Struggling Breather sold for just US$3M

• An American company has agreed to buy Montreal-based flexible-workspace provider Breather for US$3 million, The Logic has learned.

In a May 20 letter obtained by The Logic, Breather CEO Bryan Murphy told shareholders of Breather Products Inc. that the company had agreed to a term sheet with Industrious National Management Company, a New York-based operator of collaborative spaces, offices and enterprise suites.

The Us$3-million cash purchase price is a fraction of the US$127.17 million Breather has raised since its founding in 2012, according to Pitchbook data. Menlo Ventures led a Us$40-million round in the company in 2016. Other investors include Peter Thiel’s Valar Ventures; New York entrepreneur Gary Vaynerchuk; the Finkelstein 2036 Family Trust, the family entity overseen by Shopify president Harley Finkelstein; Montreal’s Real Ventures; RRE Ventures; Slow Ventures; SOSV and the Caisse de dépôt et placement du Québec, Quebec’s public pension fund manager.

Industrious made the offer in an April 20 letter to Murphy. Few, if any, of Breather’s investors are apt to see money from the sale.

In most cases, debtholders are paid out before shareholders, so the proceeds from the transaction — which is set to close by Friday — won’t cover the company’s senior class of preferred shares. As a result, “holders of all other classes of preferred shares and common shares in the capital of the Corporation will receive no consideration.” Shareholders had until Thursday to sign the letter.

Industrious CEO Jamie Hodari declined to comment on the deal. Murphy didn’t respond to a request for comment, nor did Finkelstein or Real Ventures partner John Stokes.

The sale would mark the final gasp of the company, which was the product of a “crazy idea” from founder Julien Smith. The Montreal-raised Smith and business partner Caterina Rizzi hit upon the idea of renting fully furnished spaces to the officeless masses after finding themselves sick of working out of Starbucks coffee shops. Breather leases its space from companies and building operators.

Yet the company was suffering even before the pandemic decimated the office real estate market. It hired CEO Murphy in January 2019, four months after Smith left. Murphy, a former ebay vice-president, said Breather’s fortunes rested on its ability to further expansion. Profligate spending characterized Murphy’s early reign, with the CEO acknowledging that the company had spent nearly all of its US$122 million in publicly disclosed venture funding.