Clearco is set to lay off 125 employees, which amounts to approximately one-quarter of its team.
Co-founders Michele Romanow and Andrew D’Souza told Clearco employees about the cuts in an email on Friday morning. The email, shared with BetaKit, stated, “Today we have made the hard decision to reduce our workforce by 125 people and are considering strategic options for our international operations.”
The email added that “invites will go out shortly to those who are part of this reduction in force followed by meetings with team leads.”
Prior to the company-wide layoffs, Clearco claimed to have employed 500 individuals globally.
Romanow and D’Souza cited the current macroeconomic environment as the reason for the layoffs, and called the move necessary in order to ensure Clearco is “able to support as many founders as possible,” and “to come out of this economic downturn a sustainable and profitable company.”
The announcement of the layoffs follows a tumultuous time for Clearco. The company has been quietly downsizing in recent months, as reported by The Logic, with multiple sources indicating to BetaKit that Clearco had made more layoffs than it had initially claimed in June.
Notably, LinkedIn notes that Clearco’s employee headcount sits at around 580, slightly higher than the 500 people that Clearco claimed to have prior to today’s layoffs.
In June, Clearco made layoffs to its Ireland team — just three months after entering that market and announcing plans to hire 125 employees there. The company also shuttered a site in Israel. At the time, a Clearco spokesperson claimed the cuts were less than 10 percent of Clearco’s overall Dublin headcount and that the layoffs didn’t affect the rest of the company. Since that time, the company has maintained that it has no need for mass layoffs — despite reports that it had been reducing its headcount more broadly.
Clearco also quietly increased the repayment fee for its loans, and has reportedly been seeking to renegotiate agreements with some of its lenders in order to reduce the amount it pays for its borrowed capital — used to make its loans to startups.
That increase in fee came in relation to market conditions, and after Clearco saw a surge in demand for its loans as small-and-medium-sized businesses that Clearco serves also feel the affects of the macroeconomic environment.
The FinTech company, which has raised hundreds of millions of dollars in the last couple of years, both in equity and debt for its loans, is not the only company to be feeling the affects of the current economic environment. Shopify made a similar call this week, letting go of 10 percent of its staff (around 1,000 employees). In his message to employees, CEO Tobi Lütke cited having made a wrong bet on where the future of e-commerce was going.
Tech companies across the globe have been making similar staff reductions. Layoff tracking website Layoffs.fyi reports that 420 startups have let go of close to 6,000 employees so far this year.
FinTech and e-commerce companies have been especially hard hit. In Canada, crypto exchange Coinsquare recently laid off about 24 percent of its employees, and in June Wealthsimple cut approximately 13 percent or 159 of its 1,262 employees.
Regarding Clearco’s staff reduction, Romanow and D’Souza noted in their email that Clearco is facing “significant headwinds that simply didn’t exist six months ago.” The pair cited rising interest rates “not seen since the mid-90s, the highest inflation in four decades, [and] one of the biggest swings in European currency since the founding of the Euro.”
“All [this] compounded with a slowdown in e-commerce growth that’s been well documented and continued supply chain issues for companies of all sizes,” the co-founders wrote.
The email stated that Clearco will be providing the laid-off employees with severance pay, a two-year window to exercise equity, extended health coverage, and job transition support.
Moving forward, Clearco is focused on being able to continue its lending. “We know we have to do everything we can to support the 10,000+ founders who have taken $5 [billion]+ from us, the people who need the capital the most,” Romanow and D’Souza said.
Clearco has been working to keep its ship afloat in recent months – from subleasing some of its Toronto office space and cutting spending on things like software, to reports that it secured $60 million USD in equity this year from existing investors and “tapped Silicon Valley Bank for tens of millions in added financing.”
All this comes after Clearco, which raised $550 million USD across two fundraising rounds last year, has failed to bring in as much revenue as it had expected to. This led to the company raising expectations for its salespeople (which in turn created high turnover) and shuttering products such as ClearAngel, which was meant to provides companies at the earliest stages revenue-share funding and support.
Having nearly doubled its headcount every year since its inspection in 2015, Clearco’s big bet led it to have a burn rate that was close to high single-digit millions at one point last year, according to The Globe and Mail.
Romanow told The Globe that after raising additional capital this year, she does not expect Clearco to need to raise further capital this year, and that the company is aiming to be cash flow positive by the end of this year.