For nearly two decades, BuildDirect was one of Vancouver’s biggest homegrown tech successes. The company, which specializes in e-commerce for home-building supplies, raised more than $100 million in venture capital and employed hundreds of tech workers.
But in late October, founder Jeff Booth resigned abruptly as CEO. Days later, the tech darling filed for creditor protection and is now exploring options that include finding a buyer. Business in Vancouver examines the moves that led it to its current predicament.
OMERS Ventures invests $16 million in BuildDirect.
BuildDirect announces $4 million in a secondary investment from the Business Development Bank of Canada IT Venture Fund.
End of 2013
According to a 2017 Booth blog post, the CEO tells BuildDirect’s board they must pivot its business model away from being simply an online retailer of home improvement supplies. The company begins pursuing an open platform to connect buyers directly to suppliers and manufacturers.
Mohr Davidow Ventures leads a $30 million Series B financing round for BuildDirect. Booth tells BIV he intends to hire another 300 employees.
BuildDirect announces another $50 million in funding from its previous investors, as well as BMO Capital Markets.
Later in the month, Vancouver-based Garibaldi Capital names BuildDirect an “emerging narwhal,” signalling the company is on track to be valued at $1 billion, similar to “unicorn” startups in the U.S.
BuildDirect launches its new Home Marketplace platform, allowing suppliers and manufacturers to connect directly with buyers. Booth tells BIV the company’s product offerings have grown to 8,600 from 6,000 in the past six months, while its number of employees sits at more than 300, up from 175 two years ago.
In a 2017 blog post, Booth says the platform “took off like a rocket.”
BuildDirect’s product offerings grow to more than 150,000 from 8,600, according to Booth’s 2017 blog post.
“But parts of the technology required to handle this growth were still in development,” he said. “As a result, customers couldn’t easily discover the products they needed on the site.”
Revenue starts to stall and long-time suppliers see their products buried “under the new avalanche of new offerings” on the site, according to Booth.
Booth says he made a “fateful decision to bring more debt into the company to try to get to the other side of [its] technology build.”
The company takes on $25 million in debt.
Late 2016/early 2017
BuildDirect takes on more debt, this time US$29.6 million.
“They were burning through a lot of money and the initial capital infusion they had wasn’t enough to carry them,” says Simon Fraser University Beedie School of Business Prof. Jerry Sheppard. “And it never got up to the point where the revenue made up for what was going out, to put it bluntly.”
June to July 2017
BuildDirect enters into discussions with lenders to secure further financing.
August 4, 2017
BuildDirect closes an equity financing deal totalling US$18.2 million, of which US$14 million was in cash and US$4.2 million in debt.
September 30, 2017
BuildDirect’s revenue through the year’s first three quarters totals $72 million, according to court documents. But the company has yet to reach profitability. Meanwhile, operating costs are exceeding revenue by $2.6 million a month.
“I don’t think enough money was put in this from the start in equity because the burn rate of money just was higher than the investors thought it was going to be and management thought it was going to be,” Sheppard says.
October 22, 2017
According to an affidavit filed in BC Supreme Court by vice-president John Sotham, BuildDirect fails to “complete an anticipated significant equity financing.”
October 27, 2017
In a LinkedIn post titled My Last Day at BuildDirect, Booth announces his departure as BuildDirect’s CEO. Chief operating officer Dan Park replaces Booth as CEO.
BuildDirect spokeswoman Katie Kernahan tells BIV, “We will continue to operate business as usual.”
October 31, 2017
BuildDirect files for creditor protection with principal owing to secured lenders sitting at $75 million.
In court documents filed in B.C. Supreme Court, Sotham says the company requires interim financing to continue operations while it “carries out a formal sale and investment solicitation process.”
Its head count now sits at 224 employees.
Sheppard says it does not appear BuildDirect had a backup plan.
“They were really counting on getting equity funding and when that fell through there wasn’t really a Plan B,” he says.
For now, Sheppard says, the company does not have much time to resolve its creditor issues.
“And now they’re going to have to stumble around and try to find [a buyer] as quick as they can because the longer this lasts, the more it’s going to hurt their reputation and the less value that name is going to have.”