Romanow stepping down as Clearco CEO
Canadian fintech Clearco – once a high-flier in this country’s high-tech sector – is undertaking another major round of layoffs and will replace the company’s co-founder Michele Romanow as CEO.
Clearco plans to reduce its workforce by another 25%-- just six months after a similar layoff at the company saw 125 employees let go. Romanow, who started the company in 2015 with four other founders and became CEO less than a year ago, will become Executive co-Chair and remain on the board. She is expected to be replaced as CEO by Andrew Curtis, who has been working as an advisor with the company for the past 6 months.
Toronto-based Clearco, whose official name is CFT Clear Finance Technology, lends money to people and companies based on revenue rather than assets.
The company is coming off a tumultuous year. Two years ago, Clearco embarked on an ambitious international expansion. But by the end of last August, the company announced it was exiting all international markets. At the time, the company blamed a combination of rising interest rates, inflation, currency swings and an overall slowdown in e-commerce, as well as supply chain constraints the companies it lends to were dealing with.
Clearco is by no means the only tech company finding itself in deep cost-cutting mode. Last summer, Shopify cut its workforce by 10%. In the U.S., major tech companies like Meta, Amazon, Salesforce and Twitter have announced thousands of job cuts. A total of 237,874 tech jobs were lost last year according to TrueUp, which tracks tech layoffs. So far in 2023, more than 30,000 jobs have been cut.
Still, it marks a tremendous turn of fortunes for a company that was valued at $2 billion dollars less than two years ago when Softbank led the funding round. Clearco, which has yet to turn a profit, has raised almost $700 million in funding over the past several years, according to Crunchbase. Part of that is a debt investment from Silicon Valley Bank. Sources say that recently the debt has become increasingly difficult to service.
Incoming CEO Andrew Curtis has a finance and capital markets background. He was brought in as an advisor six months ago, in part to help with capital structure issues the company has been working through. Curtis denied any struggles with servicing the debt from Silicon Valley Bank in an interview with BNN Bloomberg saying, “We are able to service the Silicon Valley Bank debt and have been able to service the Silicon Valley Bank debt.”
Late last summer, Clearco hired U.S. fintech investment bank Financial Technology Partners to explore strategic options, including a possible sale. There was some inbound interest but the focus of the strategic review was injection of capital instead of an outright sale, according to a source familiar with the matter. Financial Technology Partners had no comment. In an interview with BNN Bloomberg, Romanow denied that the purpose of the engagement with Financial Technology Partners was to sell the company, "I wouldn’t call that a failed process at all because that wasn’t the purpose of that.”
In addition to layoffs and management changes, the company also intends to raise more capital. “We have a plan for profitability, so we may be taking on additional capital raises,” said Curtis in an interview, “but that doesn’t mean we don’t have very strong liquidity right now.” In October, Clearco raised US$30 million from existing investors and founders. “In our business there is always a need to raise capital,” added Romanow.