In December, Cometeer quietly conducted layoffs and installed its chief operating officer as co-CEO. Former employees spoke of dysfunction and high executive turnover as growth has slowed at the most-funded coffee startup ever, where headcount is down nearly 50%.
To the outside world, Cometeer was buzzing. Its coffee — roasted by elite partner brands like Counter Culture and Joe Coffee, flash-frozen and shipped in recyclable aluminum pods that needed only to be dropped into hot water to serve — was beloved by tech influencers and venture capitalists alike.
When Cometeer announced $35 million in funding from name-brand investors in October 2021, taking its total raised to $100 million, the startup became the highest-funded coffee startup ever. “We’re hiring folks from Apple, Tesla, Palantir and Wayfair,” founder Matthew Roberts told Forbes then. “We are talking about real tech companies, real tech employees coming into the coffee industry because they see the opportunity to change an industry that’s really been stuck in its old ways.”
But behind the scenes, it’s Cometeer that’s been stuck in a cycle of layoffs, executive departures and dysfunction that has contributed to slowed growth and a doubtful future. June and December layoffs, never publicly acknowledged, each cut about 20 employees, more than 10% of Cometeer’s workforce, Forbes has learned. Key executives across its business have otherwise quit or been fired – including one marketing boss hired in the fall who lasted just two weeks. The exodus has come as the growth of its subscriptions, which stood at around 28,000 subscribers to end the year, have slowed in the past six months. (Assuming each subscriber consumed one Cometeer pod daily, that would put the company on pace for about $22 million in annual revenue.)
Forbes spoke to sixteen former employees and others close to the company for this story, all of whom asked to remain anonymous for fear of retaliation or loss of career opportunities, and reviewed internal documents. They painted a picture of a startup that, despite a well-liked and high-quality product, has struggled under the weight of inconsistent strategy and a well-intentioned but inexperienced founder CEO.
Last month, as Cometeer conducted layoffs across two consecutive Wednesdays, the company internally announced that chief operating officer Matthew Mandel would be stepping in alongside Roberts as co-CEO; a December organization chart obtained by Forbes showed that most of the company reported to Mandel, who updated his LinkedIn profile to note the change in title (Roberts did not). Then on Friday, the executive who had overseen Cometeer’s layoffs, chief people officer Elyse Neumeier, announced her own departure. From a peak of 160 employees, Cometeer now employed “roughly 85,” Neumeier said in an all-hands email reviewed by Forbes, implying headcount at the company has dropped 47%. (Based on the org chart reviewed by Forbes, this number appears to have included more than 20 contractor or hourly employees.) “With the reduction of the Cometeer team comes a necessary reduction in my role,” she wrote. Neumeier did not respond to a comment request. Cometeer declined to comment on its headcount.
In response to a detailed list of points in this story, Roberts and Mandel provided a statement: “Like so many other companies, the tactical realignment last year of our business model resulted in painful but necessary adjustments to our team size and composition in order to match market conditions. We feel how difficult that has been for those affected and remain grateful to all those who have played a role in Cometeer’s journey thus far.” (Emphasis theirs.)
Investor D1 Capital declined to comment. Investors Elephant and Greycroft did not respond to requests for comment. Cometeer partners Counter Culture and Klatch did not respond to a comment request. Jonathan Rubinstein, the founder and CEO of Joe Coffee, said “they’ve been an incredible partner for us and I think they have a great mission.” News of December 2022 layoffs at Cometeer was first reported by food news site Nosh.
Cometeer is far from the only startup to have conducted layoffs or faced challenges in the latter half of 2022 as public markets contracted and venture capital firms have urged their startups to cut spending and focus more on profits and hoarding cash. Public tech companies like Alphabet, Amazon and Microsoft have recently cut thousands of jobs; even high-flying Silicon Valley unicorns like Stripe have cut thousands more in aggregate. Such an environment has proven particularly challenging for retail and direct-to-consumer brands closer to Cometeer’s business, from widespread layoffs at businesses like Allbirds and Everlane to other startups shutting down.
But whereas recent cuts at larger startups like Flexport and Lattice came with public letters from their CEOs and promises of support, Cometeer has kept quiet, to the frustration of some former staffers. (Others have scrubbed their LinkedIn profiles and social media accounts of any mention of ever working at Cometeer.)
“I think they have a pretty good facade going on,” said one former employee, who, like others, said they felt misled after being recruited by Cometeer. “I would see the articles and shows about dysfunctional startups and think, ‘no, not us!’” said another. “And it’s so demoralizing that over time, that wasn’t true.”
Cometeer frozen pucks like the one at right are removed from pods and dropped into hot water and dissolved, or left to melt and poured over ice and water to make an iced coffee.
Boston Globe via Getty Images
In
May 2022, Cometeer employees received an email from leadership touting the funding the startup had raised and how fast it planned to grow. There were some warning signs of growing pains – some staff were let go the previous December, according to two people with knowledge, and the company’s chief financial officer had departed in April. But, according to one former employee who received the email, it reflected the optimism that persisted internally at the time. “There was a lot of ‘we just got funded, we’re going to the moon’ talk,” they said.
Cometeer was making marquee hires as Roberts had predicted, filling roles quickly through an accelerated interviewing process and offering top-of-market salaries, multiple sources said. And it’s possible Cometeer had an even bigger war chest than outwardly known: according to startup tracker PitchBook, the company raised an estimated $80 million in additional funding that spring, doubling its valuation to more than $800 million. (By comparison, fellow coffee startup Blank Street Coffee, a retail chain, has raised at least $60 million; Blue Bottle, a chain acquired by Nestlé in 2017, raised $117 million.) Cometeer declined to comment on the funding.
For those whom an attractive salary didn’t immediately sway, there was Roberts, the company’s founder, who made the Forbes 30 Under 30 list in 2021. Prospective employees got his full pitch: together, Cometeer could disrupt the staid coffee industry for the better, not just providing a high-quality product to customers, but supporting roasters with ethically sourced products, too. And unlike with many job pitches, Cometeer’s product itself was right there to try. “You’d get hyped up on the caffeine and sold the vision,” said another former employee.
But a more existential friction was also developing between the approaches of two groups of employees at Cometeer: those who saw the business primarily as a coffee company that operated like a tech startup, and those that considered it foremost a tech startup that happened to sell coffee.
Even at its higher price point, Cometeer was lucky to make a dime per pod, one source said.
Cometeer’s core innovation – the one for which it held a patent, one source with knowledge said – was how it flash-froze the coffee it received from roaster partners into its self-serve pods, to be shipped over dry ice around the country. Cometeer investors had long imagined the company expanding beyond coffee to other product lines delivered similarly, such as tea and alcoholic beverages, two sources said. Roberts, however, seemed more interested in “running a billion-dollar coffee brand,” one of the sources added. “Unless you start roasting your own beans, you’re not a coffee company,” the person said.
To acquire and ship coffee from its twelve roaster partners like Counter Culture, Joe Coffee and Klatch in such a fashion wasn’t cheap, either. At about $2 per cup, Cometeer was twice as expensive as Nespresso pods, or six times the price of lower-end Green Mountain pods available at Staples. Unlike those rivals, Cometeer touted that its aluminum pods were recyclable, as was its packaging. But even at its higher price point, Cometeer was lucky to make a dime per pod, one source said. The company lost money on at least some orders it shipped, another claimed.
“We’re proud that Cometeer has built a sustainable model and is now comfortably profitable on nearly every box of coffee that we ship,” said Roberts and Mandel in a joint statement.
Every source who spoke to Forbes said that at least until recently, Comteer’s product was well received by customers. The problem was that despite vocal online fans such as Josh Wolfe, the Lux Capital cofounder, and its own busy Twitter presence, Cometeer was struggling to reach newer demographics outside the Twitterati, six people said.
Some employees grew frustrated when Roberts and other executives told the teams responsible for improving Cometeer’s sales that they couldn’t risk spending money on untested strategies or marketing, the people added. An internal document reviewed by Forbes showed that Cometeer spent more than $160,000 on influencer and creator marketing alone in one month that spring. “They would spend $50,000 on an influencer, but they wouldn’t try new demographics because they didn’t want to test them,” said one. “They were stuck doing the same thing repeatedly, and hoping for a different result.” Cometeer declined to comment on its marketing spend.
When Cometeer laid off about 20 people that June, leaders told remaining employees the cuts had been long-planned and didn’t reflect weakness in the company’s business prospects, two people said. But that summer, as growth slowed, according to one person with knowledge, Roberts and the company’s board started to preach cutting costs, from how much it paid its roasters (cheaper providers became favored for larger orders) to advertising spend. A milestone that August, Cometeer’s first brick-and-mortar presence in famed Los Angeles area grocery mini-chain Erewhon, was cause for public celebration. But that placement was costly to the company, three people said, while continuing to cater to a smaller, well-heeled set.
Other red flags were appearing across the business. Many Cometeer employees worked at least part-time from a New York office or at its Gloucester headquarters. Downstairs, the company employed several dozen people in charge of actually manufacturing, packaging and shipping its pods, and conducting quality assurance. Morale in such jobs was low. “They were working there for the money,” one person with knowledge said. “It wasn’t a happy place.” In the months after the June layoffs, more than a dozen other people were quietly cut, at least some from such teams, the person added, without the wider company being informed.
“Gonna pursue a life with less stress that [sic] cometeer has endure [sic] on my life,” one employee wrote in a November resignation email to Neumeier that copied the entire company. “Cometeer has created way to [sic] much stress for me to return to work.”
Roberts struggled during this period in setting consistent goals for his executives, as well as trusting their expertise, three people said. In one instance that reverberated around the company, Cometeer’s long-time vice president of food science and coffee development quit in frustration as Roberts continued to trust outside consultants and agencies over their input, two people said. (The former executive did not respond to a request for comment.)
“Great product. Company should not have raised $100 million.”
A recent college graduate when he started Cometeer, Roberts, who is 32 now, was also heavily influenced by one of his investors in particular, four sources said: Zach Frankel, a low-profile venture capitalist who has backed companies including e-cigarette maker Juul, controversial online mortgage business Better.com and fintech unicorn Ramp. (Disclosure: this reporter attended college with Frankel and has maintained his acquaintance in the years since.) Frankel exerted heavy influence over Roberts and the company’s hiring and firing decisions, the people said.
Leaders who didn’t fit their preferred mold, according to the sources – young, Ivy League or comparably educated, often white and male – struggled to maintain Roberts’ trust, they added. (One noted that while many of the company’s coffee industry veteran leaders are no longer employed by Cometeer, its head of coffee product, who joined immediately after graduating from Princeton in 2021, per his LinkedIn, remains.) “It was a fratty culture in the inner circle,” said one former employee. Frankel referred a request for comment back to Cometeer. Mandel and Roberts did not answer a question about the company’s culture.
Investors’ faith in Roberts himself was shaken, however, following his hiring of a new marketing leader in October. The hire, made without the board’s knowledge, two sources said, was reversed and the executive let go within two weeks. By December 2022, when Cometeer let go another group of 20 or so employees across two Wednesdays, Roberts’ own role was on the block. The same week it informed staff they were to depart, the company announced internally that chief operating officer Matthew Mandel would be stepping into a co-CEO role. The move was not publicly announced, though Mandel updated his LinkedIn profile. An organizational chart seen by Forbes showed that most teams and employees at Cometeer reported to Mandel following the move, with Roberts left in charge of several employees in sales and PR.
In the first week of 2023, bankers at Goldman Sachs stopped by a Cometeer cart parked outside their Manhattan office to enjoy free cups of coffee and pods to bring back to their desks. Coming just after the investment bank had cut some free coffee in its offices, an employee identified as Cometeer’s “owner” told a New York Post reporter who covered the stunt: “The situation is dire,” and, “people are really bummed about the coffee phasing out.”
In the fall, Cometeer hired a number of brand ambassadors for such opportunities, a person with knowledge said. The org chart reviewed by Forbes lists 17 people in such a role, the most of any job function at the company. (That “owner” appeared as head of field marketing for New York.) Despite head of people operations Neumeier’s recent departure, most former employees who spoke to Forbes believed that the company faced better prospects under Mandel’s leadership; at least one said they could see a scenario where the company could still turn things around.
One former staffer insisted that, if Cometeer could revise its pricing model and bring in an outside, seasoned CEO, “there’s a model there that could still work.” Others, however, say that with the benefit of hindsight, the “rose-tinted glasses” have been removed. “My major takeaway is that in this startup world, there can be a lot of smoke and mirrors,” said one laid-off Cometeer staffer.
Most said they didn’t believe their options to buy Cometeer shares would amount to much. “I would urge whoever is looking to work there to do more research,” said one. In this case, smelling the coffee may not have been enough. Summed up another former employee: “Great product. Company should not have raised $100 million.”
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Source: https://www.forbes.com/sites/alexkonrad/2023/01/30/cometeer-coffee-pods-layoffs-ceo-switch/