Like her predecessor, Clearco’s Michele Romanow is stepping down as CEO of the company she helped found, BetaKit has learned.
In an interview with BetaKit, Romanow confirmed that the announcement was made to employees Monday morning. Along with that announcement came the second set of significant layoffs for the company in the last year, a reduction of approximately 50 employees, just under 30 percent of the company. The layoffs span departments across the company, impacting a mix of junior and senior employees. Clearco previously made a 25 percent staff reduction of 125 employees in July 2022.
Replacing Romanow as CEO is Andrew Curtis, a New York-based investment banker who has 20 years of experience in investment management and financial services. Curtis has been working with Clearco since last summer and will assume the role effective immediately.
Romanow is the second Clearco CEO to step down from the role in the last year. Then-president, Romanow replaced fellow co-founder and former romantic partner Andrew D’Souza as CEO in February 2022 as part of a swap that saw D’Souza move to executive chair.
At its peak, Clearco comprised more than 500 employees in markets across North America, Western Europe, and Australia. The company’s headcount now sits at 140 employees, a 72 percent decrease from just six months prior.
Romanow is also not the only Clearco executive departing their role. CRO Mark Steinman is leaving the company to pursue other ventures, according to Romanow (Steinman did not respond to requests for comment by BetaKit). With Clearco since 2018, Steinman previously held roles as the company’s head of capital markets, general counsel, and chief administrative officer.
Romanow told BetaKit that the decision to step down was hers and communicated to the board towards the end of 2022 following conversations “about who needs to be the right person leading a company at this stage and moment in time.” Romanow added that she is “not going anywhere,” taking on a new position of executive co-chair along with D’Souza.
Clearco was founded in 2015 by Romanow, D’Souza, Charlie Feng, and Ivan Gritsiniak. Originally an alternative banking product for Uber drivers named Clearbanc, Clearco rose to prominence as a debt lender for e-commerce businesses, specifically dealing in revenue share agreements. The company has raised close to $400 million CAD in equity financing from the likes of SoftBank, Inovia Capital, Portage Ventures, Real Ventures, and Intuit. Clearco has also secured more than $300 million CAD in debt to finance its loans.
The company’s latest executive transition is just one more event in a whirlwind two-year period for Clearco, which saw it reach a unicorn valuation in 2021, with more than 500 employees at its peak in markets across North America, Western Europe, and Australia. Clearco’s fortunes started to turn in 2022 as the company faced significant executive turnover and a changing economic environment. Its 2023 headcount now sits at 140 employees, a 72 percent decrease from just six months prior.
The changes began early last year, with none more prominent than the CEO switch between Romanow and D’Souza. Around the same time, Feng also departed to start his own company, while Gritsiniak transitioned to interim CFO following the departure of Curt Sigfstead to Clio.
Like many other companies, Clearco soon began feeling the effects of the changing economic environment. While Clearco initially continued with its international expansion strategy into mid-2022, it was simultaneously cutting staff in other newly-launched markets, citing “macroeconomic headwinds caused by rising inflation, supply chain shortages and the impact of the war in Ukraine.” By July, Clearco was making significant staff cuts and “considering strategic options for [its] international operations.” Sources told BetaKit at the time that Clearco had quietly made more layoffs than the company had announced.
RELATED: Clearco hands overseas business to Outfund to focus on North American market
Just one month later, Clearco announced it had scaled back its international presence to focus on the North American market, handing off its overseas business to United Kingdom-based revenue-financing firm Outfund. Previously holding operations in the United Kingdom, Ireland, Germany, and Australia, the move came with additional layoffs.
Since then, Clearco hired American FinTech investment bank Financial Technology Partners to explore strategic options, including the possible sale of the company or fresh financing. Additional financing came in October, with Clearco securing $17.1 million USD, including a combined $6 million USD from Romanow and D’Souza. SEDAR filings reviewed by BetaKit show that Clearco secured an additional $8.3 million USD just prior to the end of the year, with the company confirming to BetaKit that the financing came from existing investors.
Both Romanow and D’Souza are clear-eyed about how Clearco got here, noting to BetaKit that today’s market is fundamentally different from the one the company was scaling for.
“Let’s be clear: in March of last year, we were in a growth-at-all-cost market,” Romanow said. “There was a ton of venture capital still be being deployed. Everyone was saying ‘grow at all costs.’”
“And as the market shifted very, very quickly on us, we had to make the right changes to retreat from those [choices],” Romanow continued. “But we hired too fast, right? And that’s why we’re unfortunately in this situation where we’re doing layoffs. But it is the right thing for the company, and it’s the right thing for the market we’re in today. Because I don’t think any of these macroeconomic conditions are going to get better right now.”
RELATED: Clearco cuts a quarter of staff amid “significant headwinds”
For Clearco’s co-founders, 2022’s reversal of fortune also necessitated new leadership.
“It would be naive to think the same leadership team that worked well in a zero interest rate, high-growth environment would work well in the environment we’re in today,” D’Souza said.
“I’m a growth CEO and that’s my expertise,” Romanow added. “What’s needed now is a leader that has operated in these conditions before.”
Curtis began working as a consultant with Clearco in July of last year, through an introduction from investor Oak HC/FT. The new Clearco CEO spent part of his career in investment banking with Merrill Lynch and Lazard, and investment managers like Mercer Park. Most recently, he served as managing director and head of credit at New York-based private equity firm Z Capital Group, where he managed leveraged finance investments.
Both Romanow and D’Souza said they were impressed with Curtis’ deep finance and capital markets experience, and ability to work with Clearco’s team in the trenches.
“2022 was a rough year for everybody in tech, really. 2023 is a rebuilding year and I think we’ve laid a lot of that foundation over the last six months to build a profitable and sustainable business.”
“He understands the capital side of our business better than anyone I’ve had the opportunity to work with,” D’Souza added.
D’Souza told BetaKit that when the decision was made to find new leadership, Clearco’s co-founders and its board opted to look internally rather than through an external search in the hopes of hitting the ground running in the new year.
“We felt that this would be the most seamless transition,” D’Souza said. “He was a perfect candidate on resumé that was also intimately familiar with the business.”
For his part, Curtis said he accepted the position because “you don’t often get a lot of opportunities to work with, never mind join, a company that’s a category creator and category leader.”
Curtis takes on his new leadership position in a macroeconomic backdrop that admittedly looks very similar to that of last year. “Everyone’s cost of capital has changed,” he said.
However, Curtis noted that the company is still seeing “very strong demand” from customers. “Our customers are generally doing well,” he said. “They still require capital and that remains Clearco’s north star.”
Curtis is also confident that his deep background in structured finance will be an aid for the company, having been “involved in many situations where companies like Clearco are evolving and undergoing challenging changes” but have “fundamentally strong businesses with great prospects,” he said. These business “just need to be managed a bit differently during periods of economic dislocation.”
Clearco’s new CEO says the company will be focused on “extremely disciplined” cost management for 2023, with an eye towards achieving cash flow break-even by year’s end. That means offering “one product, in one geography” and continued pursuit of additional financing, both at the operational and asset level.
Both Romanow and Curtis added that while a re-expansion to oversea markets remains a possibility, it is not a company focus for 2023.
“2022 was a rough year for everybody in tech, really,” D’Souza told BetaKit. “2023 is a rebuilding year and I think we’ve laid a lot of that foundation over the last six months to build a profitable and sustainable business.”
“This market is going to require a different set of leaders,” Romanow acknowledged, while adding that: “I’ve dumped my heart and soul into [Clearco] and I’m really proud of what we’ve built.”
Update (01/16/22): This story has been updated with additional details and commentary from Romanow, D’Souza, and Curtis following the announcement made to Clearco employees Monday morning. Along with BetaKit, both The Globe and Mail and The Information published news of the company’s CEO change and impending layoffs Sunday night.
With files from Josh Scott. Feature image courtesy Flickr.