May 10, 2019 · 31m · 20vc
20VC: Clearbanc's Michele Romanow on Why 40% of VC $ Raised Today Goes To Google and Facebook, How To Create A Financing Mechanism For The Repeatable Parts Of Your Business & Why We Need To Stop Celebrating Fundraises
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Michele Romanow, co-founder and CEO of Clearbanc, joins Harry Stebbings on The 20 Minute VC to discuss how revenue-share financing provides a non-dilutive alternative to traditional venture capital. She shares insights on algorithmic underwriting, founder equity retention, customer acquisition economics, and eliminating funding bias.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 41.3% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 4.0 Guest disagreement 2.0 Harry pushing back 1.5
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 11:34 Rejection of Distribution Channel Framing
Michele directly rejects Harry's premise that distribution is harder today, arguing forcefully that pre-Facebook channels like television and billboards were far more prohibitive for startups.
Hardest push from Harry ▶ 9:31 Challenging CAC Volatility in LendingHarry refuses to accept that digital ad channels offer predictable returns, pressing Michele on how ClearBank handles extreme CAC volatility and channel saturation.
Biggest teaching moment ▶ 11:34 Historical Media Buying LessonMichele educates Harry on the high costs of legacy advertising relative to modern $20 digital tests, leading Harry to concede that he was not working in the industry a decade ago.
Harry holds his own ▶ 13:26 Defending VC Strategic Board ValueHarry draws on his venture expertise to challenge ClearBank's model, pointing out the net loss of losing a high-value VC partner and strategic board member.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| ClearBank's Founding Story and Origins | 1 | 4 | 1 | 0 | Harry asks introductory questions about Michele's background and the spark for ClearBank. Michele dominates the segment with a long narrative covering her career from caviar farming to Dragon's Den and the origin of ClearBank's revenue-share model. | |
| Target Businesses and Unit Economics | 4 | 3 | 2 | 3 | Harry asks a grounded question about target unit economics and pushes back by noting the extreme volatility of customer acquisition costs (CAC) on digital channels. Michele explains how ClearBank's data science team monitors ad performance on a daily basis to mitigate risk. | |
| The Evolution of Customer Acquisition and Distribution Channels | 3 | 6 | 5 | 3 | Harry presents the argument that distribution channels are increasingly closed and saturated. Michele explicitly rejects his premise, explaining how legacy media buying like billboards and TV was vastly more restrictive for startups, leading Harry to acknowledge his lack of industry experience at that time. | |
| Non-Dilutive Capital vs. Traditional Venture Capital | 4 | 5 | 3 | 3 | Harry challenges the non-dilutive funding approach by highlighting the strategic board value that traditional VCs bring. Michele responds by framing VC as true risk capital while advocating against celebrating massive dilution events, citing stats on founder equity at IPO. | |
| Democratizing Access to Capital via Data Science | 2 | 4 | 1 | 0 | Harry asks about geographic venture capital distribution. Michele shares data on capital concentration, explaining how automated underwriting removes human bias and reaches non-traditional founders across underserved regions. | |
| Scaling Automated Underwriting in 20 Minutes | 3 | 2 | 0 | 0 | The interview shifts to lighthearted banter over the 20-minute brand naming followed by a quickfire round touching on book recommendations, failure, and founder stories in a collaborative atmosphere. |
Statements from this episode (18)
Clearbanc plans to invest $1 billion across 2,000 companies in 2019
“In 2019 alone, ClearBank plans to invest one billion dollars in 2000 companies.”
Buytopia raised no venture money and acquired 10 competitors in five years
“In 2010, started an e-commerce company called Bytopia. We couldn't or didn't raise any money, became one of the fastest growing companies in Canada just through low-cost user acquisition, and then over the next five years, bought 10 of our competitors.”
Romanow: 40% of venture capital goes directly to Google and Facebook ads
“40% of venture capital dollars that are raised today end up going straight to Google and Facebook ads.”
Romanow: Major e-commerce brands spend 70% to 90% of capital on CAC
“You look at the big e-commerce brands, they were spending 70, 80, 90% of their dollars on customer acquisition.”
Clearbanc funds ad spend cheaper than equity to preserve founder ownership
“We can fund that for way cheaper than equity can, and ultimately that means that founders will be able to keep way more of their companies by the time they go public.”
Romanow: Clearbanc earns a 6% fee on deployed capital
“I mean, this is a business where I make, you know, six percent when we put out our money, and so we don't have the luxury of a VC fund where you're picking lottery tickets, and one company can really carry a bunch of losses.”
Romanow: Scalable growth channels should be funded with debt, not equity
“VC is true risk Capital. This, you know, zero to one risk that we describe. If you are building a crazy piece of AI and need 50 engineers or solving a disease, VC is the perfect fit for you. What I'm saying is, ClearBank, we're like, if you know that channels …”
Vinebox doubled its Series A valuation after taking Clearbanc capital
“You know, he took some of our capital last year in Q four, got to raise a series A that was double the valuation.”
Romanow: Funding celebrations glorify founders giving up 30% of their companies
“It's actually celebrating founders giving up a piece of their company, often a very large piece, 20 to 30% around, and giving up control of their companies.”
Romanow: Lyft Founders Retained Only 3.5% Equity at IPO
“The founders of Lyft went public, and they owned three and a half percent of Lyft”
Romanow: Bill Gates Owned 50% of Microsoft at IPO
“When Microsoft went public, Bill Gates owned half of that company”
Romanow: Nine U.S. States Received Zero Venture Capital Funding in 2018
“And there was actually nine states in America where there was zero dollars in venture funding. There was no companies that got venture funding.”
Romanow: Clearbanc Funded Eight Times More Female Founders Than VC Average
“And so, when I pulled our numbers, like, we funded eight times more women than industry average.”
Clearbanc provided $8M to a 100% founder-owned murder mystery subscription box
“So two years later, this guy has 60,000 subscribers. He has a massive multi-million dollar business that he owns a hundred percent of himself. ClearBank scaled up from 10,000. We've given him out eight million dollars in funding.”
Romanow: Clearbanc replaced Stanford MBA analysts with automated data science models
“The only way that we could do this in 20 minutes is we totally had to change the model, and so instead of using smart Stanford MBAs, we had to use data science and technology, and we had to really understand, and the data sources had to be big enough.”
Romanow: Clearbanc could not have existed three years ago
“To make no mistake, this company could not Three years ago. I mean, the data sources themselves had to be big enough, and then we had to figure out what are the indicators that did matter, and how to assess unit economics, and return on ad spend, and all of th…”
Banks required Lululemon founder personal guarantees despite $20M in revenue
“He was on his fifth store, already a wildly successful brand, and the bank made him take a personal guarantee to buy at that store when he was at, you know, over twenty million dollars in revenue, and I was just so inspired.”