Mohr Davidow Ventures Looks to Rescue BuildDirect from Creditor Protection

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BuildDirect looks like it may be coming back from its death throes.

The Vancouver-based e-commerce site filed for creditor protection three months ago and looked to be on the verge of folding—and now, a Silicon Valley venture firm has announced plans to save the company, according to reports from The Globe and Mail.

Mohr Davidow Ventures invested in BuildDirect four years ago and has now agreed to lead an equity-financing round somewhere between $39.5 million and $48.5 million USD, committing $10 million of its funds to a deal. That means the rest of the financing will have to come from other investors. BuildDirect, along with investment bank Canaccord Genuity, is currently in talks with existing financiers as well as new backers.

The proposed deal would value BuildDirect at around $65 million before the new cash infusion, and the deal would close at the end of February. If a lender has committed $15 million in financing to bring BuildDirect through the Companies’ Creditors Arrangement Act (CCAA), a restructuring process would allow $13.5 million of that to be turned into equity.

It will fall to Canaccord to either complete the refinancing or sell the company. If they wish to refinance, they will need to find another $16 to $25 million from new investors.

Back at the end of October 2017, BuildDirect’s co-founder and CEO Jeff Booth stepped down, describing problems around differing visions and the ability to not scale quickly.

“Suppliers who had been with us for years saw their products buried under the avalanche of new offerings on our site, and customers couldn’t easily find the products they needed. It’s much harder to hold faith in a grand vision when every new data point warns of disaster,” Booth wrote in a LinkedIn post. “As this problem intensified, I made a fateful decision to bring more debt into the company to try and get to the other side of our technology build.”

BuildDirect has seen a lot of institutional investments, securing two major rounds of financing in 2014. Mohr Davidow is hoping that the company can once again become the e-commerce giant it was when it became a market leader for large construction goods and saw annual revenues top $100 million CAD.

BuildDirect has done more than keep its head above water since their CCAA filing. The company has amassed close to $9 million in revenue in the 10 weeks leading up to January 21.

There was some speculation as to how the company was run when Booth stepped down. He made broad strokes comments in his blog post, not directly mentioned BuildDIrect, but making general statements towards how companies should be managed.

“If a company is unfocused, or if its leaders can’t get everybody on board with its mission, what sounds like a dream job can easily turn into a daily grind,” he wrote. “Poor internal communication and competing priorities translate directly to less satisfaction and more frustration.”

It will take some savvy investors and a very strong business plan to get BuildDirect running again, but it is entirely possible that the e-commerce platform becomes a leader in the sector again.

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