The Glone and Mail - 01.08.2019

B2| REPORTONBUSINESS O THEGLOBEANDMAIL| THURSDAY,AUGUST1,

A Toronto startup co-led byDragons’ Den
star Michele Romanow that is aiming to
transform how young e-commerce com-
panies finance their growth has secured
US$300-million in capital to fund its own
expansion.
Clear Finance Technology Corp., which
operates as Clearbanc, said on Wednesday
it has raised US$50-million in venture cap-
ital led by Boston’s Highland Capital Part-
ners and backed by existing investors In-
ovia Capital and Emergence Capital. It has
also secured US$250-million led by Bos-
ton-area credit financier Arcadia Funds
LLC and New York private equity firm Up-
per90 for a fund separate from Clearbanc’s
capital structure that it will use to bankroll
its e-commerce customers.
The first chunk is an investment in the
Clearbanc business itself; the larger
amount is a key input for the company’s
business model. Clearbanc provides cash
advances to e-commerce companies to
spend primarily on marketing on Face-
book, Google and other online channels.
Clearbanc then receives a small percent-
age of the ensuing revenues generated by
their customers until the advance is
repaid, plus a 6-per-cent premium (the
rate is higher, up to 12.5 per cent, if the ad-
vances are used to cover other expenses).
Customers don’t have to provide per-
sonal guarantees, give up equity or submit
to credit checks, but do have to give Clear-
banc access to business data from their
bank accounts, online payment processors
and online advertising accounts. Clear-
banc then crunches the data to assess the
economics of the businesses, producing an
automated financing offer for anywhere
from $10,000 to $10-million within 20 min-
utes based on the customers’ ability to re-
pay, Ms. Romanow told The Globe and
Mail. Clearbanc has financed 800 compa-
nies so far in 2019 and she expects to ad-
vance US$1-billion to 2,000 companies this
year.
“They’re running at double our projec-
tions and 20 to 30 per cent above where
they forecast” for the year, said Inovia gen-
eral partner Karamdeep Nijjar. “It’s the
embodiment of product-market fit.”
For young companies, it’s a cheaper op-

tion to fund their marketing, compared

with other choices such as bank loans

(which are harder for young e-commerce

companies with few physical assets or re-

ceivables to secure), running up their cred-

it cards or selling stakes of their companies

to early-stage investors. “The message and

value proposition [have] really resonated

in the market,” said Ms. Romanow, Clear-

banc’s president, whose life partner, An-

drew D’Souza, is chief executive.

It’s also an opportunity that didn’t exist

until the recent shift in online-advertising

spending to digital media platforms made

it easier to measure and predict returns on

marketing expenditures.

“I think [Clearbanc’s business model is]

smart,” said Erin Bury, CEO of Final Blue-

print Inc., a Toronto-based online estate-

planning startup operating as Willful that

has secured $45,000 in funding from Clear-

banc and paid most of it back. She called

Clearbanc “one of the only sources of cap-

ital for early-stage digital-product compa-

nies,” adding it has allowed her company

to delay its search for equity financing.

“Companies today aren’t selling the

same way they were 20 years ago, so why

would we be assessing the risk of a small

business the same way we were 20 years

ago? We’re not spending on billboards and

TV ads, but on things where we can con-

nect in directly and see the efficacy of it. I

imagine we’re going to see more of these

creative funding models that use different

risk metrics in the future.”

Clearbanc started out four years ago

looking to build “the bank for the new

economy,” Ms. Romanow said. The compa-

ny started out trying to finance Uber driv-

ers and Airbnb hosts. Early last year, it be-

gan realizing success with the e-commerce

cash-advance business developed by one

of its early hires, digital entrepreneur

Tanay DeLima. Ms. Romanow and Mr.

D’Souza promoted Mr. DeLima to vice-

president of product and co-founder, and

proceeded to go all-in on the e-commerce

funding business. Clearbanc raised US$70-

million last year for a mix of equity and fi-

nancing capital for the business, then se-

cured another US$50-million in December

from Upper90 to bankroll a surge in de-

mand from entrepreneurs. Mr. D’Souza

said the company will set out to raise an-

other chunk of capital exceeding US$250-

million to fund its customers in early 2020.

“It’s rare, as a venture capitalist, to see as

powerful a concept come down the pike as

we’ve seen with Clearbanc,” Highland gen-

eral partner Dan Nova said. Based on his

discussions with large financial institu-

tions that are intrigued by the model, he

said he believed Clearbanc will be able to

tap “billions upon billions” of funds from

investment banks, sovereign wealth funds

and pension funds to finance its custom-

ers. “We felt it was important to be com-

fortable there would be ample supply of

capital” before investing, he said.

Dragons’Denstar’sstartup

raises$300-millionincapital

Fundingwillaidexpansionof

MicheleRomanow’sClearbanc,

whichgivescashadvancesto

e-commercecompaniesto

spendononlinemarketing

SEANSILCOFFTECHNOLOGYREPORTER

ClearbancpresidentMicheleRomanowsaysthecompanystartedfouryearsagowiththe

aimofbuilding‘thebankfortheneweconomy.’MICHELLESIU/THEGLOBEANDMAIL

Oil and gas producerEncana

Corp.edged past estimates for

quarterly profit on Wednesday,

helped by increased production

in Anadarko and Permian shale

oil basins.

Total proforma production

rose 11 per cent to 591,800 bar-

rels of oil a day in the quarter.

Encana inked a deal in June to

exit its offshore operations in

China and sold its natural gas

assets earlier in July to focus on

its core regions – Anadarko and

Permian basins in the United

States and Montney in Canada.

Permian and Anadarko basins

have been at the heart of the

U.S. shale revolution, prompting

several companies to invest in

assets in the blocks.

Encana’s profit was also

boosted by a 3.7-per-cent rise in

realized prices for oil.

The Calgary-based company’s

net profit was $336-million in

the second quarter ended June

30, compared with a loss of

$151-million a year earlier, dur-

ing which it booked a non-cash

charge.

On an adjusted basis, the

company earned 21 cents a

share, or $290-million in the

quarter, beating the average

analyst estimate of 20 cents,

according to IBES data from

Refinitiv.

Encana’s shares closed at

$6.03, up 28 cents or nearly 5 per

cent, in Toronto.REUTERS

ENCANABEATSPROFIT

ESTIMATESONINCREASED

U.S.SHALEPRODUCTION

Shoppers atSobeys Inc.grocery

stores will soon need to bring

their own totes or lug their

purchases home in paper bags

as the chain moves to phase out

plastic bags by February, 2020.

Canadians go through hun-

dreds of millions of single-use

plastic bags at grocery stores

each year, and the chains – most

of which charge a nominal fee

for plastic bags – are facing

pressure from consumers to do

more to eliminate plastic-centric

packaging.

Sobeys said it is making the

move to phase out plastic bags

as a response to calls from cus-

tomers and employees to use

less plastic. The retailer also

committed to launch programs

to reduce plastic in other areas

of the stores.

“We really felt that the

amount of avoidable plastic in

grocery stores is shocking,” said

Vittoria Varalli, the company’s

vice-president of sustainability.

The change will eliminate 225

million bags used annually at

Sobeys 255 stores.

The company, which is owned

by Stellarton, N.S.-basedEmpire

Co. Ltd., will phase out plastic

bags and introduce paper bags

at its other banners soon after.

Sobeys also operates Safeway,

Thrifty Foods, IGA, Foodland,

FreshCo and Farm Boy. It boasts

more than 1,500 stores across all

its chains.THECANADIANPRESS

SOBEYSTOPHASEOUT

PLASTICBAGSFROMALL

STORESBYFEBRUARY,

SANFRANCISCOPlant-based

burger makerImpossible Foods

Inc.on Wednesday announced a

partnership with major meat

supplierOSI Group, a long-time

producer of patties for fast-food

chains, as it ramps up to meet

demand from consumers and

restaurants including Burger

King.

Burger King started offering

the Impossible Whopper in April

in 59 stores in and around St.

Louis and is expected to launch

nationally in the United States,

which would put the plant-based

Whopper on the menu in about

7,000 Burger Kings.

The partnership between the

vegan burger maker and one of

the biggest meat suppliers comes

as young, environmentally con-

scious consumers are feasting on

plant-based patties and sausages.

“We got ourselves into a sup-

ply-demand imbalance in which

we frankly just did not anticipate

the level of demand that came

from consumers,” said Sheetal

Shah, Impossible Foods’ senior

vice-president of product and

operations. Mr. Shah said Impos-

sible Foods and OSI will both be

investing in OSI facilities to

produce the plant-based burger

patties and that multiple facil-

ities will start supplying Burger

King and eventually other cus-

tomers. The investment details

were not disclosed.REUTERS

IMPOSSIBLEFOODSTEAMS

UPWITHMEATCOMPANY

TOBOOSTPRODUCTION

OFITSPLANT-BASEDBURGER

A judge has approved more than
$1.1-million in fees for lawyers
and the accounting firm probing
the controversial demise of the
QuadrigaCX cryptocurrency ex-
change.
Justice Darlene Jamieson
agreed to Ernst & Young’s bill for
$778,444 in legal and other fees,
saying the firm has been diligent
as it investigated what she called
the country’s first insolvency pro-
ceeding involving cryptocurren-
cy.
She said during the hearing
Wednesday the case is challeng-
ing because auditors were unable
to speak to its owner, Gerald Cot-
ten, whose wife has said he died
from complications linked to
Crohn’s disease while travelling
in India last December.
“The monitor’s work has been
extensive in administering the ...
proceeding and seeking to recov-
er funds on behalf of Quadriga
and its affected users,” Justice Ja-
mieson said in a decision read in
Nova Scotia Supreme Court. “The
monitor has faced complicating
factors including the lack of
books and records and the exten-
sive use of third parties to store
information.”
Fees for legal teams represent-
ing an estimated 76,319 unse-
cured users of the cryptocurrency
exchange – who have come for-
ward to claim more than $214-
million in cash and cryptocurren-
cy – also were approved at
Wednesday’s hearing.
A court report says representa-
tive lawyers have been paid a to-
tal of slightly more than
$380,000, with about $340,
going to lawyers with Miller
Thomson in Toronto and the re-
mainder to locally based counsel
at Cox and Palmer.

THECANADIANPRESS

Courtpermits

morethan

$1.1-million

infeestiedto

Quadrigacase

MICHAELTUTTONHALIFAX

Some trading and investment firms are

calling for competition regulators to scruti-

nize London Stock Exchange’s proposed

US$27-billion takeover of financial infor-

mation provider Refinitiv to prevent fur-

ther market data price hikes.

Asset managers have been pressing reg-

ulators in the European Union and the

United States to help cut the cost of the fi-

nancial market data that they buy from ex-

changes and rely on to make investment

and trading decisions.

While few of the investors Reuters spoke

to expect market data pricing to prove a

deal breaker, they said it should be scruti-

nized and regulators could push LSE to pro-

vide undertakings about pricing and acces-

sibility of some products.

The European Commission, which de-

clined to comment, is expected to under-

take a full review if the LSE’s

proposed transaction goes

ahead, with data a likely fo-

cus, sources close to the pro-

posed deal have said.

“There is cause for some

concern for investors as ac-

cess to LSE’s data could be-

come more costly and less ac-

cessible outside of the con-

fines of Refinitiv’s products,”

Jordan Hauer, chief executive

at Amass Insights, a U.S.-

based platform that matches

data providers with inves-

tors, said.

LSE had no comment on

antitrust issues, while Refini-

tiv’s two largest shareholders, private-eq-

uity group Blackstone and Thomson Reu-

ters, which owns Reuters News, declined to

comment.

While LSE-Refinitiv would form a bigger

non-exchange data player, it would still lag

market leader Bloomberg LP, Douglas Tay-

lor, managing director of consultants Bur-

ton-Taylor, said.

LSE data is mainly proprietary index-re-

lated or transactions such as stock trades,

while that sold by Refinitiv is based on

sources such as financial institutions and

databases, he added.

Joe Wald, chief executive of independ-

ent agency broker dealer Clearpool, said

market data costs were already “excessive-

ly high” and in his experience were growing

at an “abnormal rate” compared to other

market products.

“A key point will be, how transparent

[they] are in the pricing of the data and en-

suring that access to the data is fair and eq-

uitable in order to not disadvantage one

market participant over the other,” Mr.

Wald said.

Market data charges have become more

complex and fund industry representa-

tives say prices have risen and become

more opaque.

“In the quest for greater market data rev-

enue, exchanges have unbundled products

and charged higher fees for the ‘new’ prod-

ucts,” five organisations representing in-

vestors in Britain, Germany and the United

States said in a letter to EU regulators last

December, without giving specific figures.

“The rising cost of market data is of con-

cern to the Investment Association and its

members, as investment managers are re-

quired to buy this data in order to trade and

by regulation,” Galina Dimitrova, director

for capital markets at the Brit-

ish trade body told Reuters.

But industry body the Fed-

eration of European Securi-

ties Exchanges (FESE) in

March said its members had

combined market data reve-

nues of €245-million

($358.32-million) in 2018,

which had risen by only 1 per

cent annually in recent years

in real terms.

Although some data pro-

viders and consumers say the

recent arrival of new entrants

is putting downward pres-

sure on costs, last year the

share of exchanges’ revenues

from market data was relatively stable at

around 30 per cent, the FESE report

showed.

Three market participants said combin-

ing Refinitiv and LSE could actually lead to

improved packages for customers, while

sources close to the planned LSE deal said

the London exchange has a track record of

rewarding customers, such as through

profit-sharing in clearing.

“A philosophy of openness is a core val-

ue of both companies and we don’t antici-

pate any of these fears on data restriction to

be founded in the actual strategy,” one

source familiar with the deal said.

“[It] would run counter to everything

these firms stand for.”

REUTERS

Regulatorsurgedtomonitor

LSE’spossibleRefinitivtakeover

SINEADCRUISEHUWJONESLONDON

Thereiscausefor

someconcernfor

investorsasaccess

toLSE’sdatacould

becomemorecostly

andlessaccessible

outsideofthe

confinesof

Refinitiv’sproducts.

JORDANHAUER

CEO,AMASSINSIGHTS