Lending startup Captain raised $107 million in the boom times. Now it’s up for sale amid layoffs and a capital drought.
- Captain, a startup that aimed to quicken home repairs after natural disasters, is winding down.
- The Louisville-based company had previously raised $107 million across venture and debt equity.
- But it struggled to secure additional capital, according to an email from CEO Demetrius Gray.
The season of startup wind-downs has arrived.
According to three people with direct knowledge of the situation, Captain, a lending startup focused on home repairs, has laid off employees and is looking for a buyer due to a funding shortfall.
Demetrius Gray, the founder and CEO of Captain, stated in an email to staff on June 29, which Insider reviewed, that the company attempted to raise additional funds in March before turning to existing investors for bridge financing in April and May. Gray wrote that after failing, “this then led us down the path of putting the company up for sale.”
Captain had been in talks with two potential buyers by late June and had reached the “final stages of due diligence,” according to the email. Gray stated that the company expected one of the transactions to close by the end of July, which did not occur. According to a person with direct knowledge, Captain was still in talks with at least two potential buyers several weeks ago.
Gray did not respond to multiple comment requests.
Many early-stage startups, including Captain, which had raised $107 million in equity and debt capital, have struggled to raise new funding as the Silicon Valley venture capital drought spreads. According to Carta data, cash raised in seed rounds totaled roughly $1.6 billion in the second quarter of this year, down 45% from $2.9 billion in the same period last year.
The makings of a fintech darling
Captain, which was founded in 2021, burst onto the public stage last year with splashy news stories and $104 million in funding. The Louisville, Kentucky-based startup aimed to assist homeowners in rebuilding following natural disasters. It claimed to fund claims in days rather than months and to connect homeowners with contractors in its network. Captain would pay the contractor in advance for the repairs, then collect the deductible from the homeowner and the payout from the homeowner’s insurance company.
“The lens through which we view ourselves is how we can help the policyholder put their life back together as quickly as possible,” Gray explained to TechCrunch last year.
The startup received $4 million in seed capital from NFX, GGV Capital, and Red Swan, as well as $100 million in debt financing from CoVenture, a firm that provides venture debt to high-flying startups that don’t want to give up stock.
Captain captivated investors with its mission to digitalize the contractor industry. Pete Flint, a general partner at NFX and a Captain investor, stated in a March 2022 blog post that the company used technology to simplify and streamline the rebuilding process.
The round came after a period of phenomenal growth for fintech. According to Carta data, fintech startups will raise $27.1 billion in 2021, accounting for approximately 12% of all venture deals tracked on Carta.
Flint was also impressed by the growing market size. Losses from natural disasters covered by insurance are expected to exceed $100 billion for the third year in a row, according to data from Munich Re, the world’s largest reinsurer, as extreme weather rages around the world.
Captain appeared to be the next Affirm, with its enterprising two-time founder, nine-figure funding, and press clippings that included a spot on Inc’s inaugural Power Partner Awards list. Gray gave TechCrunch fundraising advice in February.
Even a deluge of floods, hail, and wildfires couldn’t save Captain’s business.
Liabilities pile up
The company uses debt financing to pay contractors for materials, supplies, and labor costs up front. According to two people with direct knowledge, Captain was having difficulty repaying its lender. If a lender does not want to make as many loans or as quickly, Captain’s ability to pay contractors will suffer.
Former employees are also awaiting payment.
Captain laid off a number of employees in sales and operations beginning in March, according to three sources and Gray’s email to employees. In April and early May, a skeleton tech crew remained. However, the company has yet to process payroll for some of the employees who remained after the March layoffs and were later laid off.
According to two sources, Captain had approximately two dozen employees at its peak.
Gray stated in his email that prospective buyers were aware of the outstanding liabilities and that the sale price would be used to satisfy those liabilities, “with wages being the most paramount,” he added.
“I understand your need to be paid, and it is my top priority for you and my family,” he said.
Overdue payments to a recruitment firm may also be among its liabilities. According to a June filing, Guild Talent has filed a complaint against Captain in San Francisco Superior Court, seeking approximately $139,000 in damages. The search firm, which lists Captain as a customer on its website, requested a default judgment last week after Captain failed to respond to a summons.
The company’s fate is still unknown. According to PitchBook data, the mood in the global merger and acquisition market is tepid at best, with dealmaking falling to $873.4 billion in the second quarter, one of the weakest quarters since the pandemic began.
Captain is now lost at sea in an increasingly desolate startup landscape.
