Fungi-fueled alt meat startup Meati Foods has warned staff of impending mass layoffs after a lender swept two thirds of its available cash because of a technical default, AgFunderNews understands.
Under the Worker Adjustment and Retraining Notification (WARN) Act, employers with 100+ full-time employees must provide written notice of mass layoffs at least 60 days in advance. A WARN notice sent to staff today and seen by AgFunderNews, explains that Meati will be ceasing operations at its production facility in Thornton, Colorado on May 6, and terminating their employment at that time unless it can secure additional funding in the interim period.
The notice explains that, “We are taking this action because our lender unexpectedly removed cash from our accounts and took control of remaining cash reserves on Friday, and the action was not reasonably foreseeable. Based on this action, we do not have sufficient funding to continue operating.
“We would have liked to have given you more advance notice of this action but were unable to do so because our lender’s actions were wholly unanticipated and unforeseeable.”
Meati has 150 employees: 90 hourly and 60 salaried.
‘We are not sitting idle’
In an email to staff obtained by AgFunderNews, CEO Phil Graves explained that, “Today, we find ourselves in a completely unforeseeable and uncertain situation. Despite nearly doubling revenue from 2023 to 2024, Meati missed a 2024 revenue and gross margin financial covenant with the bank. On January 31, the bank assured Meati’s management and board that it would not sweep cash or accelerate payments. However, without notice, the bank swept approximately two-thirds of Meati’s available cash on February 28, putting the company in a precarious financial position.
“Since learning of this reversal, we have been working tirelessly with our board, investors, and key stakeholders to explore a path forward. We will continue doing so.”
He added: “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.”
‘Inexcusable and gut-wrenching’
“This is a bank-induced crisis,” one source close to the board told us following an all-hands meeting on Friday afternoon.
Sources told us that Meati was advancing an insider-led round that would have extended runway well into 2026. And while it had breached a financial covenant tied to revenue and gross profit, what’s known in banking as a technical default, it was current on all of its payments.
According to the source, the bank assured the company in late January that it would not sweep cash unless fraud was involved, which was not the case in this instance, and had been reassured that the company would be able to finalize a new funding round before its runway date of July.
But things changed rapidly although Meati had term sheets coming within weeks, rather than months, added the source. “I’ve never seen that in my career, where a lender sweeps that much cash because of a technical default, where you jeopardize a company’s financial future without a conversation. It’s inexcusable and gut-wrenching.”
According to the source, staff had been optimistic about the company’s future despite several rounds of layoffs given some recent retail distribution gains and revenue growth, so the news was a “big surprise.”
A Meati Foods spokesperson told us: “We firmly believe in our mission and that mycelium will change the protein paradigm. While we’re unclear on the future, we hope for the sake of consumers and the planet that Meati’s mission will endure.”
Accelerating the path to profitability
A high-profile player in the meat alternatives space with $365 million in funding from backers including Grosvenor Food & AgTech and Prelude Ventures, Meati has engaged in four rounds of layoffs over the past couple of years in a bid to streamline operations and accelerate the path to profitability.
However, things had been moving in the right direction, according to Graves, who spoke to us in January after launching a new line of breakfast patties.
While sales of meat alternatives continue to decline in the US, Meati is tapping into demand for simpler products with fewer ingredients and less processing, claimed Graves, a former Patagonia executive who took the helm at Meati last February following the departure of CPG veteran Scott Tassani.
Meati now has products in 7,000 locations across Kroger, Whole Foods Market, Meijer, Sprouts and Wegmans and others, and has been picking up traction following moves to improve retail execution, Graves explained in January.
“We just launched in some new retailers and we’re seeing really good commercial traction. Thanks to our team and the product itself, we have increased our distribution by 130% year over year, from 23 to 24. We’ve also engaged a firm to audit more than 1,000 of our stores and ensure that the product is consistently in stock, priced appropriately, and that any signage that’s there is as it should be.”
‘Overly exuberant goals’
Speaking to us in September, Graves acknowledged that former CEO Scott Tassani had raised some eyebrows in 2023 after predicting Meati would generate $1 billion in retail sales in five years.
“We’ve put some overly exuberant goals out there publicly in the past and we own that,” Graves told us. “So today we are setting goals that are grounded in reality. What I am seeing in the market now is an increased sense of urgency. Can you show profitability not in 10 years, but in 12-18 months?
“And how we were set up when I arrived, the answer was no, so we needed to make some changes, as the market has dramatically shifted. We had raised a large amount of capital and brought in a lot of uncommonly talented individuals, but ultimately, we were overstaffed and we were very siloed. Instead of behaving like a scrappy startup, we were operating more like a big CPG.”
