Bench’s $135 Million Burn Rate: The Shocking Story Behind Its Shutdown

New insights into the downfall of Bench, a Canada-based startup specializing in cloud accounting software, are emerging from recently uncovered bankruptcy filings. This situation highlights the challenges faced by many startups in achieving profitability and managing financial stability.

Overview of Bench’s Financial Struggles

Bench’s bankruptcy records reveal a troubling trend: the company struggled to reach profitability since its inception in 2012. Over the course of its operations, Bench burned through an astonishing $135 million in capital, leading to its eventual collapse by September 2024.

Liquidity Crisis and Financial Decline

According to the filings, Bench faced a severe liquidity crisis that forced it to shut down. At the time of its closure, the company had:

• $800,000 remaining in its Canadian bank account
• Less than $400,000 in its U.S. entity account

Despite efforts to improve financial performance, Bench’s journey towards fiscal health was tumultuous. The company had appointed a new CEO in 2022, a former CFO, who prioritized cutting operational expenses and implemented layoffs to stabilize the financial situation.

Revenue and Loss Trends

From March 2022 to March 2023, Bench reported:

• $42 million in revenue
• A staggering loss of nearly $30 million

While the subsequent fiscal year saw Bench halve its losses and increase revenue to $49 million, it wasn’t sufficient to alleviate the financial strain.

The Role of National Bank of Canada

In June 2024, Bench’s largest lender, the National Bank of Canada (NBC), extended over $40 million in loans to the company. This funding was intended to provide temporary relief while Bench sought potential buyers. However, just days before its collapse on December 25, 2024, NBC entered into a new funding and forbearance agreement with Bench, pausing loan repayment obligations.

Final Days and Acquisition Announcement

The circumstances surrounding Bench’s sudden shutdown remain unclear. Reports suggest that a bank, likely NBC, called in Bench’s venture debt, leading to the company’s downfall. Despite this, only 72 hours post-collapse, Employer.com, a U.S.-based firm, announced plans to acquire Bench. The acquisition is set to conclude by February 28, 2025.

Lessons Learned: The Risks of Venture Debt

Bench’s story serves as a cautionary tale regarding the perils of excessive debt for startups. Experts predict that venture debt lenders will significantly influence the ongoing trend of fire sales and startup closures throughout this fiscal year. The situation emphasizes the importance of financial prudence and sustainable growth strategies for new businesses.

For more information on startup funding and financial management, you can visit Entrepreneur.com for valuable resources and insights.