Montreal-based construction-tech company RenoRun has begun the process of seeking protection from creditors as the insolvent startup scrambles to avoid bankruptcy. 

On Monday the company filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act, the first step in the process to restructure the firm and prevent all-out bankruptcy. 

Neither RenoRun CEO Eamonn O’Rourke, nor a company spokesperson immediately responded to The Logic’s request for comment. Deloitte, which is acting as RenoRun’s trustee, also did not immediately respond. 

The notice kicks off a 30-day period, by the end of which RenoRun needs to present a plan to its creditors for how it will repay the debts the company owes them. Creditors are not able to take legal action against the company during that period. 

RenoRun’s challenges signal a major reversal for the company after it saw its business balloon in recent years. 

After raising $181 million in late 2021, the promising Canadian startup has been teetering on insolvency for months. The Logic reported last week that RenoRun—which delivers building supplies to customers’ job sites—has been exploring options, including a sale and another injection of capital to salvage the firm. 

While it’s 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 company has laid off the majority of its employees in a seven-month period. Sources told The Logic the company did not have enough cash to pay the legal minimum severance owed to workers who were terminated in the latest round of layoffs in February, a move that could leave RenoRun directors personally liable. Several former employees have since filed complaints with the Quebec labour board seeking unpaid wages. 

“We’re finding it hard to keep people engaged,” O’Rourke told The Globe and Mail in an interview published Sunday. The CEO said investors were pressuring him not to pay employees severance. 

The company has taken funding from a long list of high-profile investors, including U.S. private equity giant Tiger Global and Silicon Valley Bank, which itself went bankrupt earlier this month. Several government funds, including Export Development Canada and two BDC Capital funds as well as Investissement Quebec, invested in the company. Real Ventures, Inovia Capital, Maple VC and Scaleup Ventures are also among its backers. 

O’Rourke told The Globe Tiger, which co-led the company’s Series B, opted not to provide RenoRun additional funding after tech valuations dropped early last year. Tiger wrote down the value of its venture capital investments by about 33 per cent in 2022. 

RenoRun has yet to disclose its creditors, which would include firms and individuals that have lent the company money, as well as employees to which it owes wages.

RenoRun’s creditors will vote on the company’s proposal for how it plans to repay them. Such plans typically involve restructuring the firm through a host of tools, including selling property, making layoffs or finding a buyer. If the company can’t come up with a plan before the 30-day deadline, it can ask the court for extensions for up to six months from its initial filing date.

If the company does not propose a plan to creditors within the 30 days or seek an extension, it will be deemed bankrupt. 

With files from Aleksandra Sagan in Vancouver