Clearbanc: Re-envisioned
0. Product re-envisions
What is this article about?
re·en·vi·sion (Verb)
“to envision (something) again especially in a different way”
Have you ever seen UX redesign and Case study articles?
In such articles, designers choose a website/mobile app and offer new looks and interactions for it. Sometimes they even go as far as suggesting new features and functionalities. It’s the designers’ way of saying, “I would have built/designed it this way.”
I think there should be a Product Management version of those:
Same as a UX case study, the Product Manager (PM) could choose a company and a product, tear it apart, and suggest changes. I called these studies “Product Re-envisions”; because the PM is offering a new vision for the product that challenges the status quo.
Just like the PM role, product re-envisions could have a broad scope. Every organization has a higher-level company vision, product vision, business objectives, and product strategies. Based on those top-level objectives, there are feature themes, features, solutions etc. within the product.
Articles by Dustin Moskovitz & Jennifer Nan, Jens-Fabian Goetzmann, and Teresa Torres inspired this artifact.
For a better understanding of how higher-level goals could cascade down to themes and features, please refer to these articles.
You could play around with any of these, for examples:
- Offer new business objectives and explain how the product should adapt to reach those goals.
- Keep the company vision, but offer a new product vision. Then perhaps, based on the altered product vision, suggest a different set of features or themes. (Close to what I’ve done in this article.)
- Keep the product vision, goals and strategies, but propose alternative opportunities/features that could achieve those objectives. (This is somehow similar to the “Missing Feature” articles.)
- You could also accept everything as is and simply suggest creative ways to implement, design, market, or sell the product. (Most UX case study articles fall in this category.)
- And so on… The possibilities are endless.
A product re-envision is like a product case study in which instead of looking backwards and seeing what has worked, we’re looking forward and suggesting what could work. It’s the PM’s way of saying, “I think the company X should do this!”
It’s a super fun exercise and packed with learning. You all should try it!
Why Clearbanc?
For this re-envision article, I chose Clearbanc for three main reasons:
- It has a truly unique innovative solution to an old problem
- It is still a relatively young company, only offers one service, and the one product (i.e. dashboard) they have is not very mature yet. This removes a lot of complexities and variables. Consequently, the re-envisioning exercise would be relatively more straightforward.
- Clearbanc has a clear vision, something that, unfortunately, many companies lack.
In this article:
First, I briefly explain what Clearbanc is, who are their customers, what problem they are trying to solve, and who are they competing with.
Second, acknowledging Clearbanc’s company vision and business model, I offer a new vision for its dashboard product.
Third, Using a simple prototype, I show how that vision could potentially be manifested.
1. What is Clearbanc?
The problem
Most successful startups reach a point in their growth that they need more capital to spend on R&D and market recognition. However, many fail to raise enough funding in time for a variety of reasons, such as Venture Capitals (VCs) biases towards founders from specific schools, banks’ requirements for assets, lengthy due diligence process etc.
Even the lucky founders who raise capital often have to, against their desire, give up a significant portion of their company and a lot of control (i.e. board seats).
Not to mention that raising capital requires lots of planning as it often takes months, a time-frame that is crazy in the fast-moving tech industry.
The Solution and Value Proposition
Clearbanc is creating a new way for entrepreneurs to fund their growth. It offers $10K to $10M non-dilutive growth capital to eligible eCommerce + SaaS Businesses.
To be considered for this fund, the business must be incorporated, have an average monthly revenue of at least $10,000, and show consistent revenue history in the past 6 months.
Currently, the fund could only be spent on marketing and ads (i.e. growth). According to Clearbanc’s co-founder, Michele Romanow, 40% of all the capital raised by e-commerce goes straight to Google and Facebook ads. So the fund will definitely be utilized fully; however, I hope to see an R&D fund offered by Clearbanc in the future too.
Clearbanc automatically generates a term-sheet in just 20 minutes and the fund is usually deployed within three business days.
In return for the capital, the business will share 1% to 35% monthly revenue until it pays back the amount it borrowed plus 6% to 12.5%. The exact numbers will depend on the business’s metrics.
In short, Clearbanc provides founders with quick capital and lets them keep their shares but gets a portion of their revenue until the money is returned.
Example
Let’s say you are an entrepreneur and come up with an idea for a particular type of Apple Watch band. You spend your own savings to incorporate the business, design and manufacture the bands and sell them on an eCommerce website that you built with Shopify. It costs you, on average, $20 to make each band and you have priced them at $80 each.
After a year of hustling and spending the remainder of your money on Facebook and Instagram ads, you see a steady $15K monthly revenue.
You then require more capital to grow your customer base. Looking at your ad data, you estimate your customer acquisition cost to be around $25. Therefore, it would be logical for you to spend more money on marketing, so you apply for more funds through Clearbanc.
Clearbanc asks for your numbers and offers you a term-sheet. If you accept, next, it looks at your Shopify, Facebook and Instagram data to validate your metrics. If all goes well, in just a few days, you will get a Master Card with a certain amount of funds to spend on Facebook and Instagram ads.
The great thing about Clearbanc is that if you require more growth capital, you can apply for it right away.
The Market and the Competition
Direct competition
Clearbanc is not the only company that offers an alternative source of capital. There’s a whole new group of Capital-as-a-Service (CaaS) companies that have started in the past few years. Some operate under the revenue sharing model; some offer quick loans or lines of credits, and some are a mix of both.
Basic comparison between CaaS companies shows that Clearbanc has a slight competitive advantage in two areas: 1) Clearbanc offers deals of higher value (up to $10million rounds), 2) Clearbanc seems to have an [on average] lower interest and shared-revenue rates.
Unlike Clearbanc, other CaaS companies in my study have not declared or disclosed essential information about their company’s operations, such as the amount of funding or eligibility conditions. Based on how young the CaaS market is, I would guess that these companies are still discovering their product/service-market fit and left these details open to future consideration.
Recognizing that we have insufficient information on other CaaS companies, I believe Clearbanc has two unique features that are so significant they might push it to market dominance:
- Amount of capital at its disposal: Clearbanc is claiming to have successfully raised $1billion in funding and is planning to deploy it all in 2019.
- Integrations and data: Clearbanc has begun partnerships with eCommerce technology services way before than other CaaS companies and probably will be able to collect more data than them. (More on this topic later.)
One interesting thing is that the current CaaS companies all market their services differently. For instance, Clearbanc has been putting considerable effort into making sure founders don’t see them as a “fast-loaning” service, even though they are similar to one.
Indirect competition
Comparing VCs, banks and CaaS companies is an in-depth topic and out of the scope of this article. However, I would like to share my thoughts briefly:
On the surface, Clearbanc (and other CaaS companies) might resemble VCs and banks; however, they are operating on entirely different models and principles.
VCs and banks finance startups based on the idea, business’s assets, or potential social impact. On the other hand, Clearbanc offers a growth capital based on current (not future) business metrics.
In a perfect world, we would have VCs funding truly innovative (yet risky) idea’s research and development. Most might not ever turn a profit, but some might end up growing exponentially. Therefore, in that ideal world, VCs wouldn’t even desire to fund companies’ ad spend.
However, we see many risk-averse VCs who favour cash-flow-positive steady-growth businesses over shoot-for-the-moon startups. Here’s the market segment that Clearbanc clearly could step-up and win deal over VCs; because many of those businesses would probably never want to trade equity for capital. Plus, some founders might not ever want to exit, something that VCs would likely push them to do.
I personally think that Clearbanc competing with VCs over such deals is a positive thing and could change the market for the better, as it would force VCs to focus back on their initial mission: to fund risky startups that could have a real impact on the world.
Other notable indirect competition
- Cryptocurrency investment/crowdfunding platforms, e.g. Circle Financials, CryptoLaunch
- Crowdfunding platforms, e.g. Indiegogo
- Fast loaning companies, e.g. Fundera
How is Clearbanc doing this all?
The underlying magic behind Clearbanc’s investment machine is the combination of 1) the granular data and business metrics they collect from companies and 2) using that data to predict the profit and risks involved in investments.
To collect the needed data, Clearbanc has partnered up (or is partnering up) with the top eCommerce platforms (e.g. Shopify, BigCommerce), payment platforms (e.g. PayPal, Stripe) and ad platforms (e.g. Google Ads, Facebook, Instagram).
They correctly understood that nearly all small eCommerce businesses use a combination of the most popular platforms in each category. In other words, most people use the same eCommerce technology stack (e.g. Shopify for the website, Facebook for ads). So by focusing on those integrations first, Clearbanc can work with a large chunk of eCommerce businesses. This is one of the reasons why Clearbanc couldn’t have existed five years ago: there were just too many small players in each category.
By aggregating data from any service that eCommerce entrepreneurs might use for marketing and sales, Clearbanc will eventually get the visibility they need to the business’s customers (e.g. acquisition cost, conversion rate), traffic (e.g. daily active users), revenue (e.g. average order), ad spent and many more metrics. Clearbanc collects all this information to the most accurate level possible, e.g. revenue to the transaction level detail. Ultimately, they could predict how much return on investment companies (and Clearbanc itself) would get if they inject growth capital into the business.
It’s safe to assume that Clearbanc has been using this data to figure out which businesses they should accept and to optimize the term-sheets they are issuing. Clearbanc gives out the offer in a few minutes, something that venture capital business analysts would do in days (and probably inaccurately).
Clearbanc further uses the aggregate data to understand which businesses should they target and market themselves to.
For Clearbanc to work, they ought to be able to collect all these data. That is why so far, they can only accept the following types of companies: direct to consumer companies, subscription box companies, online retailers, mobile apps with in-app purchases, and mobile games with in-app purchases. According to their website, they are still in Beta for B2B SaaS companies.
2. Clearbanc Dashboard: re-envisioned
Dissecting Clearbanc
As we can see in the diagram above, Clearbanc’s technology has three parts:
- Integrations e.g. Clearbanc <-> Shopify
- Data analytics: Processing data on the back-end to be used for multiple purposes
- Founder facing dashboard (Spoiler alert: I will be re-envisioning this part)
There are opportunities to innovate in any of these parts. In this section, I will be showing how I identified some of those opportunities and designed a solution to tie them all together.
Identifying opportunities to innovate
To determine the areas in which Clearbanc has room to improve, let’s start from the higher-level goals and get deeper:
What is the ultimate goal?
Clearbanc’s goal is not too far from a VC’s/bank’s goal: 1) discover businesses with potentially high growth and 2) invest in those businesses to 3) maximize profit.
What does Clearbanc need to achieve this goal?
- Discover: To reach its goal of finding the right businesses, Clearbanc is already exploring to find new marketing channels, like partnering up with thought leaders and influencers. Moreover, as mentioned above, to focus their marketing, they need to find and target that sweet spot in the eCommerce business market. The pre-requisite for successful market segmentation is more granular data from the companies they have already funded.
2. Profit: Clearbanc has perfectly discovered a viable pricing strategy (i.e. revenue sharing until 106% of the money is returned). However, I believe there are still great opportunities to save money. For instance, Clearbanc could directly buy bulk ad credits from Google and Facebook for a discount and give them to businesses instead of real dollars.
3. Invest: To make more reliable choices and to improve the term-sheets, once again, Clearbanc needs to collect and analyze more metrics. However, Clearbanc could only do so much to optimize its term-sheets. At the end of the day, the term-sheet is only one side of the deal. On the other, more important, side of the deal, we got the founders. One thing we know about entrepreneurs is that they are complicated, have different motives and, therefore, difficult to build a persona around. But let’s try to get deeper.
What do founders want?
“What do founders want” might be the single most fundamental question that Clearbanc [and other CaaS companies] should keep asking themselves and build their business around. Entrepreneurship, as we know it is evolving, so, to stay relevant, CaaS companies should be flexible enough to adapt to these changes. Answering this question should ideally involve multiple interviews to get insight into what factors are included in the founders’ decision making.
Here I must acknowledge that I have personally never started a company myself or have interviewed entrepreneurs on a large scale. However, I am going to attempt answering this question based on my conversations with few entrepreneurs, readings and web searches.
Drawing from some of the research done by Noam Wasserman, author of The Founder’s Dilemmas, I believe there are roughly four reasons why founders choose one source of capital over another:
- Better deal: a “better” term-sheet. Cold hard Cash! Also, a better deal could mean faster fundraising. This is something that Clearbanc has a distinct advantage over VCs.
- Network: entrepreneurs more often than not choose a niche market VC over a general one, since those investors could open up their network and potentially enable/ ease future partnerships.
- Advice: So-called “Smart Money” investors are attractive to founders because they promise to bring their market expertise.
- Reputation: Many founders choose to raise money from more popular VCs simply because it draws more attention to them.
Seizing all the opportunities
The following diagram summaries the opportunities discussed above:
There are multiple techniques to capture each of these opportunities, some of which are already being utilized. For example, Clearbanc already has a referral program to promote its service.
However, I believe the dashboard that is sitting between the founders and Clearbanc to be especially valuable as it could allow us to incorporate all these opportunities. (I do recognize my bias here as a Software Product Manager who works on web and mobile applications.)
So for the remaining of this article, I’m going to focus on this dashboard and propose a new vision for it.
Coming up with a vision
In order to re-envision the dashboard to solve all the problems, I looked at the common themes that are emerging from the tree above:
- For Clearbanc, the most important thing is to be able to collect more data — both from the services that funded companies are using and the founders themselves. Data is the key ingredient for many parts of the Clearbanc’s business, including marketing and term-sheet optimization.
- For founders, having instant access to capital is just part of the deal. Founders also want advice to help to make better decisions for their business, a vibrant and supportive network, and reputation.
Based on the above, my vision for this dashboard is to be an on-demand Venture Capital in the cloud, plus a light Business Intelligence platform.
Let’s analyze this vision:
A. On-demand Venture Capital in the cloud: meaning the dashboard should bring the value (or at least the perception of the value) that a VC brings to the table:
- Better deal: The dashboard should give founders a transparent way to handle their finances. Founders should be capable of paying back Clearbanc and spend their money on ads inside the dashboard itself. Also, it would be interesting to see a visual payment plan and ways they should budget their funds. Accounting software and Corl (Clearbanc’s competitor) have some of these features.
- Network: At the very least, the dashboard could create a virtual/online community for all the Clearbanc funded ventures. Features for this vertical could get inspired by forums, meetups, communities.
- Advice: Giving founders the ability to ask for advice could come in multiple forms. For example, Clearbanc could have mentors/entrepreneurs in residence for this.
- Reputation: the reputation factor would be a somewhat harder aspect to replicate as a CaaS company. Although I believe Clearbanc could, according to that business’s metrics, give it a public ranking or a certificate. Proving users with a way to show off their merit is a solved problem in many spaces, such as video games (e.g. gamified badges or certificates), bond ratings (e.g. AAA), entertainment (e.g. YouTube Creator Awards or RIYAA plaques).
B. Light Business Intelligence (BI) platform: As mentioned above, founders need help making tough business decisions, and Clearbanc, using the dashboard, could help them do so.
This will be a win-win for both Clearbanc and founders. Clearbanc will collect all of the business’s information to fuel its investing machine. On the other hand, founders will see their data analyzed in one place and could make decisions according to those.
Considering that many smaller eCommerce companies can’t afford expensive enterprise-level BI software, this valuable insight will be a significant value proposition for them to stay in the platform even after they have returned the money to Clearbanc.
Furthermore, I believe every business should be able to create an account, even if you’re not immediately eligible for funding.
If the BI features in the platform are useful enough, businesses will keep their accounts open. Clearbanc could even inform them as soon as they are eligible for funding.
3. Prototype: Founders Dashboard
Like any other vision, my vision for Clearbanc’s dashboard could have many manifestations. This prototype is just an example to showcase how all of the ideas mentioned above could be transformed into features and fit into one platform.
Overview
For this prototype, I chose the classic top+side navigation design, mainly because it is easy to scale and quick to create.
I have divided the application into five sections. Every section has a few pages, and each page is sectioned via cards.
Aside from the menu and navigation bar, two elements appear on every page:
- Manage integrations: To make sure founders keep connecting every single one of their services to Clearbanc as the information coming from these services are vital to the business.
- Founder’s status: To praise founders for their success and encourage them to keep working with Clearbanc.
Sign up page
As mentioned above, everyone should be able to create an account, and I made the sign-up page as simple as I could to nudge founders to do so.
Even if founders aren’t immediately eligible for funding, they could still use other features (e.g. advice). The data gathered from all these ventures are invaluable.
My Clearbanc
To see accounting details related to the founder’s Clearbanc contract, such as balance, recent spendings, payment details and more.
Business Intelligence
A crucial part of the platform containing:
- Essential business insights
- Ability to easily integrate with other BI platforms for more analytics
- Contextual suggestions on critical decisions
Founders Network
Clearbanc founders should be able to reach out to each other online or in their city. It would be highly beneficial for small eCommerce business owners.
Also, creating an exclusive tight-knit community of its funded businesses will give Clearbanc a substantial competitive advantage over other CaaS companies.
Here, just as an example, I suggested this community to be in the form of a Slack team and in-person meetups.
Clearbanc Advice
“Claerbanc Advice” is a platform-wide AI-powered feature to guide founders and help them grow their businesses. These recommendations are generated based on data from all Clearbanc funded ventures.
This screen shows a summary of all the advice on one page:
Furthermore, founders can get 1-on-1 mentorship from Clearbanc entrepreneurs in residence.
Dashboard
To summarize the most important information on one screen.
Feedbacks are more appreciated than claps!
Product re-envisions, though challenging, are extraordinary learning tools. My main goal for writing this article was to learn, and no learning is complete without constructive feedback.
So I would like to ask you to please take a few minutes and share your thoughts. You may:
- Comment below.
- Direct message me on LinkedIn.
- Use this survey if you’d like to share your feedback anonymously.
Thanks for taking the time and reading this article!
