MONTREAL — Billing itself “the world’s largest e-commerce investor,” Clearco has funded thousands of businesses since its founding in 2015. With its latest moves, however, the company is starting to use the insights collected from its investments to finance mergers and acquisitions—and compete on turf traditionally dominated by large banks.

The Toronto-based fintech’s main offering is an automated investment product that analyzes a company’s financial data and determines how much Clearco is willing to invest, a sum that can range anywhere from US$10,000 to US$10 million. In exchange, Clearco takes a percentage of the company’s revenue.

With its new partnership with Silicon Valley-based MicroAcquire, a platform that helps startups find buyers, Clearco is taking its investments a step farther. Under the agreement, announced last month, the company will provide financing to individuals or firms interested in acquiring its portfolio companies—transactions that would typically be worth “single-digit millions,” CEO Andrew D’Souza said in an interview with The Logic.

The move marks a shift from providing capital in exchange for a share of revenue to purchasing a company outright on behalf of a buyer, who will pay Clearco back over time. It also underscores how Clearco is using its scale to help it compete in new verticals as the company looks to present itself as an alternative to more traditional sources of capital.

For its mergers and acquisitions effort, Clearco is using the troves of data it has about its portfolio companies to accurately price valuations for the deals it is financing, D’Souza said, allowing it to underwrite them regardless of who the buyer is.

“It’s using a lot of the same intelligence and infrastructure that we’ve built over the last six years, but applying it to what is sort of a new and emerging set of activities that is really underserved by traditional institutions,” he said.

“We’re getting pretty accurate at valuing e-commerce businesses and understanding what drives the value of them,” said D’Souza, who co-founded Clearco with Michele Romanow, now its president. “It was actually pretty straightforward for us to say, ‘OK, well, if somebody wants to buy this business, here’s how we can structure a way to finance that.’”

While the average acquisition via MicroAcquire will be roughly the same size as Clearco’s larger investments, the company now has a considerable war chest, having raised more than US$500 million this year. Notable among its backers is SoftBank, the Japanese conglomerate whose CEO Masayoshi Son has made huge bets on global tech giants like Uber and Slack. In July, SoftBank made Clearco the first Canadian investment from its new Vision Fund II.

The MicroAcquire partnership could be the start of a broader push into mergers and acquisitions. Clearco has several M&A employees working on a product called ClearX, the details of which haven’t been announced publicly. On LinkedIn, they describe their roles as helping Clearco’s portfolio companies get acquired. Among the employees working for ClearX are a general manager for M&A and a director of product and engineering for M&A.

Asked how ClearX relates to the MicroAcquire effort, D’Souza said only that it is part of Clearco’s overall goal to help founders, whether it’s through partnerships, such as the one with MicroAcquire, or its own set of products. “We’re still experimenting with how we end up working with them, supporting them, coaching them” through an exit, he said.

The idea for the MicroAcquire initiative grew out of Clearco’s existing work brokering deals among its customers, which range widely in size, D’Souza said. It had already been financing acquisitions for some of its portfolio companies on a less consistent basis, he said.

The transition to M&A is not unlike a venture capital firm providing services offered by traditional investment banks, such as brokering deals or providing underwriting services for large transactions. At the same time, other large tech investors, including Andreessen Horowitz, have gained an edge by expanding the range of services they provide to their portfolio companies. 

Clearco, too, has used its stores of data to offer founders specialized advice to help them grow their companies, and tools to recommend potential partners. 

Mergers and acquisitions have been on the rise, with total deal volumes in Canada hitting their highest level in nearly five years in the first quarter of 2021. The top investment banks involved in the deals were BofA Securities, BMO Capital Markets and TD Securities, respectively, in terms of value.

Clearco isn’t the only fintech to use customer data to develop new financial products. Pipe, which raised money this year at a US$2-billion valuation, offers a similar product that gives businesses access to cash up front in exchange for recurring revenue.

Alex Johnson, research director at the Arizona-based consulting firm Cornerstone Advisors, said the partnership with MicroStrategy is part of a strategy to bundle as many services as possible in order to attract customers, a playbook that has also been used by corporate-card providers Ramp and Brex.

“Zooming out, every fintech company in the B2B space is basically building towards the same thing—providing the best bundle of products and services to help small and mid-size e-commerce and SaaS businesses grow,” Johnson said.