Newly published bankruptcy filings are providing a clearer insight into the downfall of Bench.
The documents reveal that the Canada-based startup, which ironically specialized in cloud accounting solutions for small businesses, faced ongoing challenges in achieving profitability. Since its inception in 2012 until September 2024, the company depleted $135 million in funds.
As it approached its collapse, Bench encountered a “liquidity crisis,” according to the filings. At that point, it had only $800,000 remaining in its Canadian account, while a separate U.S. account held less than $400,000.
In recent years, Bench had been making strides in reducing its cash burn, as indicated by the filings. Enhancing the company’s financial health was the primary goal of its second CEO, a former CFO who took over in 2022 and initiated layoffs, according to accounts from ex-employees.
For instance, between March 2022 and March 2023, Bench suffered a loss of nearly $30 million against $42 million in revenue. However, in the subsequent fiscal year, it managed to halve its losses while increasing revenue to $49 million.
Despite these improvements, Bench’s losses continued to mount. In June 2024, as financial difficulties persisted, Bench’s principal lender, the National Bank of Canada (NBC), provided over $40 million in loans to the company, as indicated in the filings.
This funding offered Bench a temporary opportunity to seek a buyer, a task assigned to its third CEO. NBC appeared supportive, as evidenced by a funding and forbearance agreement signed on December 12, 2024—just 13 days before Bench’s collapse—which allowed the startup to pause or modify its loan repayment obligations.
The documents do not clarify the exact reasons for Bench’s shutdown only two weeks later. It has been reported that a bank—likely NBC—called in Bench’s venture debt. Additionally, it was noted by Newcomer that NBC refused to make further accommodations while Bench was seeking buyers.
NBC did not respond to a request for comment from TechCrunch. According to the filing, Bench owes NBC $51 million, and this amount continues to increase due to accruing interest and associated fees.
Nonetheless, Bench is embarking on a new journey after U.S.-based Employer.com unexpectedly declared its intention to acquire the startup just 72 hours post-collapse. This acquisition is based on an agreement that “envisions” a closing date of February 28, 2025, as stated in the filing.
Still, Bench’s bankruptcy serves as a cautionary tale regarding the risks associated with excessive debt in startups. Experts predict that venture debt lenders will significantly influence the anticipated wave of fire sales and startup closures expected to escalate throughout the year.
Compiled by Techarena.au.
Fanpage: TechArena.au
Watch more about AI – Artificial Intelligence
