AI tool lets startups determine the value of their e-commerce business in 24 hours for free

ai-tool-lets-startups-determine-the-value-of-their-e-commerce-business-in-24-hours-for-free

Valuation was developed by the co-founder of VC firm Clearbanc, who spent six years on the Canadian version of “Shark Tank.”

Pinkypills, Getty Images/iStockphoto

Trying to figure out the value of a startup is critical, but it’s complicated and rarely done without raising funding from venture capitalists. Zillow built the technology to find out the worth of your home. Kelly Blue Book has done it for decades for cars. 

Now Clearbanc, a VC firm that specializes in helping startups, has launched an AI-based platform that lets startup founders know how much their company is worth—in 24 hours, for free. 

Michele Romanow, co-founder and president of Toronto-based Clearbanc, said she got the idea for the platform during the six years she spent as an investor on the Canadian version of the TV show “Shark Tank.”

“We kept seeing all these entrepreneurs giving away huge portions of their company to buy growth,” she said. Romanow recalled a father and son who came on years ago with a cell phone case that cost them $10 to make and $10 in ad costs, and they were selling it for $50.

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COVID-19 e-commerce bubble is inflating prices, Adobe finds

“They were looking for $100,000 for 20% of the company, and I remember thinking it was such a bad deal for both parties,” she said. Romanow ended up making a different deal with the father and son, giving them $100,000 and getting 5% of the revenue until they paid back the money and a 6% fee for her capital.

That gave the founders a chance to grow without having to give up control of their company, she said. “That effectively became the first Clearbanc deal.”

So far, the firm has invested more than $1 billion in over 2,800 e-commerce companies on the same principle: That founders shouldn’t be giving up equity for things that are repeatable in their business, Romanow said.

Clearbanc’s new tool, Valuation, lets founders plug in information including their online bank account, payment processor, ads account and their accounting platform. The more accounts connected, the more accurate the valuation, the company said. 

Valuation uses AI and leverages an extensive data infrastructure to analyze a company’s position in the market, revenue trajectory, and potential for growth alongside competitors in the vertical, the company said. 

Within 24 hours, companies receive a free valuation report based on current revenue, costs, cash on hand, market segment success and a comparison of the business to other businesses in the sector, Romanow said.

After receiving the valuation report, founders have the option to access growth capital, connect with investors to explore raising venture capital; meet buyers to explore selling the business; and take additional funding through Clearbanc’s 20-minute term sheet if they qualify. 

Valuation was beta tested by thousands of companies over 18 months, the company said. The combined total value of the companies using the platform in beta is $32 billion. To date, Clearbanc has connected over 60 companies with VC investors.

Romanow said the e-commerce space has continued to grow and surge even during the pandemic. In the US, e-commerce as a percentage of retail sales spiked from 14% of retail sales to 28% in the first 12 weeks of COVID-19, she said.

“I think the risk [of starting an e-commerce business] is offset by sales that have come online,”‘ Romanow said. “Valuation is so relevant now because it’s harder to meet investors and get a sense of what a company would be valued at and that’s why a product like this is so much more valuable in this climate.”

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Tech startups globally have laid off 69,000 employees amid COVID-19 pandemic

tech-startups-globally-have-laid-off-69,000-employees-amid-covid-19-pandemic

The transportation, finance, and travel sectors have cut 31,000 jobs in four months, according to data compiled by UK-based BuyShares.

Tech startup layoffs as of July 2020.

Image: Statista via BuyShares

Over 500 tech startups have laid off more than 69,000 employees between March and July due to the COVID-19 pandemic, according to data gathered by BuyShares, a UK-based investment firm.

Nearly half of the global workforce is at risk of losing their jobs, the investment firm said. Thousands of companies worldwide have been forced to reduce costs and cut the number of workplaces, and startups are no exception, the firm noted. Suffering the biggest losses are startups in transportation, finance, and travel, which have cut 31,000 jobs in four months, BuyShares said. Retail is close behind, with 7,600 job cuts.

In March, the number of employees who had been laid off amounted to 9,628, BuyShares said, citing data from Statista and Layoffs.fyi, which compiles public layoffs announced in the tech industry.

In the next 30 days, this number jumped by nearly four times, reaching 36,244 by the end of April. Statistics show the number of job losses continued rising, reaching almost 62,000 in May, the firm said. Since then, another 7,645 jobs have been lost, with the combined total reaching 69,623 the last week of June.

SEE: 
How to survive a layoff from your tech job

(TechRepublic)

With more than 14,600 job losses in this period, the tech startups in the transportation industry have taken the hardest hit. The finance industry ranked as the second-most impacted sector, with 8,466 startup employees losing their positions.

Startup companies in the travel sector had to lay off 8,198 workers due to the coronavirus outbreak, ranking as the third-most affected industry. Statistics show startups from retail, food, and consumer industry had to cut down more than 19,100 workplaces in the last four months. The real estate, fitness, and marketing industry follow with 3,503, 3,022, and 2,631 displaced workers, respectively.

Uber, Groupon, and Airbnb had the biggest layoffs

Analyzed by geography, startups from the San Francisco Bay area have been the most affected by the COVID-19 outbreak, with more than 25,500 displaced workers between March and July.

The Layoff Tracker data also revealed that Uber Technologies laid off the most employees since the COVID-19 outbreak. The San Francisco-based ride-hailing company cut a total of 6,700 jobs between May 6 and May 18, BuyShares said.

Groupon ranked as the second firm on the list, with 2,800 laid-off employees or 40% of its staff, the firm said. Airbnb is listed as the third-largest layoff amid the coronavirus outbreak. The San Francisco based company cut 1,900 jobs on May 5, or 25% of its staff.

The performance of tech startups, considered the lifeblood of the industry, surged during the first half of the last decade along with the Nasdaq 100 Index, a technology-heavy mix of large non-financial companies, Bloomberg reported. Then, in 2018, startups pulled significantly ahead of their publicly traded counterparts, driven in part by big gains in valuations at late-stage private companies, according to Bloomberg. That momentum has stalled this year.

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