Online personal-finance startup Planswell is shutting down, laying off 57 staff following a long stretch of financial instability and public allegations of sexual misconduct against a former executive.
“Our leadership spent every waking moment on emergency calls and in board rooms while our team broke client service records… it wasn’t enough,” Eric Arnold, CEO of the Toronto-based company, wrote in a letter published on the company’s website Monday. “You could not be saved.”
Toronto-based personal finance startup Planswell is shutting down and laying off 57 staff, according to a letter from the company’s CEO published on its website. Its closure follows allegations of sexual misconduct against a former executive, but internal emails reveal the firm had been struggling financially.
In September, a former Planswell employee published a post on the blogging platform Medium under the name Jane Doe, alleging that a senior executive had coerced her into a relationship. “[He] repeatedly made sexual advances towards me despite my persistent no’s. He would consistently push boundaries in an effort to get closer to me,” she wrote. “I would reject [his] advances, and he would relentlessly pressure and pursue me until I caved in. This went on for over 10 months.”
Arnold confirmed to BetaKit in September that Jane Doe had informed him of the harassment by the senior executive, but said he felt the situation was being presented in an “unfair way.” As soon as he was made aware of the allegations, he said, the executive had not been allowed to return to the office, and the company hired a third party in February to conduct an investigation. The executive resigned in March while the investigation was ongoing, Arnold said. Planswell subsequently implemented stronger sexual harassment policies, he said, and its staff were trained on recognizing and reporting harassment.
Neither the executive, Arnold nor Planswell immediately responded to The Logic’s request for comment. The Logic has not been able to independently confirm Jane Doe’s identity.
A source with direct knowledge of the company’s operations told The Logic that Planswell had been expecting funding from an investor, but that deal fell through after the sexual harassment allegations were made public.
Internal emails viewed by The Logic, however, show a company in financial trouble well before the former employee went public with the allegations.
Arnold told investors in a June 2018 email that the company “essentially ran out of money” in December 2017. Planswell was barely scraping by financially, according to the email, with Arnold naming seven recent instances in which the company didn’t have enough money in the bank to pay its employees, just two days before payday. Investors bailed the company out each time, the email notes.
Arnold also offered assurances in the email that Planswell’s financial standing improved in the first half of 2018. The company secured $4 million in investment from two mutual funds at Fidelity in June. In April, it launched a pilot with Sun Life in which the startup white-labelled its financial plans for the insurance giant to implement to its clients under the Sun Life branding. Sun Life paid $300,000 for the three-month pilot, according to internal emails, plus another $4 million in warrants, giving it just over 10 per cent ownership of Planswell. “It’s expected, with a fairly high degree of confidence, to convert into a relationship that could fund the entire company going forward,” Arnold wrote of the pilot.
The company’s latest annual financial report, however, shows steep and growing losses. It brought in just $155,612 in revenue in 2018, with net losses of $5,403,326, up from $3,812,495 the year before.
“Sun Life made a small investment in Planswell early this year and also established a commercial relationship,” Sun Life spokesperson Darren Friesen said in an email to The Logic. “At this time, we have determined that further investment in Planswell does not align with Sun Life’s core investment strategy.”
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Sun Life was preparing to formally announce the partnership when the sexual misconduct allegations came to light, according to a source who had worked on the project. Last week, Planswell suspended the service it was licensing to Sun Life and told the company it was insolvent, the source said.
Arnold’s letter published Monday is addressed not to Planswell’s employees, but to the company itself. “You were built on a series of miracles,” it says. “We were one miracle short.” A second portion of the letter directly addresses Planswell’s clients, saying their investments are kept at BBS Securities/Virtual Brokers and are unaffected by the company’s closing, as are the agreements Planswell brokered with third-party vendors for insurance and mortgage clients.
The letter makes no mention of the sexual harassment allegations.