VANCOUVER — A Vancouver-based green-construction startup that surpassed a $2-billion valuation in 2022 and at one point partnered with actor Michael Keaton has been granted creditor protection as it looks for a buyer.

Nexii, which once billed itself as the fastest Canadian company to become a unicorn, owes roughly US$80 million to its secured creditors. It “requires immediate additional funding to meet operating expenses, including its next payroll,” said acting CEO William Tucker in an affidavit filed last week with the Supreme Court of British Columbia, calling the company’s liquidity constraints “significant.” A judge granted the initial order Jan. 11, as first reported by Business In Vancouver.

Nexii’s liabilities, including debt and unpaid rent, total nearly $153 million. It has almost $70 million in assets, including intellectual property and project contracts.

The company has so far funded its operations through venture capital and debt, but those avenues have run out. “Currently, Nexii is not able to raise additional capital through equity,” and its existing lenders “are not prepared to advance additional funds without a clear path to the sale of Nexii’s business,” Tucker said in the affidavit. The company did not immediately respond to The Logic’s request for comment.

Founded in 2018 by brothers Michael and Ben Dombowsky along with Stephen Sidwell, Nexii makes panels made out of a material called Nexiite, a blend of sand, aggregate and binding material that it markets as a low-carbon, durable alternative to concrete. Noting that a sizeable share of global emissions come from buildings and construction, Nexii says its materials can reduce the industry’s carbon footprint while speeding up construction projects. Its clients include Walmart, Starbucks and JPMorgan Chase. Last year, it announced a partnership with German engineering firm Siemens to create an electric-vehicle charging bay using Nexiite panels.

Nexii embarked on an aggressive expansion plan in 2021 that failed to yield the revenue growth the firm expected, according to the affidavit. It committed to building a manufacturing facility in Pittsburgh with Trinity Sustainable Solutions, an entity newly created by Nexii, actor Keaton and a developer. The group promised to bring more than 300 jobs to the area—Keaton’s hometown—when it opened in 2022. 

The money for the expansion came from both venture capital investment and debt, the document states. By September 2021, the company had raised $125 million—with its most recent $45-million round promoting it to unicorn status, with a $1.55-billion valuation. It later surpassed a $2-billion valuation, closing another $45-million round. 

The Pennsylvania expansion, however, did not work out. Trinity did not pay a $5-million licensing fee and Nexii worked for more than a year without compensation, according to Tucker’s affidavit.

In the meantime, the company faced mounting debt obligations. In August 2021, Nexii had taken out five loans from secured lenders Horizon Technology Finance, Trinity Capital and Powerscourt Investments XXV, totalling US$40 million, according to the court filing. About a year later, Nexii added US$20 million from the same backers. The agreement was amended again in December to give Nexii access to still more funding. As of Jan. 4, the company owed about US$79 million.

After the expansion plans failed to deliver, the firm realized it needed to rework its product cost structure significantly to be competitive, Tucker said in the affidavit. In 2022, the cost of production exceeded its revenue by $23 million, or 335 per cent. Nexii spent two years redesigning and re-engineering its product. While Nexiite showed “strong profitability” late last year, the company had used up much of its money to achieve that.

Nexii started to cut costs in an effort to get its finances under control. Its affidavit states it conducted two rounds of layoffs in 2023, letting go of over 40 per cent of its employees in total. (As of Dec. 20, 2023, Nexii employed 137 people, mostly in Vancouver and Squamish, B.C.) The company also shut down its operations at a Moose Jaw, Sask., facility and cut other costs.

The belt-tightening helped somewhat. Nexii expected to make about $14 million in revenue in 2023, up by $7.1 million from the previous year, according to the document. It recorded its first positive gross margin of about five per cent as of Sept. 30, 2023.

Still, the company was unable to make payments on its secured loans for several months starting in April 2023, and in June, the trio of creditors demanded action. 

Nexii tried to find more funding. In August, it received $5 million from Investcorp Green Limited and sought interest from strategic investors in the Middle East. The latter effort resulted in a term sheet for a roughly $18-million injection that fell apart just before closing, according to court documents.

The company decided its existing lenders were its best, if not only, option for cash to tide it over. The parties agreed Nexii would enter creditor protection, with the lenders providing an additional $4.3 million as it works toward a sale. In the interim, Nexii may continue to cut costs, which Tucker anticipated would include terminating some of the company’s leases. 

Nexii does not own real estate, but leases its Squamish manufacturing and R&D facilities, as well as a Vancouver head office and Moose Jaw manufacturing plant. The company owes nearly $1 million in unpaid rent across the locations, but continues to use only the Squamish manufacturing plant.