Already one of Canada’s highest-valued technology startups, Clio claims its new Series F round makes it the most valuable cloud-based legaltech company in the world. Buoyed by strong revenue growth, the Burnaby, BC-based unicorn has closed the fresh funding at a more than $4-billion CAD ($3-billion USD) pre-money valuation.
Clio’s $1.24-billion CAD ($900-million USD) Series F also marks the largest software funding round in Canadian tech history, topping Toronto-based 1Password’s $744-million CAD 2022 Series C round. Clio also claims it represents the largest-ever capital raise for cloud legal software, a top five largest fundraise for a vertical market software company historically, and the largest growth equity capital raise in Canadian history.
The legal software-as-a-service (SaaS) provider’s all-equity Series F round was financed entirely by new United States (US) investors. New Enterprise Associates (NEA) led with support from Goldman Sachs Asset Management, Sixth Street Growth, Alphabet’s CapitalG, and Tidemark. It comes shortly after Clio crossed $200 million USD in annual recurring revenue (ARR), the company claimed, up from $100 million USD in 2022.
“We view Clio as a best-in-class, generational software business.”
Tony Florence, NEA Co-CEO
“We wanted to bring on a group of investors that had expertise and a demonstrated capability to assist companies in … that next part of the scaling journey from $200 million [USD] of ARR to a billion dollars of ARR and beyond,” Clio co-founder and CEO Jack Newton told BetaKit in an interview.
Per data from the Canadian Venture Capital and Private Equity Association and RBCx, the largest Canadian tech funding rounds on record include 1Password’s $744 million CAD Series C, Wealthsimple’s $750 million CAD round, Cohere’s recent $688 million CAD Series D, and Trulioo’s $476 million CAD Series D. At $1.24 billion CAD, Clio now tops that list.
But big numbers do not always tell the whole story; at least four of those five rounds featured some form of secondary capital. Wealthsimple and Trulioo disclosed how much—$500 million CAD and nearly $295 million CAD, respectively. 1Password has never publicly confirmed the levels of secondary capital included in its $265 million CAD Series A round, $125 million CAD Series B round, and previously chart-topping Series C round (sources BetaKit spoke with indicated that 1Password’s Series A featured the most significant amount of secondary). A Cohere spokesperson told BetaKit that its Series D round did not include any secondary.
Clio would only confirm to BetaKit that its Series F was “substantially secondary,” making it difficult to triangulate the true amount of operating capital being sent to the company, as well as where the round ranks historically. In a July 24 post on X (formerly Twitter), Newton said that heading into this round, Clio had more than $100 million USD on its balance sheet, leaving it with “little need for primary.”
According to Newton, Clio’s Series F consisted of a combination of primary and secondary capital, “with a view to creating liquidity for existing investors as well as our employees.” Newton noted that Clio has done this before: the late-stage legaltech company also conducted secondary financings in 2019 and 2021 for similar reasons.
Clio’s existing investors, which include TCV, JMI Equity, funds and accounts advised by T. Rowe Price Associates and by T. Rowe Price Investment Management, and OMERS Growth Equity, remain shareholders. “Nobody is exiting in this round,” Newton said.
In an interview with BetaKit, NEA Co-CEO Tony Florence called Clio a “best-in-class” legaltech company, and described Clio’s Series F investor syndicate as “world class.”
“This represents a really big, important strategic transaction for the company and obviously for the software industry overall, and we’re thrilled to be leading it,” said Florence, who will join Clio’s board as part of the round, which NEA has contributed $688 million CAD (over $500 million USD) towards.
Image courtesy INNOVATEwest.
Selling cloud-based legal practice management software, Clio aims to simplify law firm management by centralizing client intake, case management, document management, and legal payments, and other tasks.
Newton attributed Clio’s growth since its $136-million CAD Series E round over three years ago to the work Clio has put into expanding its customer base and its multi-product platform strategy, which he said has helped the company drive more revenue from existing clients.
Since April 2021, Clio has expanded to the Asia-Pacific region, moved upmarket, built out its leadership team, rolled out a slew of new offerings, completed a couple of acquisitions, unveiled an investment fund, and launched a payments business. Today, the company claims to serve over 130 countries around the world, cater to more than 1,000 mid-sized law firms in the US alone, and process “billions of dollars” annually in legal transactions.
Clio set out to raise capital this spring amid “a pretty tough fundraising landscape” for startups and investment firms alike, one that has seen investors put pressure on tech entrepreneurs to deliver a compelling mix of growth and profitability.
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According to Newton, Clio benefitted from its financial profile to achieve both. “We’re growing quickly, and we’re able to drive that growth profitably … If you’re able to achieve profitability at [a] real revenue scale while maintaining significant, rapid growth, investors will put a real premium on those kinds of businesses,” he said.
Newton has also since claimed that Clio is “rule of 40+.” The Rule of 40 states that, at scale, a healthy SaaS company’s growth rate and profit should add up to 40 percent or more.
Clio plans to use this capital to keep “building out the operating system for legal.” According to Newton, this entails investing in Clio’s core platform, its FinTech offering, artificial intelligence, and other new products. “We’re going to continue investing in the product initiatives that have been driving terrific results for us over the course of the last few years, and just pour more fuel onto that fire,” he said.
The company also plans to accelerate its international expansion and move upmarket. To support these efforts, Clio intends to grow its more than 1,100-person team with hires across all areas of its business, including product, research and development, sales, marketing, and customer success, with over 100 roles currently open.
RELATED: Clio doubles C-Suite with four new execs to support product, international expansion
As public markets have stagnated, many companies are staying private for longer or ceasing to go public altogether, and looking for alternative ways to generate liquidity for existing shareholders. In the tech world, US payments giant Stripe is an example of this.
Clio was founded back in 2008. Like its Canadian tech peers of approximately the same age, 1Password and Vancouver-based Hootsuite and Trulioo, 16-year-old Clio has opted to remain private rather than go public.
Newton noted that while Clio is “continually evaluating” and preparing for the possibility of an initial public offering (IPO), this round gives the company some optionality. “As we’ve demonstrated with this round, you can achieve many of the same goals that you might try to achieve with an IPO in the private markets,” he said.
However, should Clio decide to pursue an IPO, Newton acknowledged that its lead Series F investor has a lot of experience taking companies public: according to Florence, NEA has helped over 300 businesses do just that to date.
“As we’ve demonstrated with this round, you can achieve many of the same goals that you might try to achieve with an IPO in the private markets.”
Jack Newton, Clio co-founder and CEO
For his part, Florence does not believe this round signals any intention either way. “I don’t think they’re in any rush,” he said. “We [at NEA are] not in a rush. It’ll be driven by the market opportunity at the time. But everything that we’re doing is not mutually exclusive for that, including raising this big round.”
Newton said that raising entirely from US investors “wasn’t a deliberate choice,” but acknowledged that, “The number of investors in Canada that can write the kind of cheques that we’re seeing from this consortium that’s in this round is pretty limited.”
As to where Clio fits into the legaltech space, Newton admitted that there may be some larger, more highly-valued legacy companies in the sector, such as in the on-premise arena.
But among firms Clio views as directly comparable in cloud-based legaltech, Newton argued that Clio stands alone. Other members of this group include players like NetDocuments, MyCase, and Rocket Matter. Meanwhile, companies like Thomson Reuters and LexisNexis also own software businesses or offer products in the same space Clio serves. “Of our peer set, we’re far and away the most valuable company in that segment,” Newton claimed.
Florence agrees, citing the strength of Clio’s platform approach, products, management team, and the progress it has achieved to date. “We view them as the clear market leader,” he said.
“We’ve got a long, long heritage of investing in best-in-class enterprise software companies, and we view Clio as a best-in-class, generational software business,” Florence said.
UPDATE (07/26/24): This story has been updated to note new metrics Clio co-founder and CEO Jack Newton shared on X following its initial publication.
Feature image courtesy Clio.