Clearco chaos: founders contribute $8m to keep company afloat

Clearco has raised $23.4m on the d-low.

Clearco has emerged as a poster child in Canada for former unicorns with unsustainable business practices spiralling down. The company has been reported to be in heavy restructuring this year with multiple rounds of layoffs. In late September, the company closed a $23.4m raise using convertible promissory notes expiring in a year’s time. The founders appear to have stepped in from their Barbados base to the tune of $8m. In contrast, during boom times in early 2021, the company raised $150m using preferred shares and there is no sign of the founders taking part. The company eventually reached a valuation of $2B, but I doubt it still has a claim to unicorn status. Inovia pitched in $4m in this latest financing, but I don’t get the impression that Softbank doubled down. In May, Inovia seems to have parachuted one of its own as Head of Corporate Development & Strategic Finance, Pranit Tukrel. The fact this otherwise high-profile company made no noise about this latest financing tells you something.

Brief background: Clearco advances receivables to online businesses, mostly ecommerce companies. By connecting to live data points from these borrowers (such as their Google ad spend), Clearco has visibility into their financial health. This enables Clearco to make quicker lending decisions using algorithms. The use of such objective models enabled Clearco to boast of a funding clientele that is more representative of the broader population compared to traditional VC. CEO Michele Romanow was pretty vocal about this, so I fear that if Clearco collapses, the heteronormative patriarchy will claim vindication and these under-represented groups might be unjustly smeared by association.

While supporting underdogs is laudable, I feel that Clearco went too far when it fought another longstanding discriminatory practice of the lending industry: lending money only to creditworthy borrowers at a net positive interest margin. The tech angle is proving superficial and the immutable laws of credit underwriting are asserting themselves.

Paid subscribers will be getting a broader update of the company this week, I just wanted to secure the scoop. I believe this is the third time Sean Silcoff has been scooped on Clearco news, which by itself might be the biggest news in tech this year.

FintechTech/VCPrivate Debt Funds