- SoftBank’s Vision Fund has been rocked by the implosion of star portfolio company WeWork and the reverberations in the venture capital industry.
- Among the casualties is Zume, the pizza-making robotics startup that had received funding from SoftBank in 2018.
- According to a memo reviewed by Business Insider, Zume was in talks with SoftBank for another round of funding in late 2019, but the deal fell apart in December.
- The scrapped funding leaves Zume with about $150 million cash on hand, the memo said. One source said the lack of funding is responsible for widespread layoffs and restructuring at the startup that Business Insider reported on Monday.
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A SoftBank deal to invest a new round of funding in troubled robotics pizza startup Zume was scuttled in December, the latest example of the Japanese tech conglomerate’s changing appetite for ambitious but money-losing Silicon Valley tech startups.
Zume and SoftBank had a letter of intent for equity financing when the deal was scrapped last month, according to an internal memo reviewed by Business Insider.
The memo does not specify why the deal fell through, or the financial terms of the deal. But the memo describes the loss of the deal as having precipitated the cost-cutting measures — which includes hundreds of layoffs — and the sharp strategy shift Zume announced last week. In its new strategy, Zume is abandoning its robotics efforts to focus entirely on the sustainable packaging business.
The cancelled deal with Zume is the latest in a series of nixed funding deals by SoftBank and its $100 billion VisionFund in the wake of the implosion of WeWork, one of SoftBank’s biggest bets. According to an Axios report from Dan Primack earlier this month, SoftBank has recently walked away from several other investments in startups that it had submitted term sheets to — including Honor, Seismic, and Creator — throwing its ambitious Vision Fund and its wide range of cash-burning portfolio companies into uncertain territory.
Zume was reported in November to be in talks with SoftBank for a funding round that would have valued the startup at $4 billion, a significant step up from the $1 billion valuation it fetched a year earlier, according to a report in Recode at the time.
SoftBank previously backed Zume to the tune of $375 million in funding in 2018. The memo reviewed by Business Insider stated that without the additional funding from SoftBank, Zume had about $150 million on hand from its 2018 funding.
Representatives from Zume and SoftBank declined to comment.
Robots Zume is pivoting its entire business to a product it acquired seven months ago
Zume announced on Wednesday that 360 employees would be laid off across its San Francisco, Seattle, and Mountain View offices due to a shifting business strategy. That strategy change included shutting down Zume Pizza, the robotics division, in favor of growing the packaging business. Several sources attributed the abrupt change and layoffs to the lack of funding and subsequently high burn rate over the past year. One source said that the burn rate was cut in half after the layoffs, but declined to specify the exact amount.
Another source with knowledge of the original SoftBank deal told Business Insider that the Japanese fund pushed hard for Zume to pursue “global domination,” far beyond cofounder and CEO Alex Garden’s ambition to unseat traditional pizza chains like Domino’s. The added pressure pushed Zume to adopt aggressive business strategies that are uncommon for young startups.
One of those strategies included pursuing high-profile acquisitions of other startups, something the source said was unusual for a venture-backed startup. Zume’s renewed focus on sustainable packaging, for instance, is the result of its acquisition of Pivot Packaging for an undisclosed amount in June. Zume partnered with Pivot Packaging to develop its “pizza pod” that is currently being used in a pilot program at a Pizza Hut location in Arizona before acquiring the company.
Multiple sources told Business Insider that Garden convened remaining employees on Friday to discuss the future of the company at an all-hands meeting streamed from its Mountain View headquarters. There, he reemphasized the focus on packaging as the company’s best chance for profitability.
He did not address previous goals that Zume would replace upwards of 1 billion styrofoam and plastic containers by 2020.
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 [email protected], or Twitter DM at @megan_hernbroth.