- Pilotworks, a startup that offered commercial kitchen space for food entrepreneurs, sent an email to its 175 startups on Saturday announcing it would abruptly and immediately close.
- In a message on its website, Pilotworks said it was unable to continue operations due to “failing to raise the necessary capital to continue operations.”
- The Brooklyn-based company will open its kitchens around the country from 9 a.m to 5 p.m. through Wednesday to allow tenants to collect their ingredients and personal equipment before the startup shutters completely.
Since it was founded in 2015, Pilotworks has raised more than $15 million to support its mission of offering budding food businesses kitchen space and equipment on an as-needed basis as well as a centralized distribution program; $13 million came from Campbell Soup-backed Acre Venture Partners last December.
Even with an infusion of cash less than a year ago, the startup was unable to keep its doors open, leaving 175 independent food manufacturers out in the cold as they prepare for the holiday season, a period that can represent 40% or more of annual sales for independent producers.
Anjali Bhargava of Brooklyn-based Bija Bhar, which makes an organic turmeric elixir, told Food Dive that the closure was so unexpected and disastrous that other commercial kitchens around the city are coming to aid the stranded companies.
However, with a large back stock of shelf-stable product, Bhargava admitted that she was in a better position than many of her peers “who are actively losing sales.” When Pilotworks closed its doors on Saturday evening, it revoked all access to storage and preparation. Bhargava noted that many people received the email about the closure after it happened. She got it at 6:30 p.m. — after the closure took place at 5 p.m.
The million dollar question remains: What happened? With high-profile backers and a significant financial boost within the last 12 months, Bhargava said she believes the answer can only be some sort of mismanagement.
“They had such a focus on expanding,” she told Food Dive. According to her, instead of focusing on nurturing a creative, productive environment in “their home base” kitchens, Pilotworks instead put its energy into acquiring significant leases.
The most significant blow to the companies that now find themselves without a home may be the sudden lack of a distribution network. Since Pilotworks handled distribution, many of the companies are now left not only without current or historical records as to who placed orders for their products. Not only that, Bhargava said, but Pilotworks hasn't “said anything about paying us overdue invoices.”
This sudden closure was not the first whiff of problems with the Pilotworks startup. In June, top management was shuffled around when Pilotworks co-founder and chief executive Nick Devane stepped down from his role as CEO and was replaced by Zach Ware, the company's chief operating officer. Then in July, Portland-based Fork Food Lab, which was owned by Pilotworks and opened two years ago, notified its members this week that it would close at the end of September. In August, TheSpoon reported that Pilotworks closed its Providence location.
Pilotworks is not the only food incubator to fail. Last year, Montreal-based The Foodroom closed, citing its inability to make enough cash to keep going.
At the same time, there have been many success stories from incubators like Hot Bread in New York, La Cochina in San Francisco and KitchenCru in Portland. These collaborative spaces for independent food entrepreneurs are springboards from which businesses have the latitude to create without shouldering all the costs associated with starting a commercial kitchen from scratch, which can cost up to $100,000.
While food startups provide opportunity for trendy ingredients and flavors — and in the case of brands like RXBAR, huge returns — it is difficult to find solid incubators to work with. Campbell Soup's backing of Pilotworks may have brought the appearance of more security, but that obviously was not the case. Even though startups are trying to get away from the processed products Big Food is known for, major manufacturers can add strength to an incubator. Companies like PepsiCo, Cargill and Kellogg have backed The Hatchery, a 67,000-square-foot incubator facility in Chicago slated to open at the end of this year. Many large food manufacturers, ranging from Kraft Heinz to Tyson, have their own incubator programs as well, giving both the big company and small brands a chance to learn from one another.
Plus, like any economy when new businesses are successful everyone wins: consumers get more choice, stores can source locally and businesses can grow.