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An update from Square Roots about today and the future.

This is a difficult post to publish. We’ve just informed our team that there will be layoffs at Square Roots. All told this will impact 49 people across the company. This is broadly in line with the current wave of layoffs across the tech sector - though I appreciate that will be of little comfort to those impacted. These are talented people who I’ve enjoyed working with and learning from. I take full responsibility for all the decisions that have led to them losing their jobs. I am truly sorry.

It’s been particularly difficult to deliver this news given our recent progress. In the last six months we’ve opened new indoor farms in Wisconsin, Ohio and Kentucky, all co-located on the distribution centers of our long-time strategic partner Gordon Food Service (GFS). We’ve also unveiled a similar strategic partnership with United Natural Foods (UNFI). Meanwhile, behind the scenes, we’ve finalized the next version of our farm-tech platform that increases operating efficiency while reducing our carbon footprint.   

Under normal economic circumstances, we’d be reasonably happy with this progress. However, these are clearly not normal economic circumstances. 

The Fed’s fight with inflation is beginning to bite everywhere. The technology sector in general is feeling acute pain. And Controlled Environment Agriculture (CEA) in particular has been hit hard. Public companies are flirting with delisting, and over-hyped private companies have gone bankrupt. Investors, rightly, are now laser-focused on business models that show a clear pathway to long term profitability. 

We feel confident that our partner-centric business model is a winning strategy. But we also have to be alert to the wider economic environment and stay ahead of it. With the benefit of hindsight, I now see that we hired too aggressively last year, pushing our operating expenses too high. So the tough decisions we’ve now made will help us streamline and stay more focused with our strategic partners as we continue to grow this year, while working within the realities of the current climate.

This rationale has also guided our decision to close our Brooklyn farm - the only farm we operate not co-located with a strategic partner. 

Brooklyn was the first facility we opened, back in 2016. Before the pandemic, our entire company used to work from this location - from apprentice farmers to the finance department - so there’s a lot of additional emotional weight to carry with this decision.

The current team there does a terrific job. But the reality is that this farm is built on an old technology stack that is increasingly hard to maintain; it is not set up to grow the range of products we offer in other markets; and the location is on a short-term lease - making it hard to justify the sort of capital outlay required to bring the farm up to par with the larger, newer, more efficient facilities that we’re now deploying with GFS and UNFI. 

Although we’ve learned a lot from our work at the Brooklyn farm over the years, we do not see a viable pathway to profitability at this location, hence the decision to close, which is scheduled to happen at the end of March. This will give us time to wind down the facility in an orderly and food-safe manner, while servicing our grocery retail customers in New York City until they can find alternative suppliers. 

The decision to close our stand alone Brooklyn farm - no matter how gut wrenching - will enable us to fully focus on our strategic-partner model. This ensures that we’re dedicating all our resources into maximizing yield and revenue at our co-located facilities, realizing their full potential.

Meanwhile, we’ll be doing everything we can to support impacted employees. These efforts include severance, full payout of any unused accrued PTO, continued benefits coverage, and an option to keep company-issued computers. I am also personally committed to make all the introductions I can to help connect people with other companies in our sphere who are hiring. 

Stepping back for a second, we have a long term vision at Square Roots, which is to responsibly feed every consumer on the planet with locally-grown food, all year round. That is very ambitious, and might take us decades to ultimately realize. I know we’ll get there, despite the challenges. I also know that it’s often in tough times like these where the strongest organizations get forged. I am convinced Square Roots will be one of them. But that doesn’t make it any easier for those people affected today. And for that, again, I’m truly sorry.  

If you have any thoughts, questions or comments, please email me directly.

Tobias Peggs

Square Roots CEO