In November 2018, Softbank funded Zume, the pizza robot company, with $375 million in venture capital investments from the Vision Fund. It seemed at the time that Zume would soon become a household name as it set out to revolutionize the restaurant industry by creating robots that make pizza.
Since the startup had a prolific future, the company was promised another batch of funding – in total, Zume has raised $423 million to date. It quickly gained traction as a powerful tech-based startup with nearly 500 employees. However, trouble soon started brewing for Zume and it was recently forced to lay off almost 80% of its workforce from offices across the US. As the tech and restaurant industries deal with the aftershocks of this massive news, the rest of us are left wondering; how did the futuristic pizza company end up this way?
The First Sign of Trouble
It wasn’t just the lower-level staff that was laid off – the victims of this downsizing include some of the top-tier executives of the company. Zume penetrated the restaurant industry using robots to make pizza, but could they really hope to compete with bigwigs like Pizza Hut, Domino’s and even Papa John’s in a pizza delivery industry that’s already worth more than 10 billion dollars? The model was clearly unsustainable from the start, which is why they put it on the backburner just a few months into operations. It is reported that with this downsizing, they have effectively shut down Zume Pizza, the robot division that was the very basis of the startup.
Interestingly enough, Business Insider reports that Zume Pizza never had any robots making the pizzas in the first place. The company used data from multiple sources to figure out which type of pizza performs well on what times and correlated to find out which pizzas they should sell at a particular time of the day. The company would then partake those pizzas, bring them to their mobile kitchens and cook them during delivery. Later, it decided to park those mobile kitchens at pre-decided spots in neighborhoods, but the dough would still be parbaked. However, a rider would pick the order up from these on-the-go kitchen vans and deliver them. With this business model, Zume Pizza did not need robots, which caused speculations since it was initially a unique-selling-point for the company. Zume had also expanded its operations, establishing a compostable packaging service for the restaurant industry. In fact, according to the company, it was the prime reason why the initial idea of pizza-making robots was stalled. Another division of Zume was busy developing food-trucks for the restaurant industry.
What led to the Decision to Layoff People?
The funding from Softbank was initially used to set up the infrastructure for this business. However, it turned out to be a multi-million dollar drain for investors and Softbank decided to stop further funding. This led to the lay-offs as a cost-cutting initiative by the company to sustain operations. After a refusal of further funding from Softbank, the company had to resort to desperate measures to survive. Had there been another round of funding, it would have led to a valuation of approximately $4 billion for Zume. This caused a significant dent to Zume’s image and reliability as a band. In fact, all communication between the senior staff and other investors has since been impeded.
The CEO of Zume Pizza, Alex Garden, was already in shallow waters due to several arguable measures that he took in the past; including canceling a company-wide meeting, laying off the executive staff, halting the use of the pizza-making robots, and now restricting communication with outside investors. The company-wide meeting was specifically called when employees started to question the rumors regarding the startup’s financial situation. Its agenda was to develop a 2020 strategy for the company while addressing the rising concerns regarding finances. However, it was canceled later, apparently because Garden wasn’t ready to disclose the plan and had to make some crucial changes to the strategy.
Key Professionals Who Departed from Zume
Although the company let go of most of its employees recently, it has been under great turmoil for the past several months, when some of its leading executives parted ways with the company, leaving Zume directionless. The interim CFO Kartik Ramachandran was terminated back in June, while General Counsel Kira Druyan left the company in October. Susan Alban, the VP of Talent, also resigned shortly after. Later in December, Druyan’s replacement Reggie Davis also left the company. With key executives gone, Zume management was under high stress with no funding or clue regarding its 2020 strategy.
As of now, Zume has come to a standstill. Unless they find long-term investors along with keen top-tier executives who are willing to take up the challenge of mending the damage, the future of this business is looking shady.
The Impact of Downsizing
The downsizing and the eventual lack of funding are bound to affect several divisions of the company. A significant impact is expected in the engineering division, followed by the corporate development department. Both departments made up the majority of the workforce at Zume. In 2019, the tech startup rapidly expanded these divisions when scaling its operations, an attempt that backfired massively. In fact, as per the comments of a few ex-employees, the engineering department saw a haphazard increase in jobs to meet the unrealistic goals of the company. The lease on its Seattle office also won’t be renewed because of the same reason – it was considered the company’s engineering base. Furthermore, the laid-off employees are still waiting for any notification regarding compensation – they are expecting a significant severance pay.
What Does the Future Hold for Zume?
Industry specialists are concerned about the fact that this rapid layoff of a massive workforce has left Zume with a weak skeleton to work with. Operations that were being managed by around 500 employees will now have to be divided among the workforce that’s left behind. There are still hopes that the startup may be able to find a reliable investor to work with – Softbank has not commented on this matter yet.
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