Dan Park’s online car retailer, Clutch, burned through cash— until the CEO was forced to slam on the brakes.Illustration by Kyle Scott
Clutch was one of the hottest startups around, and it got a massive boost during the pandemic-era used-car frenzy. In his quest for growth, CEO Dan Park burned through cash — until he was forced to slam on the brakes. Here’s how the humbling played out and how Park plans to get back on the growth track, in his own words.
“There was a frenzy around used cars back in 2020—people couldn’t get one. Clutch buys and sells cars from the public to the public, and in late 2021, we raised $100 million, with the mentality to use that money to continue to grow aggressively. Our investors told us there was another $100 million behind it, and so within six months, we were hiring 250 people and scaling up the business to serve this massive opportunity.
But then the narrative changed, and the capital markets started to evaporate, particularly in growth-stage ventures. The mandate shifted from aggressive growth to profitability at all costs. Burning a lot of money to continue to scale, which had been quite fashionable in the zero-interest-rate era, became less so as rates started to rise.
We started to see cracks in early 2022. Steve Seibel, Clutch’s founder, and I flew to California to meet some investors to secure a $95-million fundraising round. I’m a movie buff, and it was one of those moments where the protagonist has one chance, and if it doesn’t work out perfectly, the world’s going to end. We got the term sheet signed on Nov. 4, and it was probably one of the highest highs I’ve ever had.
But things just got worse. On Jan. 5, the lead investor called me and said, “We’re not feeling this deal anymore. It’s not going to happen.” That was one of the lowest lows I’ve ever had.
We cut 65 per cent of our staff—150 people— and exited three markets to focus on survival. A lot of companies didn’t make that decision and let it go on maybe longer than they should have. And they’re probably paying the price now
— Clutch CEO Dan Park
I called an executive meeting on Zoom, and since I was on vacation with my family, I did the call sitting on a stool on the bathroom floor. I told the team we were going to have to lay off a whole bunch of people. On Jan. 17, we announced we were cutting 65% of our staff—150 people—and exiting three markets to focus on survival. A lot of companies didn’t make that decision and let it go on maybe longer than they should have. And they’re probably paying the price now.
A lot of investors have asked me, “How did you turn it around?” There was no silver bullet. There were a lot of lead bullets—a lot of small improvements that allowed us to strengthen the foundation over time. We focused on selling high-quality, profitable products. We had incredible discipline around inventory management, and we aligned the team to a singular financial goal, which we hit. It was like, “Okay, we’re going to survive. At a minimum, we’re going to survive.”
Earlier this year, we raised a bit of capital and hit our first quarter of profitability. It proved the business model.
We’ve also invested heavily in a machine learning–based pricing model so we can value cars instantaneously. Now we can buy directly from the public, which gives us an inventory of better cars at generally better prices than you can get from the average dealership. That was transformational. We now send out more than 100,000 offers a month. We’ve added folks to the team, and we’ve started expanding in the Ontario area. We’re not quite back out West yet, but it’s on the map.
One of the things I’ve taken away from this is that you can’t get too excited about the highs and too disappointed about the lows—building a company is a 10- to 15-year journey. Understanding the volatility helps you sleep at night.”
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