TORONTO 鈥� When Andrew Curtis took over Clearco, he had his work cut out for him.
A downturn in the tech sector that hit companies big and small was well underway and financiers were so spooked they were tightening their purse strings and pausing the lofty deals they signed at a dizzying rate during the height of the COVID-19 pandemic.
With its mandate to lend cash to small businesses under terms more favourable than traditional lenders, Toronto-based fintech Clearco was not immune to the pressures.
It said goodbye to 25 per cent of staff in its third round of layoffs in a year as Curtis took the helm. By then, it had already culled 125 employees from its 500-person workforce in July 2022 and let go of 60 that August, when it handed off its international business to U.K. and Australian e-commerce investor Outfund. A slew of senior leaders also departed.
So when Clearco's board approached Curtis in January with news that co-founder Michele Romanow was exiting the top job and joining ex-flame and fellow co-founder in the executive chair role, the New York-based investment banker-turned Clearco adviser couldn't resist the opportunity to chart the company's new future.
"When things are challenging, you just dig in and you work through this stuff and I really enjoy the challenge of sorting out and solving complicated problems," he said.
At the top of his to-do list was raising money and better supporting the company's lending.
On Tuesday, he checked off those items with a US$60 million Series D round from longtime Clearco investors Inovia Capital and Founders Circle Capital, which have backed a slew of big names including Wealthsimple, Lightspeed, Cohere, DoorDash, Pinterest and Poshmark.
The funding was coupled with a committed asset-backed facility from Pollen Street Capital that's earmarked for revenue-based advances to e-commerce businesses approved for funding through an artificial-intelligence-backed underwriting model Clearco uses.
The transactions provide up to $100 million in financing capacity and are expected to support $850 million of Clearco originations in the next two years.
"It's just great, great news for Clearco and more importantly, great news for the customers that we serve that we're able to ... move past some of the challenges that the company has had over the last year or so," Curtis said.
But getting ahold of such big sums is no easy task these days, even with Clearco's unicorn status and a reputation for pulling in $400 million in equity financing from prominent investors like SoftBank.
"Lots changed in the last couple of years, most importantly, central bank's tightening of monetary policy, so rates are much higher and that, that always has some effect," said Curtis.
"I think it would have been easier (to raise in another environment) and I think the Silicon Valley Bank collapse complicated things both for us as well as for the broader market."
U.S.-based Silicon Valley Bank, known for being friendly to startups, fell apart in March, when its clients rushed to withdraw billions of dollars as they feared for the lender's solvency.
When the bank's 91原创 branch was liquidated, some of Clearco's early investors were able to buy the company's $60 million loan.
As the Merrill Lynch & Co.-bred Curtis machinated the "unique and unusual" arrangement, Clearco was needed more than ever, because in the first half of 2023 alone, venture capital funding fell 48 per cent to the lowest level since before the pandemic.
Banks continued to be careful lending to small businesses, making Clearco's selling points -- no equity dilution, hidden fees, or compounding cost of capital -- even more attractive.
While economic conditions have eased for clients, Curtis said "a fair amount of uncertainty" still lingers.
"The good news is things are not as bad as maybe people thought they would be a year ago, but they still face challenges," he said.
"I don't think anyone thinks we're out of the woods yet."
That's true for Clearco too.
Despite juicing the company's coffers, Curtis remains on a mission to transform and steady the business that's advanced over $2.5 billion in financing to more than 10,000 companies since 2015.
Next, he'll turn his attention toward building origination volumes and profitability.
"There's been a lot of change at the company and now the goal is really to dial in our focus on the core business itself."
This report by The 91原创 Press was first published Oct. 4, 2023.
Tara Deschamps, The 91原创 Press
