Bench Accounting, like many fintech startups, had ambitions to revolutionize a boring but important, finance sector – in this case accounting for small businesses.
It accumulated over 10,000 customers in just over a decade and seemed to be on the right track. However, this was not fast enough to make it the hot fintech that aspired to be when it raised more than $ 100 million in risk financing. In an end effort to improve its business, Bench resorted to the new favorite resource of technology: AI. He fired employees and introduced new automation programs, including a bot called BenchgPT.
It all culminated in a disaster, punctuated by a problematic fiscal year in 2023, when the company had to request extensions for many of its customers, according to former employees. The following year was no better. At the end of 2024, Bench informed customers that he could not afford their bills. In January of this year, the company filed a bankruptcy, harming investors, including Contour Venture Partners, Bain Capital Ventures and innovated capital. His customers were temporarily in a limbo until a buyer agreed to acquire his assets and relive the business.
“Likewise days to the end of the year and I don’t know how my bills are,” said Sam Plester, former Bench client, CEO and founder of Mission Brands Consulting in Madison, Wisconsin, during an interview in December, adding that he had to pay another company to redo your books.
The fall of Bench is a warning for companies that are in a hurry to use to transform their business. The episode ended a year of hard headlines for fintechs that were previously promising and stood out in risk capital – and now they are learning that there is virtually no margin for error when dealing with financial services. While bankruptcy follows its course at a Vancouver court, KSV Restructuring, the administrator hired to supervise the process, expects almost all investors to be eliminated. Bench’s most senior creditor, the Canada National Bank, should receive only one fraction of what he lent back, according to court documents.
A “serial buyer” saw the closure of Bench as an opportunity. Jesse Tinsley, co -founder and CEO of Employer.com, contacted the Bench team on the day of the closing announcement to make his offer for the company’s assets. He won the business and promised to honor all customer contracts rehiring accountants and adopting an approach to back to basics.
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“If you just look at the basics, you can manage this business well, especially if you do not have the financial pressure of risk capital financing or private equity“Said Gary Levin, co -founder and strategy director at Employer.com. The business, whose terms were not disclosed, must be completed in this quarter, still depending on judicial approval.
This account of Bench challenges is based on interviews with more than a dozen current and old -fashioned executives, employees and investors who asked not to be identified when discussing their internal issues, as well as documents provided by them.
Internal challenges
Former Bench executives say that by the end of 2021 the company was raising $ 35 million in revenue and growing 40% per year. However, it was not yet profitable; Its automation efforts required investment, and the small business segment is marked by notoriously high turnover rates, which means that it lost customers due to closures. Bench was not demonstrating the characteristics of a successful success story. It was not a hyper growth and high margin software business, the type of metrics that have the potential for a public action listing.
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Despite this, Ian Crosby, co-founder and former CEA of Bench, was in negotiations that year to receive an acquisition offer rated between US $ 200 million and $ 300 million from Brex Business Startup, Newcomer publication said technology publication . He used the offer as an opportunity to submit to his advice a new way forward: he would make another fundraising and use the money to make a greater bet – an expansion for banking services. The Council agreed and, in June 2021, Bench announced that it had raised US $ 60 million in mixed capital and debt financing in a round led by Contour Venture Partners with the participation of Altos Ventures, Inovia Capital, Shopify and Montreal Bank.
With fresh money in the bank, Bench has tripled the size of its engineering team, product and design to build the next iteration of the business. It began to burn this money-spending about $ 1.5 million per month at the height, according to a former executive. A few months after the closing of the 2021 financing round, council members approached Crosby with concerns, according to people familiar with the discussions. Instead of moving away from the main accounting business by expanding to banking services, board members thought Bench should use new funding to focus on achieving profitability. The board insisted that the goal should be to cut one of the company’s biggest expenses: the accountants said the same people.
In the months following the June funding round, Crosby and Board members conflicted whether they should continue to automate processes gradually, bet heavily on automation, or move on with expansion to banking services, according to former executives. On December 1, 2021, Crosby was removed as CEO of the company, according to people close to the discussions. He refused offers to stay on the board or take on a different executive position and left the company, they said.
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In August 2022, Bench Director Finance, Jean-Philippe Durios, was promoted to CEO. At this point, a significant part of the US $ 30 million in Serie C capital financing had been spent, according to people familiar with the company’s operations. Durios did not respond to requests for comment.
AI implementation
The mandate of landslides was defined by an intense focus on profitability, according to former executives. In the first two years under their leadership, the team of 613 people from Bench has undergone several rounds of layoffs. When he filed a bankruptcy, Bench had 413 employees.
In mid-2023, Ladies implemented a strategy designed to increase accountants’ efficiency, dividing them into specialized teams and arming them with AI tools. Under the new model, members took on communications with customers, although they no longer perform most of the accounting services. The number of customers for which they were responsible increased by about 70 that they completely managed to approximately 200 to which they only answered questions, according to former employees. Shortly after reorganization, about 40 counters were fired, a former executive said, adding pressure to implementation.
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Bench hired the Outsourcing Company HJS Accountants and promised that the upcoming AI product launches would make it all work smoothly. One of these new programs has been called BenchgPT, an internal tool for employees to ask questions about customer needs. The tool has proven to be unusual, according to a former employee. Bench launched a similar chatbot tool for customers, designed to help categorizing expenses, but was often inaccurate and their entries needed to be manually corrected, two employees said. HJS Accountants did not respond to a request for comment.
As in most AI product launches, the tools gradually improved, but were not active in time to support the reduced accounting team for the 2023 tax season, according to former employees. That year, Bench failed to comply with the filing deadlines and requested extensions for a significant part of its customers, the same people said. The company had to reject counters, adding additional financial pressure.
Meanwhile, people familiar with company operations say Bench often faced cash shortages and depended on risk and debt financing rounds to continue operating. During the mandate of Having, Bench paid its debt with the Montreal Bank and obtained an increased credit line from the Canada National Bank, the same people said.
Last fall, Durios told the board that the company needed money again. They responded with additional financing and sent Adam Schlesinger from Inovia Capital to evaluate the state of the business. In October, Schlesinger was appointed to replace Larious as CEO while the board was looking for a buyer for Bench. However, Bench had violated the terms attached to its credit line, according to people who were present and asked not to be named when discussing confidential information.
On December 27, Bench posted on its website that it was closed for business and recommended that customers resort to a competitor, Kick. In January, Bench Accounting and 10Sheet Services, which operated as a consolidated business, filed a bankruptcy with a $ 135 million accumulated deficit, according to an administrator report, KSV. The National Bank of Canada did not respond to requests for comment. Montreal’s bank refused to comment.
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