Bench Burned Through $135 Million Before Shutdown

Bench's Financial Struggles Revealed in Bankruptcy Filings

Recent bankruptcy filings are providing a more detailed understanding of the factors contributing to Bench’s business failure.

Consistent Losses and High Burn Rate

The Canadian startup, which specialized in cloud accounting software for small businesses, experienced persistent difficulties in achieving profitability. From its inception in 2012 through September 2024, the company expended a total of $135 million.

Ultimately, Bench was compelled to cease operations due to a severe liquidity crisis, as indicated in the filings. Available cash reserves were limited to $800,000 in its Canadian account and under $400,000 in its U.S. account.

Efforts to Reduce Expenses

The documentation demonstrates that Bench had made some headway in reducing its spending in the preceding years. A primary objective for Bench’s second CEO – formerly the company’s CFO, appointed in 2022 – was financial improvement, which involved implementing workforce reductions, according to former employees.

Between March 2022 and March 2023, Bench incurred a loss of approximately $30 million on revenue of $42 million. However, during the subsequent fiscal year, losses were halved while revenue increased to $49 million.

Last-Minute Funding and Subsequent Collapse

Despite these improvements, Bench’s cumulative losses continued to mount. In June 2024, the company’s primary lender, the National Bank of Canada (NBC), extended over $40 million in credit facilities to Bench.

This infusion of capital provided Bench with time to explore potential acquisition opportunities, a task assigned to its third CEO. NBC initially appeared supportive, signing a new funding and forbearance agreement on December 12, 2024 – just 13 days before Bench’s collapse – which temporarily suspended or modified the startup’s loan repayment obligations.

The precise reasons for the shutdown just two weeks later remain unclear. Reports suggest that a bank, potentially NBC, demanded immediate repayment of Bench’s venture debt. Additionally, Newcomer reported that NBC refused further concessions during the sale process.

Outstanding Debt and Acquisition

NBC did not respond to a request for comment from TechCrunch. The filing indicates that NBC is currently owed $51 million by Bench, a figure that continues to grow due to accruing interest and fees.

Following its collapse, U.S.-based Employer.com unexpectedly announced its intention to acquire Bench. The acquisition is predicated on an agreement with a projected closing date of February 28, 2025.

Implications for Startups

Bench’s bankruptcy serves as a cautionary tale regarding the risks associated with excessive debt for startups. Experts predict that venture debt lenders will significantly influence the ongoing trend of fire sales and startup closures throughout the current year.