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Clearbanc uses data to fund e-commerce startups

Entrepreneurs in California may be interested in the new financing company Clearbanc, which has designed a fast alternative to venture capital funding. Clearbanc provides between $10,000 and $10 million to qualifying applicants to fund online marketing efforts. The company then collects fees starting at 5 percent from monthly top-line revenue until funding is repaid. In contrast to VC funding, this arrangement does not require entrepreneurs to give up equity. A founder of Clearbanc also highlighted the company's data-based approach, which eliminates the biases often inherent in convincing VC investors to provide money.

The founder said that female entrepreneurs only receive 2.2 percent of VC dollars because the funding is reliant on business connections and in-person presentations. A female entrepreneur commenting on the Clearbanc approach said that it provides additional value by sparing startup founders the time investment necessary to woo VC investors.

Clearbanc aims to make the funding process fast. A startup that can demonstrate at least six months of steady online sales could receive a term sheet within 20 minutes. From there, a due diligence process that confirms revenue through a company's payment processors could be complete in one week. The funds will then be distributed a day later.

When making decisions to accept funding, an entrepreneur might want legal advice. An attorney familiar with business formation and planning could explain financing terms and contractual obligations. A person considering a VC investment that requires an equity stake could gain insights from an attorney while negotiating the terms of the deal. Legal advice during the drafting of the contract may protect the entrepreneur from excessive exposure to personal liability when making financial commitments. An attorney could also evaluate a proposal for compliance with financial regulations.

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