Name: 'Dragon's Den' Alum Michele Romanow: How I Made it
Uploaded: 2019-12-31
Duration: 15 min 19 s
Description: The co-founder and president of Clearbanc joins Fortune’s MPW International Summit.

'Dragon's Den' Alum Michele Romanow: How I Made it

Leadership

The co-founder and president of Clearbanc joins Fortune’s MPW International Summit.

okay. Michelle welcomed unfortunate, powerful women. Thank you. Like your, um So, like, there you're taking shoes. Oh, my gosh. So I want to get I want to get your back story because you have actually entrepreneurial roots in Canada. So tell us where you grew up and what your family was like that led you to this place you are at today. Yeah. I mean, it's great. It's a great question. I grew up in Calgary and so, you know, had parents in the resource industry and felt like a group in a really entrepreneurial place. My parents told me I could study anything I wanted. Thio, as long as it started with engineering, had a lot of choices. Um, and that ended up, you know, serving the incredibly well. I did an MBA right after, and by the time I had graduated, figured out that worldwide supply of caviar of all products was down by 95% because we had over fished the Caspian Sea. Crazy enough to say no to all of my job offers. Move out to the east Coast and build a fishery from scratch. This is everything. It sounds like. Boats, fishermen. My hands knee deep in fish, like the hopeful five yards. And, you know, our thesis is cracked. Couldn't find the products that we had no problem selling the product. Problem was, we went into the biggest recession of the last 70 years, the year after I started with. So I'm 21 years old, selling the world's most superfluous luxury product and quickly figuring out I'm probably not gonna make it. And I think having early failure at the beginning of your career is is just so important. You just have this incredible realization, the world of you. Absolutely nothing. And so, from there and it up, getting to take a job as a director of strategy from a big retailer, I thought Commerce blow up and started commerce company. The big retailer was tears. Yeah, uh, that's correct. Another and, you know, always be grateful for that opportunity because I got to mean they gave me as a 22 year old. It was the director, that baby, you know, uh, in the commerce area. Yeah, and so So I got to leave my own e commerce company. Um, we were self funded for five years. I couldn't raise any money has figured out how to grow just by low cost customer acquisition, which then became a your team in kind the rest of my career. That story ended up pretty well. We just tapped going. At one point, we had six competitors that raised more than $10 million that company was called Utopia. And is that the company you sold Thio Group on? No, that was That was a little bit later way. We figured out too many to count way figured out. You know, this the e commerce. If we could attract customers for low enough cost, we could keep growing on. Dhe then started an app called Snap Save the digitized coupons with CPD space. That company got sold to group on, and after that was asked to join the cast of Dragons in I'm on the show. And that was five years ago, five years ago, five years ago. And how many of you? I mean, I know we don't have a lot of Canadians in the audience. How many people watch dragons? Wow, a lot. I know I said the Michelle backstage. I said, Now well, the Canadian women know you is this a really popular show. It is a very popular show. I think it it is popular because, you know, everyone has a dream, and there's a natural tension between investors that have money and people that have dreams. So the show has really shown that, and it's shown it in, I mean seven minute segments of of these different businesses. And so it circles back really nicely because I'm on the show. One of the things that most people don't know about is that we film 250 pitches in 17 days back to back. So I sit in that chair and I see 10 pitches a day. Um, it's a lot of things start to clarify when you see 10 pitches today and what I kept seeing. Waas. You know all of these commerce entrepreneurs air coming on the show and remember these guys they had made those wooden iPhone case and they're like it's a father son team so memorable for me. They did a $1,000,000 in sales, which is pretty good for entrepreneurs on the show, and they were like, Look, we have great unit economics. We make each case for 10 bucks cost $10 on Facebook ads, Ben and we sell them for 50 bucks, and we're here on the show looking for $100,000 for 20% of her. And I just remember sitting back thinking this is a bad deal for both. Like, this company isn't gonna sell to Apple 10 times multiple. Uh, these guys really need the money, and they're gonna be really resentful when I own 20 or 25% of the company. And if they take $100,000 in investment Facebook ads, they're going to make $4000 of feels pretty good for them. And so this is You know, four years ago on the show, I was like, Okay, guys were throwing out a distant deal type. I'll give you $100,000. I'm not gonna take any equity in your company. I want 5% of your revenue until you pay me back. $106,000. We'll charge. You said this on the air on the air and, uh, and really not thinking anything of it. Just kind of brainstorming with these guys needed. And I said, This isn't alone. There's no personal guarantees fixed payment timeline. There's no compounding interest. You use my capital to grow. I could pay back a little bit faster. I'm happy. And if your business slows down, awaited out for the journey. And even the entrepreneurs were like throat. It's the only thing I wanted to see with Facebook ad because I knew I'd look at Facebook campaigns for e commerce companies. I would know if they had a really good return on there, and that became kind of effectively was the first clear bank deal, and I never would have guessed that would have become so big. So here Michelle joins Dragon Stone five years ago. There's this moment and you're thinking You okay, so the cameras go off and you make you fund this company wouldn't nice phone case, father and son team, and you think to yourself immediately or later. Wow, Maybe I should start an alternative startup funding company and call it clear back. Oh, this is like, you know, it takes two years of hop, skip and jump to actually get to the right place and seeing if you think that. But how did you get from there to clear bank this company that by the end of 2019 will have funded to the tune of a $1,000,000,000.2000 companies. How do you get from there to here? A lot of things, Not working. That's the first thing. So So when we started Clear Bank, we kind of I could see that. Like, you know, the future of work was changing. We started a couple of different products. We had done this one experiment, and I think what struck a chord is that 40% of all VC dollars today go into cos they're spent directly on Google. That means that entrepreneurs are spending the most expensive capital to do something that by definition, should be repeatable, scaleable. That's what the magic of the digital platforms, where you knew if you injected a dollar, you could get $4 in sales out. And so we can just give entrepreneurs a cheaper way to fund that and a faster way to fund that. We created something called the 20 minute term sheet. I thought it was a cute name because typically it takes you 6 to 8 weeks on the road to get a single term sheet. So in 20 minutes. We could tell you we can give you this much capital on on these terms. At least you had another option in your back pocket. When the how does the 20 minute term sheep she work? And how does it possibly, uh, provide adequate screening for companies? Really good. Really good. Uh, really a question. So what you know typically happened in the old world Waas a bank would look at a company that was small, and they would say, we have no idea if you're gonna pay our money back, so we'll take a personal guarantee where we could go off your personal assets if we don't pay. It was it was the catchall for basically not having, you know, data that was easy enough to understand. Or that was in a no automated stream. That way I could look at and the other option was going to equity investors, and you'd have really smart Stanford MBA, you know, spend four weeks looking at your company and determining if this is good enough. And so what we saw is that there were all these new data sources today. You know, you could automatically connect two bank accounts two payment processors like striped the Facebook ad account, your commerce account And with all of that data, we could build automation. So, clear bank, there actually isn't anyone that looks at individual companies. It's all a eye on automation that we've built to be able to do this really quickly. And we're looking at data for more accurate, you know, system of record. So, you know, people can't lie when they give us their data, they have to connect the real account. Um and, uh and we can see what their return on ad spend is and what their unit economics are, which are far more indicative of if the company is going to be successful. That if not, and it takes out the gender bias it takes of the gender by the other night. Part of it looking at Data iss, is that you get rid of your bias. And so we've funded eight times more women, and I mean, it's very sincerely not by doing anything at the top of the funnel. And how what is this gender split between these 2000 companies that you have funded? Now I realize men tend to start Maur company Well, no, actually, no, That's not true, is it? Women start more companies. Yeah. So anyway, basic question. What's the gender split? So, Arjun, we funded eight times more women in the venture capital, right? Three average. So it's politically the vent. Traveling, traveling with 2%. So where? Anywhere between 16 and 20%. I Okay, who has a question? Turn up the life against See back here? Okay. Uh, yes, Cape. Reckon I'm curious. How did you raise the $1,000,000,000 that you actually funded? The companies with, uh, I got 450 knows how the heart Everyone on Wall Street thought I was completely crazy because they told me that, um, I think the line was I don't think you understand, Miss, this is not how you lend to Small. Um, and I was almost certain that using riel system of record data would be far more productive because they had run one of these companies and former accurate been doing what had historically been done, which is looking at personal credit score and adding personal guarantees. But it took us a long time. Our first funders were actually ex founders like us who had determined who had seen the problem cell. The second son was anchored by Jason Finger, who had started Seamless, folded to brew pub and deeply understood the problem that we were doing. And then eventually, as soon as you build up enough data, you can start going to larger and larger creditors. Two shins. But it took a long time, and I have an enormous amount of respect for kind of our early credit backers because that was, uh, that was not easy. And you just raised, what, 250 million for a new fund for any fine? Yeah, and, well, that's fun. Be any difference in its mission and intention from what you've been doing? No, it's see, it's the same thing. We just want to expand. We want to expand right now with service e commerce. Business is, we want to expand its different verticals. We want to expand it a different geography of this year. We're in Canada and the U. S. Marshal, the UK, and are looking at other places because if we think it's hard for founders in Canada and the U. S. To get capital to grow their business, it's even harder in international markets where the venture capital system is way less developed and the banks are even more conservative. And I think that you could do a lot when you empower every founder at every level, depending on what they're building. Yes. And the other questions Over here. Over here. Hi. My name is creamy. Someone can. The nun with our PC. My question for you is, uh, back to your roots. Where did you go for your engineering degree? Oh, I am. I went to Queens. My, uh you know, by second year I had figured out that I was gonna be much better at building businesses in building bridges. And so I started this little sustainable coffee shop on campus called the Tea Room. The still there 11 years later. And I credit the university for forgiving me that ability to be entrepreneurial in in kind of the early days. You know, people ask me all the time like, Well, why were you successful in like I just failed more started earlier. When you're 21 it's a lot easier to fail than being 31 on your How do you encourage young women and men do what you did because to start up that age is, um you think you need to have capital or you need to have backing you. How do you do that? Yeah, I think, um, you gotta remind young people today that it's easy to become an entrepreneur than it's ever been in the entire course of history. I mean, I always think of this like pets dot com example. You probably covered from a merely days. Well, I just Carolyn Iverson, who's one of the most senior executives that Facebook was part of that founding team recovered from that. And it wasn't It was that it was a $1,000,000 servers. It was a $1,000,000 to build that website. And, you know, $2 million get going. I mean, that entire process today cost you 100 bucks. You can get started with an online e commerce account. You can get going with AWS, and even better, you could do a Kickstarter and see if people actually want your product before you have to make any of it. And so I say this on dragons and all the time, like it literally cost you almost nothing to figure out if you have a good idea today and that envy Global Instant, Let it be globalist Lee. And so that should really reduce the risk of young people starting and seeing if they can figure this out. Because more founders we can create the more global problems I think we can solve. I mean, I personally look at, you know, the trillions of dollars that governments have invested in climate change, and the biggest difference that has been made in the U. S. Is the nest thermostat and the entrepreneur that built cars and trucks. People want to drive. And so if we want to look a real solutions for the future, I think that all comes in and backing entrepreneurs. And I think that that's part of my own personal mission, the McClure vanquishing That is an inspiring note to end on. Thank you, Michelle. Thank you so much for being here.