Clearco is laying off 125 people, roughly a quarter of its workforce, as it deals with fallout from a slowdown in global e-commerce growth and macroeconomic challenges like high inflation and rising interest rates.

The company is also considering “strategic options” for its international operations, co-founders Michele Romanow and Andrew D’Souza told employees in an email Friday morning.

“We were building to match the growth of the economy and now face significant headwinds that simply didn’t exist six months ago,” Romanow and D’Souza wrote. “We grew our headcount too quickly in anticipation of continued economic growth and that decision rests on us alone.”

Clearco spokesperson Nick Rosen-Wachs confirmed the layoffs but declined to comment further.

D’Souza and Dragon’s Den star Romanow are prominent figures in the country’s tech sector, and have run Clearco since its founding.

The Toronto-based merchant financing startup, which provides advances to e-commerce businesses in exchange for a share of their future revenue, is one of Canada’s highest-profile private tech companies, valued at roughly US$2.5 billion earlier this year. It was the first Canadian company to earn the backing of global investment giant SoftBank, which led one of two funding rounds last year that raised US$550 million for Clearco to develop new products and fuel its expansion into new markets around the world. The company has since established operations in Ireland and Germany. 

In Friday’s note to staff, Romanow and D’Souza cited the declining value of the euro as one of the economic challenges Clearco faces. It made cuts to its workforce in Ireland this past spring, just weeks after announcing a commitment to invest €100 million into Irish businesses.

The company has faced intensifying competition recently from well-funded players like Wayflyer and Shopify. Rising interest rates have cut into the fintech’s margins.

Some of its newer initiatives have failed to pan out. Earlier this year, Clearco suspended work on two new products, ClearAngel and ClearPro, reassigning most staff to other parts of the business. A number of senior executives have left over the past year, including chief financial officer Curt Sigfstead, U.K. general manager Sarah Clark and chief strategy officer Gilad Rom.

Over the last several months the company has quietly reduced its headcount through waves of downsizing. As The Logic first reported, Clearco raised about US$60 million in additional funding from existing investors this year. It has also taken other steps to free up cash, including renegotiating the terms of its agreements with lenders and scaling back its in-person office presence in downtown Toronto.

Friday’s layoffs follow cuts at other major Canadian tech companies, including Wealthsimple and Shopify. “No words can soften the blow of being part of a significant layoff and I won’t pretend that hearing ‘I’m sorry’ from us will make it any easier,” the co-founders wrote in their email to staff. “We’re deeply saddened to lose so many talented, hardworking and entrepreneurial people across every part of our organization and will work tirelessly to open our networks directly to ensure you find a great next home.”

Clearco will give laid-off employees severance pay, a two-year window in which to exercise equity options and extended health coverage, according to the email to staff.

In the email, Romanow and D’Souza said Clearco will continue to fund as many founders as possible, “even through a recession.”

“We’ve created a category, and now there’s a company that looks like us in almost every country in the world. As painful as today is, it should remind us to move forward with more focus, determination and purpose than ever.”