Q&A with Michele Romanow: Dragon Den host and founder of Clearbanc
When most college graduates think about what they want to do with their professional lives, they follow the same script as millions of people before them: They seek their first real job, apply to graduate school, or take a gap year. But not Michele Romanow. She threw out the script and founded a vertically integrated commercial fishery.
“It’s hard to be 21 years old selling caviar to Wall Street in the middle of a recession,” she explains when talking about her experience of building Evandale Caviar at an inopportune time. While the business eventually closed, her career as a serial entrepreneur and investor was only beginning. Several successful companies later, she co-founded Clearbanc: an investment platform that offers companies a straightforward revenue sharing model without forcing them to give up equity or submit to the stringent conditions imposed by traditional financial institutions. Clearbanc provided more than $100 million in funding in 2018 alone, and the company is on target to do even more in 2019.
It’s no surprise that Romanow is the youngest “dragon” on CBC’s Dragon’s Den (or that she’s on just about every power list of stratospherically successful young entrepreneurs). She’s a fearless, relentlessly inventive thinker who understands exactly what it takes to build and sustain a great company, which is why we were delighted that she took the time to answer a few of our questions.
Ricciardi Group: What’s your definition of innovation?
Michele Romanow: Innovation requires us to completely reexamine our preconceived notions about how things should be done. Every product and system was developed by humans with a limited amount of time and resources. Innovation is really a way of saying: “If we were to create this from scratch right now, what would we do differently?”
In many ways, innovation is just iteration. Everyone thinks innovation comes from one giant idea, but great ideas actually start small and then iterate themselves into something really big. Airbnb started with an air mattress on the floor of a loft, while Uber originally limited its service to black luxury cars. It’s impossible to innovate without the ability to challenge what was there before, but iteration is a vital part of the process.
RG: What are some key entrepreneurial qualities that don’t get enough attention?
MR: Resilience. That’s still the most underrated virtue. Until you’ve built a company from the ground up, it’s difficult to recognize how critical this trait is. You put everything into a start-up: From your reputation to your time and energy. Resilience isn’t just a matter of doing things over and over again – to come back to what we just discussed, it’s the creativity around what can be iterated on. A combination of resilience and creative iteration is necessary for any entrepreneur.
The media celebrates dramatic successes and epic failures. They don’t celebrate the everyday grind. They don’t emphasize the day-to-day resilience that entrepreneurs have.
RG: What are a few of the problems with the way VC typically works today?
MR: Probably two things. VC today funds maybe 1 percent or less of business models. A very small percentage of businesses can grow at 10x over three years. There’s also a huge amount of bias in the decision-making process. As a business owner, I was deeply and intimately aware of how much of my money was going to customer acquisition – more than half is spent on Google and Facebook ads. Founders are using the most expensive capital in the world (which is always equity) to do something which is by definition repeatable and scalable. Entrepreneurs have to use way cheaper capital to fund ad spend.
This was the inspiration for Clearbanc, and we offer a true revenue share. You’re not giving up equity – something you’ll never get back – to buy Facebook ads. Because we had to do this in a really scalable way, we had to build a completely automated process of looking at companies’ data. One of the surprising side effects is that we took a lot of bias out of VC investing.
RG: What’s your favorite company to come out of Dragon Den?
MR: This is kind of like children – you don’t get to choose your favorite. But…
Two military guys came on the show (Mike McNaught and Will Thompson), and they’d figured out that there was no Airbnb for RVs. Although it’s hard to break into this market, they have been absolutely relentless in building up the business, which is called RVezy.
Then there’s Tapplock. A group of engineers created a fingerprint padlock. In the original version, they disassembled an iPhone, took the scanner off, and put it on a lock. It’s just a great idea and a huge success story – they have a ton of accounts and they’re growing rapidly.
Endy is a mattress company that was recently acquired by Sleep Country for $89 million. A brand that was so uniquely Canadian really resonated with me (Endy sources all its materials, houses its production facilities, and conducts its R&D in Canada).
RG: How do you recharge?
MR: Universally the greatest way to recharge is to get outside, which is why I’m on the board of Vail Resorts. I also try to do a bunch of sailing in Toronto in the summer. Discovering audiobooks was really helpful, and gives me a chance to consume books while I’m on the go: In cars, on airport tarmacs, and so on. I listen to a lot of Audible, typically at between one-and-a-half and two-and-a-half speed (which actually makes it easier to focus).
RG: What have you been reading?
MR: “Educated” by Tara Westover. I read a lot of stories about how companies are built, such as “Steve Jobs” by Walter Isaacson. There’s a really good book called “The Coddling of the American Mind” by Jonathan Haidt and Greg Lukianoff, which relates to a point we discussed earlier: We can’t live in a world where we have no resilience. When you do difficult things and fail, it builds muscle – then it hurts a lot less when you fall down.