Vancouver's BuildDirect.com Technologies Inc. has emerged from creditor protection with a clean balance sheet and US$28-million in fresh financing to take a second crack at building the Amazon.com of the home-improvement market.
"We find ourselves in fantastic shape," said Suzanne Mercier, the company's chief legal and people officer and corporate secretary. "We have virtually no debt, we have no liabilities and we have a significant amount of runway ahead of us to execute against our operating plan."
The company overwhelmingly won creditor approval on March 12 for a "plan of compromise, arrangement and reorganization" that would reduce its debt to US$4-million from US$58-million and pay unsecured creditors about 5 cents on the dollar for their claims, representing a roughly US$1-million outlay. But the court's endorsement of the plan was subject to the company completing an equity financing.
That happened last Thursday, Ms. Mercier said, when BuildDirect closed a deal brokered by Canaccord Genuity to raise US$28-million of shares led by past investor Mohr Davidow Ventures, the Canadian arm of fund-management giant Fidelity Investments and lenders Pelecanus Investments, Lyra Growth Partners and Beedie Capital. In addition, the lenders, who provided US$15-million in debtor-in-possession financing to keep the company going under court protection, agreed to convert that funding into equity.
Furthermore, the company has agreed to a "call option" to sell an additional US$10-million of equity on the same terms to shareholders for a two-month period beginning on Nov. 30, backstopped by the lead investors. That is subject to meeting "certain key metrics," according to a March 12 court filing by monitor PricewaterhouseCoopers. "This capital call allows the company to ensure it is adequately capitalized to execute against its operating plan without having to run another financing process," the monitor stated.
BuildDirect had been one of Vancouver's most prominent private technology firms, raising more than $100-million in venture financing since its start in 1999. Co-founder and long-time chief executive Jeff Booth hoped to turn BuildDirect into the Amazon of heavy-duty home-improvement supplies, matching buyers and sellers of heavyweight construction goods, such as flooring, and handling delivery logistics across North America. Sales exceeded US$100-million annually at the company's peak.
But BuildDirect undertook a risky expansion plan in 2014 that saw it overhaul its online platform and add artificial-intelligence technology to make it easier for suppliers to manage sales. The rollout was marred by snags that negatively impacted sales. The company continued to lose money and struggled to raise needed venture funding last year before Mr. Booth resigned days before it filed for creditor protection in late October.
However, Silicon Valley venture fund Mohr Davidow, a past backer, agreed to lead the refinancing after the firm performed better than expected during its court protection period under the leadership of Dan Park, a former Amazon executive who replaced Mr. Booth just weeks after joining the company as chief operating officer. On Mr. Park's watch, cash sales, net cash receipts and net cash flows in the company's first 15 weeks under court protection exceeded initial management forecasts, while operating costs were 20 per cent lower than the US$13-million forecast. The company is still not profitable.
The company also said more than 99 per cent of suppliers remained through the restructuring process.
"Today marks a defining moment for BuildDirect and I am confident customers and sellers alike will soon recognize the signs of a newly energized and well-capitalized business poised for success," Mr. Park said. The new CEO also shifted the company's focus to serving contractors rather than do-it-yourselfers, hoping to generate larger orders and repeat business from professionals rather than rare, one-time orders from consumers that were its mainstay customer base. Contractors now account for more than one-third of company revenues.
"We are very bullish on the shift towards professional contractors," said Katherine Barr, Mohr Davidow's Canadian-born general partner. "BuildDirect is pursuing a very large market opportunity and we believe that the company's assets, capabilities, and executive leadership uniquely position the company to be extremely successful moving forward."