Online car retailer Clutch has laid off a significant portion of its employee base in a move to slow down growth and extend its runway.
Clutch CEO Dan Park told BetaKit that the decision was in response to the current market conditions, noting that the startup “is not immune” to what is currently happening to tech companies around the world.
The layoff of 76 individuals took place on June 14, and represents approximately 22 percent of the company. Prior to the cuts, Clutch sat at around 340 employees.
In addition to the mass layoff, Clutch also recently made what it called “performance” cuts, but declined to disclose how many people were let go. Sources that spoke to BetaKit and public posts on Glassdoor indicate that around 30 percent of Clutch employees were cut in recent weeks. Park claimed that Clutch’s team currently sits between 260 to 270 people.
News of the staff reduction comes shortly after Park had indicated to The Globe and Mail in recent weeks that his company had slowed hiring plans – one of the many Canadian tech companies to do so in recent weeks. Clutch told The Globe it had limited its current hiring plans to between 50 to 60 roles, down from the 200 it planned to hire when it announced its $100 million Series B in November.
While announced in November, Clutch told BetaKit at the time that the round had closed earlier in 2021, but did not disclose the date. Earlier this year, Clutch also secured $150 million in financing, though the cash is a secured debt facility against the startup’s car inventory rather than operational capital.
The CEO did note, however, that a “large majority” of its operational capital is still on Clutch’s balance sheet and the startup remains well-capitalized. Park said the decision to limit growth and cut down on staff was purely about ensuring Clutch is set up for not just the next year but the next 24 months.
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He indicated that Clutch was influenced by Sequoia Capital’s recent memo that called the current market conditions a “crucible moment” of uncertainty and change. Sequoia suggested that companies move quickly to extend their runway and examine their business for excess costs. The 52-slide deck follows similar memos shared by Sequoia in 2008 and in early 2020.
Noting that he’s been through a few cycles of downturns, Park said the idea was for Clutch to be prudent and extend its runway sooner rather than later given a tougher environment for raising capital. “[These conditions] typically last anywhere between 18 to 36 months and we want to make sure we’re prepared for that.”
Park told BetaKit that the cuts were company-wide, across departments and geographical regions. Remote workers were particularly hard hit, Park said, noting that while Clutch believes in hybrid work, in-person team development is core to its culture.
Clutch is not unique in this approach. Reports indicate that remote tech workers have been increasingly at risk of losing their jobs amid widespread layoffs.
Despite the staff cuts, Park echoed statements made in May that Clutch has seen “consistent growth” over the past year. He noted record weeks and months of growth, and that Clutch continues to see its sales increase.
Park said Clutch remains focused on its core market and product lines – a marketplace for customers to browse and purchase from a selection of vehicles, with Clutch also making available financing and insurance. Clutch’s model also includes home delivery of the vehicles.
The startup currently operates in Alberta, British Columbia, New Brunswick, Nova Scotia, Ontario, and Prince Edward Island. Last year, Clutch had laid out an ambitious goal to service 90 percent of Canadians by the end of 2023. While that growth plan may not be more limited, Park remained adamant that Clutch is still in a positive position.
“Our industry is largely insulated from recessionary shocks,” said Park. “Used cars are generally the preferred category of purchase when it comes to transportation when things like this happen.”
In fact, the used car market in Canada has been booming since the onset of COVID-19. Used car prices have increased as supply chain issues have led to a shortage of new vehicles availability.
However, the increased demand also brings limited overall supply as Clutch looks to increase its inventory and geographic reach. The startup is contending with a competitive online used car market that includes the likes of Canada Drives, which recently received a commitment of $40 million in equity from goeasy. Canada Drive currently intends to double the amount of certified used vehicles in its market.
Carpages and AutoTrader are other recognized brands in the online used car marketplace in Canada.
Park is not deterred. Noting the difficulty of making employee cuts, he called things essentially “business-as-usual” with Clutch’s product line and the market it plays in.
“At the end of the day, the fundamental of the business hasn’t really changed and our plans, although growth has been pared back slightly because you can’t be aggressive with preserving capital, largely hasn’t changed in any real way,” he said. “So we feel really good about the path forward when you think about the next couple of years.”
CORRECTION 30/06/22: This story previously incorrectly stated that Clutch has employees in The United States and India. Based on new details from the company the story has been updated to note that Clutch’s employees are solely based in Canada.
Feature image courtesy Clutch.