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

Michele Romanow is the Founder & CEO @ Clearbanc, the startup that provides entrepreneurs capital to grow without giving up a piece of their company. In 2019 alone, Clearbanc plans to invest $1B in 2,000 companies. To fund these ambitious plans, they have backing from some of the best in the business including Founders Fund, Santi @ Emergence, Social Capital, Precursor Ventures and Y Combinator just to name a few. As for Michele, prior to Clearbanc, she founded SnapSaves, a leading mobile savings platform that was acquired by Groupon. Before Snapsaves, Michele founded Buytopia, one of Canada’s leading e-commerce companies with over 2.5m customers. If that was not enough Michele is also a Dragon on Dragons Den Canada, the youngest dragon ever. In Today’s Episode You Will Learn: 1.) How Michele made her way from serial entrepreneur with exits to Groupon and being a Dragon on Dragons Den to changing the way we fund today's businesses with Clearbanc? 2.) Why does Michele fundamentally believe we need to rethink the way we fund our businesses? Why does giving away equity to buy FC and Google ads not make sense? What is the solution? What types of business with what types of revenue does this work for? Why does Michele believe we need to fundamentally stop celebrating fundraisings? 3.) So if Clearbanc lends on repeatable revenue from Google and Facebook, how does Michele think about the volatility of CACs we see as businesses progress? Is Michele concerned by the large incumbents pushing up CACs on traditional platforms? Investors can also be wise strategic advisors, how does Michele think about the potential loss of these advisors and board members with an alternative financing mechanism? 4.) From Clearbanc's data, what have been the big learnings on how venture is currently distributed across the US? To what extent does Michele believe that unconscious bias pervades into the decision-making of much of venture? What have Clearbanc discovered in terms of the diversity of the founders they back, purely through objective data analysis of their businesses? 5.) How does Michele respond when shit hits the fan? What is her coping mechanism? How would Michele advise young founders today in coping with tough times? What were Michele's lessons from her first sturgeon caviar business not being a success? Items Mentioned In Today’s Show: Michele’s Fave Book: Little Black Stretchy Pants As always you can follow Harry, The Twenty Minute VC and Michele on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC. Want to book your own travel and not have the admin team chasing you for every receipt? Take your business travel program to the next level with TravelPerk. They’ve built the world’s largest inventory of low-cost flights, hotels, airbnb, trains, cars, you name it, all in one gorgeous booking experience. AND they’re built for business. Book, manage, support, analyze, and optimize your business travel, all in one place. Add to this a support team made up of dedicated travel experts who deliver a 7-star experience around the clock, and you’re taking corporate travel out of the dark ages. 20VC listeners can score a free lounge pass to over 1200 airports for a whole year. Not only will you be able to add “company savior” to your email signature, but you can also enjoy the luxury of amazing airport lounges all over the world. Click here to find out more!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Hello and welcome back to the 20 minute VC with me, Harry Stebbings. Now, I've done over 2,500 interviews and I'm not sure I've ever had so much fun on an episode as I did with today's guest. It's episodes like this, which honestly remind me just how much I love doing the show, building friendships with incredibly inspiring people. So with that, I'm so excited to welcome Michelle Romano, founder and CEO at Clearbanc, the startup that provides entrepreneurs capital to grow without giving up a piece of their company. In 2019 alone, Clearbanc plans to invest $1 billion in 2,000 companies. To fund these ambitious plans, they have backing from some of the best in the business, including Founders Fund, Santi at Emergence, Social Capital, Precursor Ventures and Y Combinator, just to name a few. As for Michelle, prior to Clearbanc, she founded SnapSaves, a leading mobile savings platform that was acquired by Groupon.

• 0:45Harry Stebbings?

  And before SnapSaves, Michelle founded Buytopia, one of Canada's leading e-commerce companies with over 2.5 million customers. If that wasn't enough, Michelle's also a prolific angel as a dragon on Dragon's Den, Canada, the youngest dragon there. I do also want to say a huge thank you to Santee at Emergence for providing some fantastic questions today. I so appreciate that, my friend. But before we dive into the episode today, I'm always focused on scaling my time and I was always crap at travel booking and management. Well, not anymore. Why? Because I now use TravelPerk, the business travel management platform that even I love. It's just so super easy to book travel and actually quite fun. And my favorite, no back and forth with travel agents or your finance team, but it gives you the best of both worlds. Companies don't just get happy travelers, but also easier management and as much as

• 1:28Harry Stebbings?

  20% in savings with 100% in compliance. Got to tick that compliance box these days. And even better, no one is going to chase people for receipts or worry about splurging on overly expensive penthouse suites. Finally, I have to say, the support is just number one rated. So you get 24/7 travel experts ready to deal with forgotten passports. Yep, I had that one before. Unexpected flight cancellations, oversized baggage requests, vegan meal options, whatever you can think of, they have you covered. And the 20 minute VC listeners can score a free lounge pass to over 1,200 airports for a whole year. That's quite astonishing, I'm quite jealous, I quite like that. All you need to do is go to travelperk.com/20vc, that's travelperk.com/20vc. Give them the name of the person.

• 2:10Harry Stebbings?

  Who runs travel at your company and if they book a demo, the lounge pass is yours. And if TravelPerk allows me to scale my time, a lot of what we do on the 20 minute VC is discuss scaling businesses, talk to experts, pick the brains of founders and investors who tell us about the trends to watch out for, offer tips on fundraising and teaches how to excel at any company stage. But there's no playbook for building a great business, but we can certainly learn from people who've done it before. Beyond listening to this podcast and talking to mentors and advisors in your own network, it's important to have resources you can turn to when you're tackling a new challenge. And Stripe has built those resources for you, whether you'd like to learn how to run a pricing experiment or build a knockout landing page. Stripe gives you the information you need to start, run and scale a technology company.

• 2:51Harry Stebbings?

  And their guides are often written by or feature people like Elad Gil, experts in their space who you've probably heard on this very podcast. And you can read my favourite guide on scaling engineering organisations and many more on stripe.com/20vc, that's T W E N T Y V C. And last but by no means least, to scale, you need customers. And Intercom offers a new and better way to acquire, engage and retain customers. They've built a suite of messaging first products from chatbots to a totally reimagined business messenger that modern internet businesses use to accelerate growth across the customer lifecycle from acquisition to engagement and support. And over the past eight years, they've totally reimagined what a business messenger can be, which is way more than simply live chat.

• 3:32Harry Stebbings?

  Today, Intercom is used by the world's most forward thinking companies, 84% of Y Combinator companies that use a messaging or live chat tool use Intercom, astonishing fact that one, and they have over 30,000 customers, including larger companies too, like New Relic, Atlassian and Shopify, and also smaller companies like Airtable and Coda. But I could not be more excited now to hand over to Michelle Romano, founder and CEO at Clearbanc.

• 4:00Speaker 01

  You have now arrived at your destination.

• 4:04Harry Stebbings?

  Michelle, what can I say? I'm so excited to have you on the show today. I've heard so many great things, but thank you so much for joining me today.

• 4:10Speaker 02

  Wonderful to be here.

• 4:11Harry Stebbings?

  I would love though to kick off with a little bit about you. We've got Dragons Den, we've got multiple successful companies, and now Clearbanc. So I want to know, and a little bit different to a lot of episodes, but I want to know, what was the first spark of entrepreneurship for you? And then second, what was that real founding moment for your creating Clearbanc?

• 4:28Speaker 02

  Yeah, for sure. So I have a totally different story. I mean, I was engineering, started a little sustainable coffee shop on campus, and started brainstorming with a bunch of friends. By the time I had graduated, I figured out that worldwide supply of sturgeon caviar, of all things, supply was down by 95% because we had overfished the Caspian Sea. So I was crazy enough to move to the East Coast and build a fishery from scratch. This is the most un-tech thing. It was everything it sounds like, boats, fishermen, my hands need to be good fish, the whole nine yards. And our thesis was correct. Chefs couldn't get the product, so we had a ton of buyers. But unfortunately, then went into a giant recession in 2008. And I'm 21 years old, in the luxury goods space, being like, I'm not going to make it. So from there, I ended up going to become the director of strategy

• 5:12Speaker 02

  to a big retailer, saw e-commerce blow up, and 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. And the only difference between us and the companies we were buying is that we had been able to control our cost of user acquisition, which kind of became a big theme in building Clearbanc. From there, I built another app called Snap Saves that digitized coupons for the consumer packaged goods space. So our customers were Coca-Cola, Procter and Gamble. That company was acquired by Groupon in 2014. And then post Groupon, a couple of interesting things happened. I got to join the board of a couple of public companies. But most interestingly, I joined the past

• 5:55Speaker 02

  of the Canadian version of the Shark Tank television show. It's called Dragons Den in Canada. Same format, and one of the investors. The interesting part is the way we filmed the show is we do 17 days back to back, which means I see 200 pitches. Back to back and I was fascinated because the first thing that was changing about the entrepreneurs that were coming on the show was that instead of asking the investors for help to get them into retail, they were now asking for help to get online. And then I just kept seeing the same story and I really remember, you know, this one father son team. They were making these wooden iPhone cases. We've all seen these, you know, they're so proud. They've done a million dollars in sales.

• 6:36Speaker 02

  They're like, look, we have great unit economics. We make each case for $10 and cost us $10 in Facebook ad spend and we sell it for 50 bucks. And we're here on the show today looking for $100,000 for 25% of our company, which was probably, you know, in the range of what the show valuations look like. And, you know, it's something after I kind of seen like 20th pitch that sounded like this, where I just stepped back and I said, you know, equity might not be the best fit for what these founders are doing. Because these guys are going to take the hundred grand that they get, they're going to dump it right into Facebook ads, which is exactly what they should do. They're going to make $400,000 in revenue. But, you know, the wooden iPhone case company is probably not going to go public, you know, it doesn't have that same growth trajectory.

• 7:16Speaker 02

  But these guys really need the $100,000. So for fun, you know, and I think it was maybe it was the end of a long day. I said, look, let's throw out a different deal type. I'll give you the $100,000. You pay me back 5% of your revenue and so you pay me back $106,000 and that's it. I'm not going to take equity. I'm not going to take a personal guarantee because I think that's the nastiest thing to do to founders in the world. But what I do want to see is I need to see your Facebook ad account and I need to make sure that your return on ad spend is exactly what you said it was. And it's hard to believe that that kind of insight into how much money, you know, companies are spending on early user acquisition has blossomed and that kind of became the core of what Clearbanc is today. I mean, last year on this same model, these revenue share deals where founders keep their companies,

• 8:01Speaker 02

  but they get the capital really quickly. They need to grow, you know, we'll give founders over a billion dollars in capital this year on this model. So clearly over the last four years, really figured out that this is a pretty big market need. And I think that's because, you know, 40% of venture capital dollars that are raised today end up going straight To Google and Facebook ads. I mean, that's huge. Shamaa has talked about this a ton. And it's literally like you're giving your shares as a founder straight to Google and Facebook. And I just thought there was a cheaper and better way to do this. This was all about building the product I wish I would have had, you know, six years ago when I was running my ecommerce store.

• 8:35Harry Stebbings?

  I mean, it is astonishing to see that forty percent, but I do want to dive straight into it because you kind of mentioned there the origins of the core offering stay with Clearbanc. But what type of business, Michelle, does this work for versus maybe not work for in your mind?

• 8:49Speaker 02

  Yeah, this works for anyone who has positive unit economics and is spending a lot on customer acquisition. Which I think, you know, the first natural vertical is any ecommerce company. I mean, you look at the big ecommerce brands, they were spending seventy, eighty, ninety percent of their dollars on customer acquisition. You know, the second place this works for is consumer apps where you're acquiring a consumer to get a download and then, you know, someone's buying a subscription off that. Subscription boxes fit that. I mean, even the repeatable parts of B two B SaaS companies really fit that as well. And so, you know, I think about if you are spending money on Facebook and Google ads, 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.

• 9:31Harry Stebbings?

  So I totally agree with you and I love that kind of founder retention of the equity. It devastates me when you see three or four percent when they go public that is owned by the founder ultimately. But I have to ask, the thing that I see more and more today when I invest is that actually there's kind of extreme volatility of ad performance on these channels and they reach these saturation rates and suddenly CACs five. So how do you think about the volatility of CACs over time when lending on what seems predictable but maybe isn't?

• 9:59Speaker 02

  Yeah, there's no question that our data science team has to be very good. 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. And so we do a lot of work to make sure that your unit economics are profitable. We do a lot of work to understand how saturated your audience sizes are. And we do a lot of monitoring, actually even on a daily basis, to make sure that if things are changing, we can. You know, help founders react quickly to that because certainly we've seen big changes. You know, we started in 2015. We've seen big changes in in the Facebook and Instagram and all of these platforms. And there's lots of creative ways for founders to solve those problems if they're kind of front and center.

• 10:43Harry Stebbings?

  I do agree with you in terms of the creativity around them, but the big question for me is, and a lot of people said this on the show. People take, that's interesting, actually, people take binary approaches. People like there's untapped opportunities and it's very negative to say that there's saturated platforms to the extreme. And others say, Harry, there's a total lack of free and open distribution today. The incumbents pay up for the large channels and we're really struggling in this kind of lack of free and open distribution. Do you think that lack of free and open distribution is fair? Or do you think that really we have a ton of more creative ways to enable customer acquisition at scale?

• 11:15Speaker 02

  What do you mean by free and open distribution in this sense? You're meaning the fact that so much of this distribution is now based on Facebook and Google today? And those are, those are kind of closed platforms?

• 11:24Harry Stebbings?

  Yes, and then also the fact that really it's just being paid up by incumbents to the extreme. Meaning that startups and that incredible wooden iPhone case company does have access to it.

• 11:34Speaker 02

  I would take a totally different approach to looking at this. I think that the world before Facebook was way harder on startups. You think about buying a billboard, you know, billboard companies would look at you and they'd be like, okay, it's like a minimum of 10 grand. If you're the best discount ever, it's usually 50 to a hundred thousand dollars to start buying out of home. It's half a million dollars to start buying television ads. You know, maybe you can place an ad in your local newspaper. And so that had a huge amount of favoritism to big companies who could buy and big media buyers who could negotiate those discounts. I would still argue today the opposite, that you can go on Facebook and you can test for 20 bucks and see if someone buys your product. And yes, you have to get very, very good as you start to scale and very creative.

• 12:16Speaker 02

  But ultimately you get to tell your end story and you get to control your budget. This idea that you could tell that every mattress you sold or every pair of eyeglasses cost you 10 or 50 or 150 dollars. But that is such a luxury for brands today and and for any company. Because the world of acquisition before this was so much more difficult. So certainly there's going to be challenges as these. Platforms get very big. They're going to make changes that are gonna have huge effects on swaths of companies. But I still think, taking the perspective of what even existed a decade ago, this is a way better world for startups.

• 12:51Harry Stebbings?

  It's super interesting to hear you do that comparison because I wasn't really, well, I wasn't working in that world a decade ago. And so I can't directly draw the correlation. So that's super interesting for me to hear.

• 13:01Speaker 02

  I bought newspaper ads. I remember how tough it was.

• 13:05Speaker 02

  And I'm only thirty three. And so I remember, we were running Bytopia when early Facebook Direct Response was coming out. And we were like, holy smokes, this is gonna change the world. And so I think that some of, as platforms go through change, some of that criticism is very real. I just think relative to the options throughout history, this is pretty good.

• 13:24Harry Stebbings?

  I do totally agree with that kind of thinking. I do have to ask, the other perspective is, okay, absolutely. It's a way better method of financing. You retain equity. But what about, and I'm very aware of VC value add as a statement, and in a lot of cases, it's quite hollow. There are some cases, though, where it really is directly strategically needle moving for a company. How do you think that in terms of kind of the net loss of a potential incredible advisor that comes onto your board through a VC financing round? Instead of maybe an alternative financing mechanism like Clearbanc?

• 13:56Speaker 02

  Yeah, so you know, when you think about VCs, they can be incredibly helpful. And I've certainly seen that in my career and have worked with some extraordinary VCs. They can also be incredibly harmful. And you could probably find founders that could tell you all sorts of stories where companies have been put in really tough positions because of the investors they had. I don't think we're taking an opinion on that. We're saying, let's look at how you should use VC. VC is true risk capital, this zero to one risk that we describe. If you are building a crazy piece of AI and need fifty engineers or solving a disease, VC is the perfect fit for you. What I'm saying is, Clearbanc, we're like, if you know that channels are working, if you know you're putting a dollar into Facebook and getting five dollars out, that is by definition repeatable and scalable.

• 14:41Speaker 02

  It's not true risk capital, and you should be able to use cheaper capital than equity to be able to fund that. And so we've actually seen a lot of our founders doing this. I mean, you know, look at a guy like Vinebox. Y C has these single-serve wines that come to your house. You can try different wines. You know, he took some of our capital last year in Q4, got to raise a Series A that was doubled in valuation. He still took VC dollars, so you still have that incredible advisor. But instead of raising $10 million as a founder, you can raise $5 million in VC, $5 million from Clearbanc. We do all the funding for your ad spend and you still have that. And so I think it's all about what you need as a founder and looking at how do we create a different asset class around the repeatable parts of scaling your business.

• 15:24Harry Stebbings?

  No, I totally agree. And I love that jewel rule where you get the very best of both worlds with that segmented ad spend through Clearbanc. I do have to ask, because the other element is it's almost egotistical in some cases. You know, we often see the unicorn celebrations when companies raise these mega rounds. And when you chatted before, you said that we need to stop celebrating funding. So why do you think we need to stop celebrating funding rounds, Michelle?

• 15:46Speaker 02

  It's not about celebrating funding rounds. 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. And I think that there's been a big difference that not a lot of people are talking about. You know, the founders of Lyft went public and they owned 3.5% of Lyft, an incredible success story by any metric and an incredible service. You know, when Microsoft went public, Bill Gates owned half of that company. And you can see the extraordinary impact that that wealth had on the non-for-profit world and all sorts of things going forward. But I want to live in a world where founders can own more of their company. That's when we know that we've made it. And so that's, I think, why, you know, if you look at where this capital is being spent, it's really, really important.

• 16:29Speaker 02

  And it doesn't mean no VC, it just means how do we get founders to take less solutions? Back to your question, and so I think that what's happened is that we are just celebrating when founders are giving up control or they're giving up pieces of their company. And I think there are way better milestones to celebrate. Watching new products, getting a critical user traction, hitting your millionth user. Like, that is what the tech press should be celebrating. I think that what this became is, it doesn't take a lot of work to verify that a round happened. And so this became a proxy for someone else thought you were successful. And therefore you did this, but I think there's a totally other way of looking at it. And for me, like, I mean, I've been a founder for 10 years. Like, all I cared about was how do we help and protect my founder? And how do we do this at every level of the stock?

• 17:12Speaker 02

  Whether you're building a unicorn or whether you're building a company that's going to make a great impact on your local community.

• 17:17Harry Stebbings?

  Yeah, no, I totally agree with you and with that perspective. Yeah, I'm really interested. You said one element there, which is kind of where the money is spent. And I'd love to talk about geographic distribution, maybe of current funding. I'm sure you've seen some incredible data points from the time already with Clearbanc. So in terms of the decentralization of entrepreneurship and maybe a lack of in terms of funding, what have been some of the big learnings on distribution of venture dollars? For you, having seen that with the process with Clearbanc over the last few years?

• 17:43Speaker 02

  Yeah, it's a great question. You know, the way that, like, I think great founders come from everywhere. It's one of these careers that if you have, you know, the right set of ambition and drive, it shouldn't matter where you come from. And I look at the challenges of the world, something like climate change, where governments have put a trillion dollars to work, if not more, to try and solve these problems. And it's effectively going to be one or two entrepreneurs that are going to build cars and trucks we want to drive that will have the biggest impact on that problem. And so if you take the view that founders are the ones that fundamentally change the world for the better, we have to be able to find them in more places than just Silicon Valley and New York. And so one of the interesting stats that I read recently in Bloomberg was last year, 80% of the venture capital dollars went to four states in America,

• 18:28Speaker 02

  California, New York, Massachusetts, and Texas. And there was actually nine states in America where there was zero dollars in venture funding. There was no companies that got venture funding. So the logical conclusion of that is certainly that there was not nine states in America that had no entrepreneur. It's that there was nine states where VCs truly had no reach into that. And so I think that became one of the incredible side effects of Clearbanc is that we built everything through data science and AI. You know, you plug into your data to us and we can give you an answer, you know, in 20 minutes on the capital that you qualify for. And we've also inadvertently took the bias out of decision making because we're not meeting our founders, we're not doing pitch meetings. And so when I pulled their numbers, like, We funded eight times more women than industry average.

• 19:13Speaker 02

  We did nothing to try to make that happen. That's just what happens when we made those decisions just based on the data. We have funded founders from all over America that are totally different. I mean, I remember actually one of our very first companies that we funded. And this one, you know, you always remember your kind of first customers as a founder yourself. So we find this guy, he's an ex-military veteran out of Baltimore. I mean, I don't think there's a VC within 100 miles of him. And I was like, exactly, right? You're laughing because it's true. And he has this idea to do a murder mystery subscription box. Like every month you get a box that has, you know, a handwritten love letter and a bunch of clues. And so you can run a murder mystery party. Pretty cute idea. But the cool part of Clearbase Model is it's not my job to evaluate the size of the murder mystery market.

• 19:58Speaker 02

  Or if this guy's a good founder, I'm like, look, it's pretty good customer acquisition metrics. We should start him out, you know, give him 10 grand of funding. So two years later, this guy has 60,000 subscribers. He has a massive multimillion dollar business that he owns 100% of himself. Clearbase scaled up from 10,000 and we've given him out $8 million in funding. And I think that is a huge success story. And that eliminates this question on not all businesses are supposed to grow forever. And it's okay, you know, this guy has a great success story. But I think that that was finding a guy that probably just wasn't in that ecosystem to understand all the options. Because I've seen VC fundraising and done that process. I mean, this takes three months. It is 100 meetings. It is getting to know people.

• 20:42Speaker 02

  You are getting into a long-term relationship. Like with equity, you never get to give it back. And so, you know, you have to think really carefully about who you partner with. And I think that's true for any founders and you've interviewed so many incredible VCs. But I think that's kind of the way we think about, you know, geographic distribution. And how do we find the most of the founders?

• 20:59Harry Stebbings?

  No, I do totally agree with you. And all I would just say as a VC, just to advocate to take my money over everyone else's. That's a much better idea. I do want to discuss one final element. You said there about the 20-minute element and you recently released the 20-minute term sheet. Now, this caused a lot of discussion in our studio here. Half of the team thought it was inspired by us and thought rather brilliantly. Of themselves and half thought it was a coincidence. Who was right, Michelle?

• 21:23Speaker 02

  There's no question that 20 minutes has a ring and I think that was 100% inspired and probably even subliminally inspired by you because I remember we can process data very quickly. So we're actually probably faster than 20 minutes, but it's just like 20 minutes had such a good ring. And I always think branding is so funny in this way is once you've heard something a couple of times. And so, you know, you guys should take all the credit. It was inspired by you guys.

• 21:46Harry Stebbings?

  Yes, that is such good news. I was on, I was on, I was on by our side. That is so good. That's literally made my day. I do have one question around it and it's just how do you plan to assess and allocate at such large scale? And maintain accuracy when analyzing kind of so many opportunities that will come through the door. What does that look like?

• 22:05Speaker 02

  Yeah, 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. But you don't mistake, this company could not have been built 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 that. And so, you know, you can give us your data, you can connect us to your online accounts and we can give you how much capital can give you. And generally the terms in 20 minutes, which we think is a great alternative option for founders to have, especially to have in their back pocket as they're negotiating.

• 22:46Harry Stebbings?

  No, I totally agree. And I think actually that's a super interesting element you just said there. And it's actually the leverage that it can provide founders in fundraising when it's not the sole source being VC. And they have this very pragmatic and beneficial alternative. So I love that additional form of leverage. I do want to dive into my favorite though, Michelle. It's the quickfire round. So I say a short statement, you give me your immediate thoughts, 60 seconds per one. Are you ready to rock and roll?

• 23:10Speaker 02

  I'm ready to rock and roll.

• 23:11Harry Stebbings?

  Okay. So your favorite book and why?

• 23:13Speaker 02

  Favorite recent book is Little Black Stretchy Pants by the founder of Lululemon. I was shocked when I read this book. He was on his fifth store, already a wildly successful brand. And the bank made him take a personal guarantee to buy out that store when he was at, you know, over $20 million in revenue. And I was just so inspired. I mean, that really means that even if you build the best brand in the world, you know, financial institutions have been so fair, unfair for so long and just inspired me even more to to keep going on our mission.

• 23:43Harry Stebbings?

  I'm actually wearing Lululemon as we speak, so that's.

• 23:45Speaker 02

  They're so comfy.

• 23:47Harry Stebbings?

  But tell me, what would you most like to change about tech and kind of the Silicon Valley scene that's really protruded so much today?

• 23:54Speaker 02

  I think, you know, what I would change about Silicon Valley is I would extend the reach of Silicon Valley. The thinking that's been so extraordinary should not just apply to people that are in the Bay Area. It should apply to every corner of America and frankly, every corner of the world. And so the more that I can play a tiny part in building solutions to hopefully enable that, I think the better off we'll be as a society.

• 24:14Harry Stebbings?

  Tell me, you've had some incredible experiences. We mentioned your early career in the beginning. What's one moment that's changed the way you think, Michelle?

• 24:21Speaker 02

  All the moments that make you think are incredible places where you failed. And so it didn't matter if I lost a big deal or a huge hire that I wanted to make. It was those moments that you have to embrace the failure and figure out what you have to learn from there.

• 24:37Harry Stebbings?

  Can I ask a really personal one? And it's unfair because it's off schedule, so I am apologizing in advance for this. You mentioned when you were 21, the Sturgeon business. How did you respond to that? You know, you were incredibly young entrepreneur and maybe it didn't work out. How did you respond to that?

• 24:51Speaker 02

  It was so important because I had been a good student at school and I needed that early setback to realize that, you know, the world owes me nothing. And that I was just going to have to be creative in the way I came out of that. And I remember, you know, the embarrassment of seeing all my friends at parties and they're like, how is the business going? And not having the heart to be like, oh my gosh, it's a disaster and I don't know how to say this. And I think that that was really important. I mean, I can remember, you know, another really personal moment early in my career is we had an e-commerce store, had a problem with a merchant and, you know, we're told by kind of the early payment processors that we had inadvertently signed a personal guarantee when we signed it for payment processing.

• 25:30Speaker 02

  And I remember the total fear going through my mind when I was like, okay, so we've done a million dollars of processing. I have $10,000 in my bank account. So if these guys are. Asking me for this money like I'm gonna have to declare bankruptcy like I'm just not gonna make it. And it was a lot of those early experiences that inspired me to build better products for founders. Because the catchall has just been put a personal guarantee on something and then the bank is covered. But I believe that data tells us way more than that story. And so I think Clearbanc was about building the product that I wish I had. And a lot of my early experiences as a founder over the last decade really went into that.

• 26:07Harry Stebbings?

  The next logical question for me, I run, what do you do when shit hits the fan, so to speak? How eloquently put.

• 26:15Speaker 02

  You know, you stay calm, you have a circle of largely other founders around you that you can kind of figure out a strategy and a plan. And I think your strategy of exercise is an amazing one. We are without question addicted to our phones, are basically glued to our hands. And the brain needs to be outside to reset. And so if I can get a walk outside, a run outside, anything, I think that's a huge reset. And so it's having a group of really close people that I can triage with and figure out how we're gonna solve the problem. And then the ability to just get outside for a few minutes and reset.

• 26:45Harry Stebbings?

  Yeah, I mean, mine does also include large amounts of tequila, but I left.

• 26:49Speaker 02

  You know, sometimes tequila is the right and only solution. And so I can, I can get behind that too on the right day for sure.

• 26:57Harry Stebbings?

  This, this episode was brought to you by Patron Silva.

• 27:03Speaker 02

  Class of Zul is the best. I discovered this new tequila like six months ago. I'm gonna send you some.

• 27:09Harry Stebbings?

  Please do. I'm so open for this.

• 27:12Speaker 02

  I have no vested interest in this company either. I just love it.

• 27:16Harry Stebbings?

  So I want to finish though today with the most exciting question of all. What's the next five years for you and for ClearBank? Just how big could this get, Michelle?

• 27:25Speaker 02

  You know, I think we win when five years from now founders are going public and they're back to owning half their companies again. And there will be no greater surprise, I think we can fund tens of thousands of companies over the next five years. And I'm really excited to do that.

• 27:38Harry Stebbings?

  Well, I cannot wait to see it. As I said to you before the episode, Michelle, I was so excited for this one. So thank you so much for joining me today and I can't wait to have you back on the show with the first IPO. That's gotta be a deal.

• 27:48Speaker 02

  Yes, we'll do it.

• 27:52Harry Stebbings?

  What can I say? I mean, I told you, she is just incredible and I could not be more excited for Clearbanc in the coming years. I do also really mean it when I say that was one of the most fun episodes I've ever recorded. If you'd like to see more from Michelle, you can find her on Twitter @MichelleRomano. Likewise, I'd love to welcome you behind the scenes here for maybe an odd tequila tasting session or two at the 20 Minute VC. You can do that on Instagram @HStebbings1996 with two Bs. Love to see you there. But before we leave you today... I'm always focused on scaling my time and I was always crap at travel booking and management. Well, not anymore. Why? Because I now use TravelPerk, the business travel management platform that even I love. It's just so super easy to book travel and actually quite fun. And my favourite? No back and forth with travel agents or your finance team. But it gives you the best of both worlds. Companies don't just get happy travellers,

• 28:37Harry Stebbings?

  but also easier management and as much as 20% in savings with 100% in compliance. Got to tick that compliance box these days. And even better, no one is going to chase people for receipts or worry about splurging on overly expensive penthouse suites. Finally, I have to say, the support is just number one rated. So you get 24/7 travel experts ready to deal with forgotten passports... Yep, I had that one before. Unexpected flight cancellations, oversized baggage requests, vegan meal options, whatever you can think of, they have you covered. And the 20 Minute VC listeners can score a free lounge pass to over 1,200 airports for a whole year. That's quite astonishing, I'm quite jealous, I quite like that. All you need to do is go to travelperk.com/20vc, that's travelperk.com/20vc.

• 29:19Harry Stebbings?

  Give them the name of the person who runs travel at your company and if they book a demo, the lounge pass is yours. And if TravelPerk allows me to scale my time, a lot of what we do on the 20 Minute VC is discuss scaling businesses, talk to experts, pick the brains of founders and investors who tell us about the trends to watch out for, offer tips on fundraising and teach us how to excel at any company stage. But there's no playbook for building a great business, but we can certainly learn from people who've done it before. Beyond listening to this podcast and talking to mentors and advisors in your own network, it's important to have resources you can turn to when you're tackling a new challenge. And Stripe has built those resources for you, whether you'd like to learn how to run a pricing experiment or build a knockout landing page. Stripe gives you the information you need to start, run and

• 30:01Harry Stebbings?

  And scale a technology company and their guides are often written by or feature people like Elad Gil, experts in their space who you've probably heard on this very podcast. And you can read my favourite guide on scaling engineering organisations and many more on stripe.com/20vc, that's T W E N T Y V C. And last but by no means least, to scale you need customers. And Intercom offers a new and better way to acquire, engage and retain customers. They've built a suite of messaging first products from chatbots to a totally reimagined business messenger that modern internet businesses use to accelerate growth across the customer lifecycle from acquisition to engagement and support. And over the past eight years, they've totally reimagined what a business messenger can be, which is way more than simply live chat. Today, Intercom is used by the world's most forward-thinking companies.

• 30:46Harry Stebbings?

  Eighty-four percent of Y Combinator companies that use a messaging or live chat tool use Intercom, astonishing fact that one. And they have over 30,000 customers, including larger companies too, like New Relic, Atlassian and Shopify, and also smaller companies like Airtable and Coda. I cannot thank you enough for your continued support. Seriously, it just means so much to me and I cannot wait to bring you another set of very, very exceptional episodes next week.