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How Revenue-Based Finance Helped This Green Startup To Grow


When startups are seeking external funding their options are often limited to debt funding from the bank or equity funding from an investor, and in the very early stages of the business, it can still be difficult to secure. When entrepreneur Cemal Ezel found himself in that position, he approached global e-commerce investor Clearco.

Ezel had co-founded an environmentally-friendly toilet paper brand, Serious Tissues, which was launched in April 2020. Made from 100% recycled material, Serious Tissues was also the U.K.’s only carbon-neutral toilet paper brand and has partnered with a number of associations on tree planting projects all around the world. Around 15% of deforestation is due to toilet paper production alone, according to the Natural Resource Defense Council.

However, despite the brand’s green credentials, promising early sales, and the global success of Ezel’s previous social enterprise Change Please, which helps homeless people off the street by training them as coffee baristas, the banks and investors were reluctant to provide funding.

He says: “When you have a strong track record in business, you assume that you are in a stronger position when it comes to securing venture capital or a bank loan, but because Serious Tissues was a different legal entity to Change Please that didn’t happen, and lenders and investors saw only the risks associated with a brand new venture.”

Serious Tissues had been launched just as the pandemic hit the U.K., so the team had to switch its plans to target the B2B market to the direct-to-consumers (D2C). And online sales via Shopify, Instagram, and Facebook advertising exploded. It was clear that the more they invested in advertising, the higher the return. The challenge was how to raise the cash they needed to reinvest, which was when they discovered Clearco.

Headquartered in Toronto, as part of its global expansion plans, Clearco entered the U.K. in October 2020, providing revenue-based financing for direct-to-consumer e-commerce businesses with a minimum of six months of trading data. It has invested almost £100 million pounds in 700 business founders in the U.K.

The model works by taking the company’s transactional data from Shopify and PayPal etc., as well as their Facebook advertising account, Google search words, etc., and running it through an algorithm to create a forecast for future revenues on which a funding decision is then based.

Clearco’s head of U.K. Sarah Clark explains: “The algorithm presents you with three offers of capital; low, medium and high. It’s not a bank loan and we don’t charge interest. Instead, we charge a fixed fee, typically about 6%, and then agree on a percentage of your daily online revenues as repayment.”

Unlike a traditional bank loan, where fixed repayments are made via a monthly schedule, with the revenue-based model, if companies don’t make a sale, they don’t pay anything, which has obvious benefits for businesses experiencing supply chain issues.

“If you’re ordering goods from overseas with a lead time of eight months, you having to pay for those goods, but you won’t sell them for eight months,” says Clark. “Our funding can be an effective way of bridging that working capital gap; we lend you the money upfront and you only start paying it back when you start making sales.”

The funding helped Serious Tissues achieve a return of 150% on its advertising investment, and hit its year four sales target by the end of year one. To date, it has received £300,000 from Clearco. Ezel says: “Having proven that our model has worked over the last year, we are now speaking to three or four different banks about some longer-term funding.”

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Another upside to the Clearco funding model is that because the investment decision is based solely on a company’s data it removes the vast majority of bias. “As a consequence, it has funded many more businesses founded by women and members of ethnic minorities,” adds Clark.

For Ezel and his team, the success of the business has also enabled it to deliver on its environmental commitments. For every pack of toilet paper sold, Serious Tissues plants a tree. “We are currently planting an area four times the size of London’s Hyde Park every week. Ezel says: “As a social enterprise, we can now make a much bigger impact on the world.”

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