Zume/Business Insider
Zume cofounder and CEO Alex Garden
Beleaguered robotics startup Zume just laid off two-thirds of its remaining employees, roughly 200 staffers, as the funding it needed to survive failed to materialize in a post-coronavirus VC market. In a cruel twist of fate, employees were supposed to be notified of the cuts via Zoom, the video conferencing software with a similar sounding name but at the last minute cofounder and CEO Alex Garden instead sent a company-wide email Wednesday announcing the changes.
The cuts leave Zume, which was once valued by private investors at more than $1 billion and had nearly 1,000 employees including specialists in robotics and AI, with roughly 100 staffers focused on a business creating compostable food packaging.
Among the latest parts of the business to be jettisoned is the GigaRanch team, which was focused on developing a sustainable food production system and was at one point said to be in contract talks with the Saudi government.
"We have seen our supply chain impacted and our customers delay or cancel business with us that would have generated revenue," Garden said in Wednesday's email, which was obtained by Business Insider. 'We have recently had no less than three potential investors back out of investment with Zume due to COVID-19's impact on their businesses," he continued.
Employees were notified of a previously unplanned company-wide all-hands meeting on Tuesday after business hours. Garden announced the cuts via email on Wednesday morning, as he and the rest of his team were under shelter-in-place orders in California's Bay Area, with plans for managers to meet with employees individually or in groups via Zoom throughout the day.
"Many of the current roles at Zume will no longer exist and we deeply regret that we must say goodbye to many of our valued friends and coworkers," Garden wrote. He pinned the blame for the layoffs on funding that had fallen through in the last month, in addition to impacts on the company's customer base and supply chain stemming from the coronavirus-led economic downturn. However, Business Insider has chronicled a pattern of financial problems, over-the-top spending, and erratic decision-making by Garden that set Zume on this path long before the current pandemic.
The layoffs affected two of the three remaining business divisions within the company and were largely seen as an extension of the company's shifting strategy announced in December that contributed to layoffs in January. In January, the company effectively shuttered Zume Forward, its pizza-making robotics and food truck delivery operation. The division included many of the startup's remaining engineers that had survived the January round of layoffs that affected 360 employees, but had been repurposed as automated food preparation became more appealing to many during the coronavirus crisis.
Unlike the 360 employees let go in January, a reduction that represented roughly half Zume's workforce, this group will get less than a month's severance. Those let go in January received 4 months' paid leave, including two months of what one source called "Alex pay," which meant they would be on the payroll but not have to show up to work. That would have ended on March 6, a few days before Silicon Valley went on widespread lockdown. According to the email, Zume will prioritize paying out terminated employees' healthcare benefits for up to 4 months.
It is not yet clear whether Garden will plan to sell the division's physical assets, including the fully customized food trucks and ovens, in an attempt to rescue the company's remaining business lines. One source familiar with the company speculated that it would be difficult for Zume to recoup many of its losses given the high-level of customization Garden insisted on for the trucks, some of which cost upwards of $1 million apiece.
Zume also had a small GigaRanch team, which was focused on developing a sustainable food production system and was said to be in talks with the Saudi Arabian government on a lucrative contract that was to act as a lifeline to the struggling company once SoftBank's previously promised funding fell through. All told, the company had raised roughly $446 million and was valued between $1 billion and $2.2 billion following a $375 million funding infusion from SoftBank in November 2018. It has summarily failed to raise substantial funding since and has struggled to turn a profit since the beginning.
Internal teams were notified of the cuts as early as March 27, according to internal documents reviewed by Business Insider. The timing of the announcement to affected team members, on Wednesday, comes exactly 91 days after the company filed its initial WARN notice with the state of California that notified the state of the terminations in January.
The remaining division, sources told Business Insider, is the packaging division. Zume Source, as it's called internally, is tasked with developing compostable packaging for pizza and other carryout items. The effort stems from Zume's acquisition of Pivot Packaging in February 2019 and appears to be the remaining glimmer of hope for the troubled company. Most of the employees that remained following January's layoffs were reassigned to Zume Source, sources said, although an organizational chart was never updated to reflect the changes. Sources told Business Insider that the initial trial of the compostable packaging, originally with a single Pizza Hut location in Arizona, had been placed on hold earlier this year, and the startup had yet to sign other customers to long-term contracts.
Zume has shifted strategies repeatedly throughout its five-year history, but the latest changes may be the final Hail Mary pass attempt by Garden, whose management style has sometimes ruffled investors, employees, and other executives. Since June, the company has lost a large majority of its senior leadership team and Garden has been unable to stem the steady stream of rank and file employees scrambling for the exits.
Zume is just the latest in a spate of layoffs sweeping some of Silicon Valley's previously high-flying startups. Those startups that prioritized growth over profitability, like Zume, were particularly vulnerable to an economic downturn and lack of readily available venture funding, investors have previously told Business Insider. Zume and others that were similarly struggling now have to make strategic cuts to survive, but in the end, it may not be enough.
A Zume spokesman did not immediately respond to Business Insider's request for comment.
Do you work at Zume or another SoftBank-backed startup and want to share your story? Contact this reporter via encrypted messaging app Signal at +1 (331) 625-2555 using a nonwork phone, email at mhernbroth@businessinsider.com, or Twitter DM at @megan_hernbroth.
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