Steve Seibel and Dan Park, co-founders of Clutch. The Toronto-based company is planning to open a 30,500-square-foot location in Richmond, B.C.JENNIFER ROBERTS/The Globe and Mail
Fast-growing online used car retailer Clutch Technologies Inc. is returning to the B.C. market, two years after pulling out of Western Canada as part of a steep retrenchment that saved the business.
The Toronto-based company said Tuesday it would open a 30,500-square-foot location in Richmond, B.C., that would buy cars from individual sellers. Clutch will inspect and buy as many as 300 cars a week with a small team of eight people that should grow to 20, chief executive officer Dan Park said in an interview.
Clutch will only sell those cars via wholesale channels to auction services and other dealers for now. But the company plans to reopen its online business to B.C. consumers within 12 months, Mr. Park said.
“It’s a bit of a departure from our previous launch strategies, where we would launch both sides of our marketplace simultaneously” to both buy used cars and then recondition and sell them, Mr. Park said.
“This is more capital efficient and allows us to start building a brand and a marketplace. Once we start accumulating inventory at scale, it allows us to put in our full production process,” which would involve opening a local reconditioning centre and hiring hundreds of people to fix up and deliver cars, as Clutch does in the Toronto and Halifax areas.
Online car seller Clutch rebounds from valuation write down with new $50-million financing
The rise and fall and rise again of online used-car retailer Clutch
Clutch buys cars from individuals through its website and typically reconditions about half of them (it sells the rest through auction and to other dealers), then offers the refurbished vehicles for sale online for non-negotiable prices with a 10-day money-back guarantee. It has no salespeople or showrooms; vehicles are delivered to buyers for a fee. Like other car dealers, the company, which currently operates at about the break-even point on an operating profit basis, relies on high-margin consumer financing to make money.
The company grew quickly during the pandemic, as consumers flocked to online channels. But sharply rising interest rates in 2022 cooled the economy and scared off many risk capital investors that had financed companies such as Clutch. After a $95-million financing fell through in January, 2023, Clutch cut 65 per cent of its staff and pulled out of Western Canada, where it had expanded just two years earlier.
Other online car merchants also ran into financial difficulties, and Mr. Park briefly considered selling the company or pulling the plug. Instead, Clutch raised $20-million that summer in a deal valuing it at just $15-million before the funding, 97 per cent off its peak.
Clutch grew quickly during the COVID-19 pandemic, but in 2022, rising interest rates cooled the economy and scared off many risk capital investors.Christopher Katsarov/The Globe and Mail
The extreme cuts and devaluation enabled the company to recover. Founded in 2016 by former investment banker Stephen Seibel (now chief operating officer), Clutch has since expanded rapidly, backed by heavy marketing campaigns in its markets of Ontario and Atlantic Canada’s four provinces. Mr. Park said revenues in the first half of this year roughly equalled the $320-million Clutch booked in 2024. That in turn was up 81 per cent from 2023.
Earlier this year, Clutch raised $50-million in an equity deal led by Silicon Valley-based Altos Ventures. That reset Clutch’s valuation slightly higher than its 2021 high of $575-million.
The company now has 510 employees – more than double its 2023 trough – and has been opening physical locations in Toronto-area malls for customers to pick up or drop off cars or get information about the company.
“A lot of the fundamental issues we had have been resolved,” Mr. Park said. “The foundation of the business is strong.”