How to attract investments from the Clearbanc platform – the experience of a Ukrainian startup
In a column for AIN.UA, Oleg Domansky, CEO of music-tech startup Jammy Instruments, which produces portable midi guitars, shared his experience of partnering with Clearbanc, an innovative platform for providing investment to startups. Not long before that, the company managed to raise the required $ 50,000 per hour on Kickstarter, and on the second day the amount increased to $ 100,000.
2020 shook the position of start-up businesses around the world: according to the Global Startup Survey, 41% of startups have less than 3 months capital turnover; 74% have seen a drop in profits since the beginning of the crisis, while 16% have seen more than 80% drop in income.
The most affected spheres of tourism, entertainment and manufacturing, including the music industry. Despite the fact that during the quarantine there was an increase in streaming, more than 50% of the profits of the music market are concerts (which is $ 25 billion worldwide according to the World Economic Forum). Added to this are the stagnation of the global economy, protests in the United States, and a drop in consumer sentiment.
Of course, Jammy Instruments was influenced by all of these factors, but we had no opportunity to delay the launch of the new Jammy EVO product on Kickstarter. Thanks to good preparation, we raised $ 213,000 as a result. Nevertheless, launching a new hardware product is a very capital-intensive business, so we looked for tools to minimize financial risks for the company and applied on the Clearbanc website.
This service is designed to provide fast and flexible funding: from $ 10,000 to $ 10 million can be provided within three days on a virtual Clearbanc card that startups can use to pay expenses (for marketing, for example). The percentage of service varies from 6% to 12.5% of the amount issued (which is significantly lower than a loan from banks), and there is no need to give a share to the company, unlike other accelerator programs. Moreover, there is no specific return period, you just pay a monthly percentage of sales.
How it was
We were contacted immediately after the end of the crowdfunding campaign, offered to meet, where we talked about our idea, business model, and processes.
After a preliminary match of values, Clearbanc connected to Shopify, where they analyzed sales dynamics using their own AI algorithm (which determines the amount of investment). The amount of investment depends on the startup’s monthly income for the last six months (the minimum is $ 10,000 / month). After the final interview, the service prepared a preliminary offer and checked all the documents. It was necessary to provide:
- bank account details;
- basic business information (eg EIN);
- basic information about the founders;
- memorandum of association;
- state-issued ID.
The whole process from interviews to funds on the card took 4 working days, everything is very comfortable and simple. Additionally, Clearbanc has created a very friendly community of founders of various startups on Slack, and has established relationships with investors (for example, Highland Capital) who are introduced to suitable startups.
The service, having raised a round of $ 300 million, has already invested in 2,200 companies, cooperates with Gary Vaynerchuk, is a partner of Amazon, Facebook, Paypal, Google, Shopify, etc.
As a result, Clearbanc allowed us to fully save all budgets without cutting operating costs in a crisis situation, as well as to establish contacts with potential classic investors. We hope our experience will help budding international startups get through the turbulence.
Author: Oleg Domansky, CEO of Jammy Instruments startup
Source: ain.ua
