that well. I mean, that's a whole nother conversation about state of US manufacturing. But that's, that's for another time. And so the fact that we are able to provide, again, the capital and the resources, supply chain resources, three PL resource, all those things, it just alleviates so much pressure on a founder who just wants to create something great, and just build a nice strong business and success can be 5 million in sales, right? Ultimately 10 million, 2 million, it doesn't matter. The point is that we can help companies grow onto that space from there, and you don't have the pressure and the dilution issue and all these other things that you're having to worry about as a founder on that end, we've been having conversations a lot with CFDA, we've had conversations with other major fashion organizations, and they see what we're doing and they're just like, this makes so much sense. It helps reinvest on this on sketch to scale on that end. So that's been honestly personally to me, where I'm really excited about the other two areas that fell off, came back from this was home and garden, which is quite exciting. Because especially coming to the pandemic people definitely reinvested in their homes and in their spaces. But the others that I'm also personally excited about on is the world where the future of health, beauty, and wellness is going. That's also where equity investors are spending a lot of their time on, especially with rich, routine driven wellness, where people are really revisiting the quality of their routines. You know, what they put in their bodies, what they're putting on their bodies, what they're wearing, dressing and everything, but especially, you know, on the Health and Beauty wellness brands of things. It's exciting to see people also focusing on genuine, authentic communities on just like what actually is better for you and is good for you on all levels. And whether it's clean beauty, whether it's scientifically backed backed beauty, and wellness and health spaces. And it's also even going to a bigger place. While you know we don't back it on the pot on the product side of things but just personally where even the future of mental health is going. The fact that people are actually not spending the time just to make sure that they're taking care of themselves is incredible. And I say that on a personal front, that I'm genuinely excited to see more of that destigmatize on there as well. So that's also just what I'm personally really excited about, on there, but also just for the Clearco front, like, it's exciting for us to also being able to help the market and also fix the funding gaps on there. I mentioned the data points about that, like, it's less than 2% of funding, right goes to female founders, less than 1% of funding goes to LGBTQA founders, the fact that we are able to give back seven times more now on LGBT, 10 times on BIPOC, 25 times on female founders, it's not just for the fact that we're hitting a checkbox here. It just needs to happen. It just, it's, it's, it's frustrating, where conscious and unconscious biases still exist, we have the ability to help close those gaps. Are we gonna be able to do it ourselves? No, but if we can help, you know, catalyze that for other investors, other stakeholders I call that a win.

Aaron Conant  45:55  

Yeah, I agree. That's awesome. I mean, if there's others, if you have questions, don't hesitate to drop into the chat or the Q&A. I don't know they have other ones that have dropped in here now. Or they're like, you know, number one, I would like to say thank you to everybody who dialed in all the great questions that came in. I would 100% encourage a follow up conversation with the team at Clearco. They're just doing some, I think really important work. I think they're completely invested, it's rare to find, you know that, that partner that is not going to take a piece of equity, it is going to promote in what you're doing. It's kind of a partner for success. So I'd encourage a follow up conversation with them as well. But sweet any, like key takeaways as we wrap up here?

Sumeet Shah  46:42  

Um, I guess on a, on a on a Clearco front, we are here to help this ecosystem grow and succeed, as the stabilized grow and succeed here. So please do not hesitate to consider working with us and connecting counsel working through us because we're only here to help you as founders and US ecosystem from here. Obviously, we have Prabh and even Murtaza on here as well, who will be more than happy also will be available, as well as as you're connecting for these as well. I know, Amy, my colleague on our platform team, will be also making sure for companies that are interested in connecting we'll, we'll follow up there as well. But also just if you have any other questions, and I'm based in New York, so if anyone here is also happens to be based in New York, and wants to grab a coffee, let me know. But also, just one last thing, and especially coming out of this pandemic and coming out this very unpredictable market downturn, everything that exists, being a founder can be the loneliest job in the world. It's not that it can be, it is. Especially if you're a solo founder. And if you feel that you are working on something, and you're just having a lot of difficulty continuing to be optimistic to be positive from here and from that space, please also do reach out to me because not just the fact that we're here to help on Clearco, but I get it. It's it's not it cannot be there's oftentimes it just, it's a roller coaster, and it can't be a fun place and you lose the fun and energy out of it. You want to talk about it? Let's talk about it. Email me, send me a message, LinkedIn, Twitter, anything. Just make sure to use the BWG as context, this event, just so I just also know where it came from. But more importantly, I'm here and you don't have to feel like it's a lonely place. It's there's people out there who want to hear how you're doing.

Aaron Conant  48:51  

Awesome. Awesome. Well, thanks so much Prabh and Sumeet for your time today. Thanks for being such great friends, partners, supporters, the network as a whole. Again, you know, we can do follow up email connections with everybody who attended. Again, thanks for the great questions that came in. I hope everybody has a fantastic Tuesday, a great rest of the week. Look for a follow up email from us. I'd like to have a conversation with you as well see what's going on in your space as a whole. If you have other pain points or ideas, that's how we get topics. So I'd love to have that conversation with you. And with that, we're going to wrap it up here. Everybody take care, stay safe and I look forward to having you at a future event. Alrighty, thanks again Sumeet. We'll see you my friends.

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BWG Connect provides executive strategy & networking sessions that help brands from any industry with their overall business planning and execution. BWG has built an exclusive network of 125,000+ senior professionals and hosts over 2,000 virtual and in-person networking events on an annual basis.
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