Colorado-based Meati Foods faces an uncertain future after its lender swept most of its cash reserves due to a technical default, but the company is fighting to save the business and 150 jobs.
Mycelium protein startup Meati Foods is battling an uncertain future after a sudden and unexpected action by its bank has left the company strapped for cash.
In late February, the firm’s lender swept away two-thirds of its cash reserves as a result of a technical default, despite assuring Meati that it wouldn’t. It legally forced the company to issue a Worker Adjustment and Retraining Notification (WARN) last Friday, informing all 150 employees of impending layoffs if immediate funding isn’t secured, in a development first reported by AgFunderNews.
The notice suggested that Meati would cease operations at its manufacturing facility in Thornton, Colorado and permanently cut all jobs at the site, all the way from the warehouse and food production technicians to the R&D team and the CEO.
In accordance with the federal and state WARN Acts, the cutbacks will occur on May 6 should Meati fail to raise the capital it needs to continue operating.
“Let us be clear: we are not sitting idle. We are actively pursuing multiple funding opportunities with our board and both existing and potential new investors,” CEO Phil Graves told staff in an email seen by Green Queen.
It comes on the back of a year where Meati doubled its revenue and expanded its retail distribution by 130%, and the same week it showcased its products at the popular Natural Products Expo West trade show in Anaheim, California.
Despite the unforeseen turn of events putting the company’s future in jeopardy, Green Queen understands that Meati is hopeful that the required investment will materialise.
Bank action ‘wholly unanticipated and unforeseeable’
Meati was in the middle of an internal fundraising round that would have extended its runway into 2026, according to AgFunderNews, which said that while the company was current on its payments, it had breached a financial agreement relating to revenue and gross profit.
This is known as a technical default. Although the bank had given its assurance that it wouldn’t sweep cash and the company would be able to secure the new capital before July, it backtracked on that promise last week.
“Our lender unexpectedly removed cash from our accounts and took control of remaining cash reserves […] and the action was not reasonably foreseeable,” Meati’s WARN document read. “Based on this action, we do not have sufficient funding to continue operating. The result of the lender’s unexpected action is that we have to shut down our manufacturing facility.
“We are notifying you of this decision as soon as it was practicable to do so, taking into account the great difficulties we face in projecting staffing needs under these unprecedented circumstances. We would have liked to have given you more advance notice of this action, but we were unable to do so because our lender’s actions were wholly unanticipated and unforeseeable,” it added.
Meati has conducted multiple rounds of layoffs since 2023 – with the latest described as a right-sizing move to move the company towards profitability – and has been involved in an IP dispute and false marketing lawsuits over the last few years.
The company is one of the most well-capitalised alternative protein startups, having raised $365M since being founded in 2017. This includes the $100M Series C round it closed last year, the largest fundraise by an alternative protein since Meati’s own $150M Series B in 2022. It’s an outlier in a space where venture capital has been hard to come by, with funding down by 27% last year.
Meati hopes its ‘mission will endure’ as it seeks capital
The financial crisis comes despite Meati heading in the direction it intended to, with a strong sales performance, a new product launch, retail expansion, and the appointment of new executives and board members earlier this year.
“We’re now in over 100 different grocery banners – including Whole Foods, Sprouts Farmers Markets, Meijers, Wegmans, HEB, Kroger family of stores, Super Target, Ralphs, Natural Grocers and several others,” Graves told Green Queen during the launch of its breakfast sausage patties. Meati’s products are now in over 7,000 stores, though this is short of the bold 10,000 target it had previously set.
Even though Circana data for the 52 weeks to July 14, 2024 found that sales of these products dropped by 9%, Meati’s whole-cut steak was among the top 15 growth items. The company saw a $2.7M hike in year-to-date sales, thanks in large part to its all-natural ingredient list.
“Early indications suggest that mycelium breakfast patties will be a significant growth avenue for Meati. We’re confident these products will perform well,” Graves had predicted. “Chefs who use Meati’s steak and cutlet products in their restaurants love the taste, versatility and health benefits, and we expect this to grow in 2025.”
Now, Meati has just under two months to secure investment and dig itself out of an unprecedented crisis, and the firm hopes it can come through.
“We firmly believe in our mission and that mycelium will change the protein paradigm,” a Meati spokesperson told Green Queen. “While we’re unclear on the future, we hope for the sake of consumers and the planet that Meati’s mission will endure.”
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