Just over a year after raising close to $200 million, Montreal-based construction-tech company RenoRun is nearly out of cash and has been looking for a buyer to take over the business, The Logic has learned.

The Logic spoke to six people with knowledge of the company, agreeing not to identify them because they were not authorized to disclose the information. The sources include investors as well as three former employees, one of whom was working for RenoRun when they spoke last month but has since left.

In February, RenoRun carried out a third round of layoffs in seven months, according to a former employee who was let go during the cuts, and another who left the firm this month. The company did not have enough cash to offer the laid-off employees the minimum severance pay required under employment law, said the sources, leaving them to apply for payment through a federal government program. The laid-off employee said they’re waiting for information from RenoRun before applying for payment through the Wage Earner Protection Program.

The startup, which had over 550 staff a year ago, is now running on what one recently departed employee described as a “skeleton crew.” If the company runs out of money before finding a buyer or receiving a new injection of money, it may file for bankruptcy or bankruptcy protection. 

RenoRun CEO Eamonn O’Rourke declined to answer The Logic’s questions when reached Monday. 

RenoRun’s challenges signal a major reversal for the company—whose fleet of drivers shuttles construction materials to customers’ job sites—after it saw its business balloon in recent years. 

In late 2021 it raised a $181-million Series B fundraising round, led by New York-based investment giant Tiger Global and Silicon Valley venture capital firm Sozo Ventures. O’Rourke said at the time that the company’s business had consistently tripled in growth year over year since its 2017 inception, and that it expected its revenue to exceed nine figures in 2022. 

Nine months after announcing the raise, the company had laid off more than half its staff, reducing its headcount to 274, according to an October 2022 report in The Globe and Mail. At the time, O’Rourke cited the impact of rising inflation and interest rates on discretionary spending like home remodeling. 

After the latest layoffs in February, one former employee said, the company offered members of the existing staff retention bonuses, encouraging them not to leave before March 21. “It really became a question of trying to keep the lights on,” the source said. “We were no longer developing features.… We were pretty much just there to fix any issues that came up and to keep the systems up and running.” 

RenoRun’s troubles reflect broader capital challenges for Canada’s startup and tech companies. The sector has struggled over the past year to adjust to a cautious fundraising environment following early-pandemic boom times that saw companies raise record amounts of money and fuelled their rapid growth. The Wall Street Journal reported last week that Tiger, the lead investor in RenoRun’s last funding round, wrote down the value of its venture capital investments by about 33 per cent in 2022. 

For RenoRun, the venture investment boom coincided with a surge in home renovations while interest rates were low and lockdowns kept home owners from spending their money on things like travel. By early 2022, the company was operating in six cities—Montreal, Toronto, Boston, Chicago, Philadelphia and Washington, D.C. It no longer offers services in Philadelphia and Washington, its website shows. 

The company amassed backing from a long list of high-profile investors, including Montreal firms Inovia Capital, Real Ventures and Desjardins Capital, along with Toronto-based ScaleUP Ventures and Vancouver’s Nicola Wealth. Two funds within the venture arm of the Business Development Bank of Canada have invested, as well as Export Development Canada. California-based SE Ventures, Obvious Ventures, Fifth Wall and Maple VC are also investors, as was Silicon Valley Bank, which collapsed last Friday. 

A source whose firm had participated in RenoRun’s Series B told The Logic investors had explored raising an inside bridge financing round to help the startup buy time until it could do another fundraise once market conditions improved. Another Canadian venture capital investor said they discussed with RenoRun’s CEO the possibility of investing in the company about two months ago when it was seeking another capital injection, but ultimately declined to fund the company. 

While RenoRun is sometimes compared to Uber Eats or Instacart for construction materials, its business model is far more asset-heavy. The company operates its own warehouses where it stocks inventory, and its drivers use company vehicles rather than their own. 

The former employee said company executives addressed concerns around negative sale margins at staff-wide meetings but maintained that the business was healthy. “The executive team constantly kept on giving us this false optimism,” the former staffer said, “despite continuously laying off people, despite the obvious lack of money.”