Clearco hands overseas business to Outfund to focus on North American market

The market exit comes less than a year after Clearco began expanding its international operations.

Clearco is scaling back its presence beyond North America and focusing on Canada and the United States (US).

Clearco has confirmed to BetaKit that it is handing off its business in its overseas markets to United Kingdom (UK)-based revenue-financing firm Outfund in what Clearco described as a “strategic partnership.”

As first reported by The Logic, Clearco is ending its international operations and laying off all of the company’s staff in those countries. Prior to this move, Clearco had operations in the UK, Ireland, Germany, and Australia.

Clearco will receive a commission for referring its international clients to Outfund.

Clearco told BetaKit that its partnership with Outfund does not include any of Clearco’s staff, technology, intellectual property, infrastructure, or operations. Under the terms of this partnership, Clearco will receive a commission for referring its international clients to Outfund.

These steps come a month after Clearco laid off 125 employees, or a quarter of its staff, citing tough macroeconomic conditions, and noting that the company was “considering strategic options for its international operations.” Clearco confirmed to BetaKit that today’s layoffs impact 60 members of Clearco’s team—approximately 16 percent of the company’s workforce.

“As we shift our focus to our Canadian and US business for the time being, finding a partner for our International clients that shares our mission to democratise funding for founders has been our focus,” said Clearco founder and CEO Michele Romanow, who expressed regret regarding the layoffs.

Clearco spokesperson Nick Rosen-Wachs told BetaKit that the company’s decision to focus on Canada and the US was “based on the rapidly declining economy and market conditions internationally, especially [in] Europe,” noting that these conditions include a pullback in e-commerce.

Amid this environment, Romanow told The Globe and Mail that Clearco has hired US FinTech investment bank Financial Technology Partners to help Clearco explore strategic options, including the possible sale of the company or fresh financing.

RELATED: Clearco cuts a quarter of staff amid “significant headwinds”

The announcement of this international pullback and these 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.

Earlier this summer, Clearco laid off members of its Irish team just three months after entering that market and sharing plans to add 125 employees there. Even as it made those Irish cuts, Clearco stated that it was expanding operations into Germany.

At that time, the company maintained that it has no need for mass layoffs—despite reports that it had been reducing its headcount more broadly.

Founded in 2015 by Romanow and executive chairman Andrew D’Souza, Clearco is a lending firm that specializes in non-dilutive revenue-share agreements with e-commerce startups. To date, Clearco claims to have advanced more than $3.2 billion more over 9,000 brands. According to Clearco, the company has invested $429 million of that total in companies outside of North America.

RELATED: Clearco commits to Dublin with $164.4 million earmarked for Irish startups

Clearco has raised hundreds of millions of dollars over the last couple of years in equity and debt to finance its lending. Armed with a ton of fresh capital and a strong presence in Canada and the US, the startup began chasing overseas markets during the past two years, adding Ruma Bose as chief growth officer last summer to lead these efforts.

International expansion represented a key component of Clearco’s growth strategy. In 2020, Clearco embarked on international expansion plans that saw the startup move into the UK, the Netherlands, and Australia. This year, Clearco, expanded into Ireland and Germany. But amid the market downturn and e-commerce pullback, Clearco has opted to cut back on these plans and focus on North America. Rosen-Wachs told BetaKit that leading up to this decision, Clearco had operations in the UK, Ireland, Germany, and Australia.

But in recent months, Clearco has quietly increased the repayment fee for its loans, and the company has reportedly been seeking to renegotiate agreements with some of its lenders in order to reduce the amount it pays for its borrowed capital (which Clearco uses to make its loans to startups). That fee increase 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.

Rising inflation, interest rates, and geopolitical tensions have contributed to a broader market downturn that has led many high-growth tech firms to reduce costs and lay off staff amid a difficult fundraising environment and prospective recession.

RELATED: Clearco commits $100 million AUD, adds former Google exec as part of Australian expansion

E-commerce market conditions have also shifted amid the return of in-person shopping, leading other e-commerce-focused firms like Shopify, Article, and Mejuri to cut staff in recent months.

According to layoff tracking website, 573 tech companies from across the world have cut a combined 74,557 employees so far this year.

Clearco noted that each laid-off employee will receive severance pay and a two-year window to exercise equity and outplacement support, “including expedited interviews with multiple partners.”

With the move, Clearco becomes the second Canadian FinTech startup to halt its overseas expansion plans in the last year and target North America, after Wealthsimple—which has also recently made layoffs—sold its UK book of business in late 2021 in a bid to focus solely on Canada.

Image source Collision via Flickr

Josh Scott

Josh Scott

Josh Scott is a BetaKit reporter focused on telling in-depth Canadian tech stories and breaking news. His coverage is more complete than his moustache.

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