Clio breaks Canadian tech financing record, raising US$900-million to give it US$3-billion valuation

Jack Newton and Rian Gauvreau thought they could build a nice little technology company on their own to adequately fund their lifestyles. Then German angel investor named Christopher Janz stumbled upon their legal software startup, Clio online, cold-e-mailed them, keen to invest. The message landed in a spam folder. When they finally responded he gave them advice: Build your company into something significant or well-funded rivals will crowd you out. Raise venture capital, grow fast, dominate your market. They listened. That was in late 2008.

Now, 16 years later, Clio, legally known as Themis Solutions Inc., has closed the largest growth capital financing by a Canadian technology company, a US$900-million equity deal valuing it at US$3-billion. That ranks it among the country’s most valuable homegrown tech companies and surpasses the previous record set by 1Password, which raised US$620-million in 2022.

U.S. private capital giant New Enterprise Associates, a past backer of Uber, Salesforce and many Canadian startups, led the deal, an undisclosed portion of which went to buy stock from existing investors with the balance going to Clio. Other new investors include growth equity giants Goldman Sachs, Sixth Street Partners, Alphabet Inc.’s growth equity fund CapitalG and Tidemark Capital. Returning investors include TCV and JMI Equity – which co-led Clio’s US$250-million financing in 2019 – and T. Rowe Price and Associates Inc., the lead of its US$110-million financing in 2021 that valued Clio at US$1.6-billion. Past backer Ontario Municipal Employees Retirement System also invested.

Clio is among an elite group of Canadian startups that have grown into sizeable companies by selling online software on a subscription basis. Such companies are labelled “centaurs” when they reach US$100-million in annual recurring revenue (Clio reached US$200-million this year), denoting their rarity compared to “unicorns,” private tech companies valued at US$1-billion.

“We are growing quickly and profitably and we’re in an enviable position” with US$100-million in the bank prior to the financing, Mr. Newton said in an interview. “I’d put us in that class of companies that have ambitions to go public” once markets rebound. “We have a lot of optionality.”

Clio has built what it calls an operating system for small to medium-sized law firms: a cloud-based platform that lawyers use to manage their practices, from scheduling, billing and client onboarding to managing documents and case files and even advertising. Last week, Clio added bookkeeping and accounting for U.S. clients.

“As a sole practitioner, when I interact with clients and they see how I’m able to respond and share documents promptly they tell me it seems like I have a team behind me, which I don’t,” said Burlington, Ont.-based lawyer Andrew Rudder, a Clio client since 2022. “Clio takes away a lot of the administrative tasks and keeps me safe.”

NEA’s New York-based co-CEO Tony Florence described Clio as being in a class of its own as it has the scale, market leadership, financial profile and opportunity grow by expanding product offerings, entering new territories outside its core English-speaking markets and incorporating artificial intelligence.

Mr. Janz praised Mr. Newton for his ability to mature as a leader as Clio has expanded to 1,100 employees, with more than 150,000 lawyers and four acquisitions completed to date. “Most founder CEOs reach a ceiling or just don’t want to do this job anymore,” Mr. Janz said. “The fact that Jack scaled from being a founder who wrote the first version of the software with his cofounder and small team and has been able to scale and perform in this job is the biggest factor” in Clio’s success.

Clio’s journey: Leveraging tech for flexible work and enhanced productivity

Mr. Newton and Mr. Gauvreau (who is no longer with Clio) were childhood friends in Edmonton who decided to build a company as cloud computing started to take off in the late 2000s. At the time Mr. Gauvreau was working as an information technology manager for law firm Gowlings in Vancouver and saw most technology tools for lawyers were cumbersome and not well used or liked by lawyers. They realized smaller law firms faced more ethics and malpractice complaints than larger ones, in part because they lacked software tools to help them stay on top of their businesses, and decided to create an easy-to-use tool that could help with the administrative burden

Their platform was an immediate hit upon its introduction at an American Bar Association conference in 2008. Its friendly user interface impressed Mr. Janz, who thought it reminded him a lot of another fledgling startup he’d just backed: Zendesk Inc.

“Just the fact that Clio had a good-looking website and that you could sign up for a free trial was enough to get my attention,” he recalled. “Those are things you take for granted now.”

He convinced the founders to raise venture capital given the “paradoxical situation” that the faster subscription software companies grow the more they burn as customer acquisition costs are typically high and upfront but lead to years of steady revenues. The six-figure seed financing deal he helped cobble together at the depth of the credit crisis valued Clio at US$1.5-million.

Clio later attracted backing from some of the top U.S. private capital firms, including a key US$20-million financing in 2014 led by Bessemer Venture Partners, one of the top subscription software financiers and a key early backer of Shopify Inc. New investors continued to be impressed. “We think the best days are still ahead of Clio,” Mr. Florence said.