Legal-tech company Clio has set a new record for the most venture capital a Canadian firm has raised in a single investment round. A US$900-million deal announced Tuesday, led by San Francisco-based New Enterprise Associates, values the scaleup at US$3 billion—and buys it time to grow as a private company before eventually going public. 

The round included investments from U.S. firms Goldman Sachs Asset Management, Sixth Street Growth, CapitalG and Tidemark. The deal effectively serves as an alternative to an IPO, letting Clio avoid public markets that in recent years have seen the stocks of newly listed tech companies trade generally below their opening prices. 

The deal defies expectations of how much companies can raise in what’s been a tepid market buffeted by high interest rates and broader economic uncertainty. The previous two record-breaking Canadian venture deals—a January 2022 US$650 million investment in 1Password and roughly US$600 million investment in Wealthsimple in May 2021—came during the pandemic-era venture capital boom.  

Clio founder and CEO Jack Newton said his company’s growth since its last raise—a US$110-million round in April 2021—captured investors’ attention in the funding drought. “We have real scaled revenue at this point, with over US$200 million in annual recurring revenue,” he told The Logic. “And we’re driving that growth profitably, which is something investors today are putting a huge premium on.” 

Newton plans to use part of the funding to grow Clio’s teams—now more than 1,100 employees spread mostly across offices in Burnaby, Toronto, Calgary and Dublin—and build out its line of software products. The firm has expanded beyond selling standard law-practice management tools—like scheduling, case management and billing—to become what Newton calls a “multi-product company.” Last week, the firm launched a new legal accounting platform, on the heels of its payment tool released late last year. The company acquired a document automation tool Lawyaw in 2021, rebranding as Clio Draft in February.

The company is making an especially hard push into artificial intelligence, said Newton, calling Clio the “natural leader in legal tech AI.” It plans to launch an embedded AI assistant called Clio Duo into its products this quarter, marking what Newton called the first chapter of Clio’s AI story. “We see the really profound opportunity here as evolving Clio from a system of record for law firms to a system of intelligence and automation.” 

Newton said he wasn’t planning to raise venture capital when investors—including its lead, NEA—began approaching him last year with offers. His original plan had been to take the 16-year-old company public after its 2021 fundraise, saying in 2022 that it could launch an IPO “on a moment’s notice.” 

Shortly thereafter, the IPO window snapped shut. “The market conditions have not been ideal for publicly traded [software] companies,” said Newton. “All things considered, a private round was the best path for us at this point in time, even though, in many ways, we have a revenue profile, growth rate, and are otherwise ready to go public.” 

Under the right market conditions, going public is still the goal, said Newton, who believes Clio’s new slate of investors is the right team to take it through the IPO process. NEA has invested in over 1,000 companies, he said, including many that are now public. Among them are Cloudflare, Didi Global, Duolingo and Kitchener, Ont.-based D2L, PitchBook data shows. 

While many companies often go public to raise a large sum of money to help finance operations, Newton said Clio’s steady revenues and profitability means it doesn’t need to go public for financial reasons. Returning money to longtime shareholders is another reason to go public. Newton said Clio’s mega round solved that problem by including secondary shares, which let early shareholders sell all or part of their equity in the company to new investors. 

“We’ve got investors that, in some cases, have been on the cap table for 16 years,” said Newton. The secondary sales, he said, gave those backers—as well as early employees with stock options—liquidity outside a typical exit window like an IPO or acquisition. 

Newton wouldn’t say which investors sold shares in the all-equity round, or how much of the US$900 million came from new investors buying secondaries, saying only that “there’s a substantial amount of secondary” in the deal. 

The investment “resets the clock for us in a certain regard from an investor perspective,” said Newton. “An IPO is something that we’re constantly evaluating, but I wouldn’t see that on the 12-month time horizon for Clio at this point.” 

Editor’s note: Clio initially said OMERS participated in this fundraising round. While OMERS previously invested in the company and remains on its cap table, it did not participate in this round. The story has been updated.