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SoftBank-Backed Pizza Startup Cuts Half of Staff, Stops Making Pizza

Sarah McBride

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Zume Pizza Inc. said it was cutting about half of its staff and shuttering its pizza business, making the former robotic pizza maker the latest in a long line of SoftBank Group Corp.-backed companies forced to slash spending. 

In a note to staff, Zume co-founder and Chief Executive Officer Alex Garden said the five-year-old startup would focus on its nascent packaging line, announced last year, along with food production and delivery systems. Zume is closing the pizza delivery business, known for serving up robot-made pies, on which it built its name. The company is also cutting 360 employees.

“After much discussion with leadership, our board and our investors, we have a clear path to provide what the market wants and what the world needs—a more sustainable food future,” Garden wrote in the note to employees, viewed by Bloomberg. The company also added 100 job openings which it said laid-off employees would be eligible to apply for. The bulk of Zume’s employees work in Mountain View, California. Its Seattle and San Francisco locations also each employ more than 100 people. 

“The market for sustainable package is about to explode and we and our partners are extremely confident in our ability to provide packaging alternatives to plastic,” Garden said in a statement.

Zume, which won a $375 million investment from the SoftBank Vision Fund in late 2018, joins a lengthening list of struggling companies backed by the Japanese conglomerate’s $100 billion tech investment fund. Known for showering companies with far more cash than they were seeking to raise, the Vision Fund’s strategy is to anoint a category leader that no competitor can catch up with.

That strategy is working in some cases—Vision Fund-backed Coupang, for example, is South Korea’s largest online retailer—but it has also created casualties. 

SoftBank-backed companies Getaround, Wag Labs Inc., Fair and Brandless Inc. have all had to cut staff or change business models once it became apparent revenue and profits were not living up to their once-grand ambitions. In the case of Oyo, the India-based hotel company, antitrust regulators are now examining its business model. And most notably, co-working company WeWork had to cancel a planned initial public offering last year as potential investors backed off, spooked by steep losses and profligate spending. 

The Vision Fund declined to comment for this story. Business Insider earlier reported some details of the job cuts at Zume. 

Many of the now-struggling Vision Fund companies are run by charismatic men without experience running large businesses. Garden, a well-connected former game developer, founded Zume with the goal of automating the pizza-making process. Eventually, his goals expanded to encompass a rethinking of the U.S. food production system.

Employees describe a culture at Zume where the emphasis moved quickly from one project to the next, with priorities driven by engineering ambition rather than market research. For example, last year a team of engineers spent months working on a project, codenamed “Penrose,” to equip food deliveries with sensors that would record data such as the temperature of the food once dropped off with the customer, according to two people familiar with the situation who asked not to be identified discussing private information. At the end of the year, with no customers committed to the sensors, the project was dropped and its manager left the company.

At a staff meeting in the Bay Area last June dubbed “Day Z,” Garden told employees cash burn had hit $10 million a month, according to people familiar with the matter, all of whom asked not to be identified. One of the people said that figure was at least 50% higher by year end.

Although Zume has emphasized sustainability with its new packaging business, some question its commitment. One employee was surprised to see that balloons, considered polluting and dangerous to animals, festooned the premises at Day Z.

The packaging business, which focuses on compostable containers for pizza and other food, has caught the eye of Pizza Hut Inc., which is testing the product in Phoenix. The Zume team is working on perfecting the boxes so they stay closed and don’t warp, one person said.

Zume’s mobile kitchen division, Forward Mobile, has also inked an agreement to provide mobile kitchens to &pizza, a mid-Atlantic chain.

To contact the author of this story: Sarah McBride in San Francisco at smcbride24@bloomberg.net

To contact the editor responsible for this story: Anne VanderMey at avandermey@bloomberg.net, Mark Milian

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