Layoffs at food waste recycling innovator Bardee

An innovative Melbourne-based startup that turns food waste into insect protein has let go of more than half its workforce, taking what one co-founder describes as a 'small pause' on further tech development to achieve profitability more quickly.

Bardee co-founder and CEO Phoebe Gardner tells Business News Australia it has been hard to lay off 30 people, but the decision was unavoidable given the state of capital markets.

"The saddest part absolutely is losing an incredible team. We really love all of these people and care so much for them, and we’ve really been in this together," says Gardner, who started the business in 2019 with Alex Arnold as part of the Melbourne Accelerator Program (MAP) at the University of Melbourne.

"Most of those employees are leaving with equity in the business, and so I really hope that through making this shift and doing this lay-off, that we’re preserving the ability for Bardee to exist into the future and deliver on the amazing impact.

"We have enough people right now working in various roles and in different capacities to deliver all of our existing food waste collections across Melbourne, where we're doing 1,000 collections a week, and continue to dispatch our fertiliser to Bunnings stores nationally and supply hundreds of farms across Australia who are now using our fertiliser and protein."

Gardner says Bardee has been run to date with an aggressive go-to-market strategy, recording 40 per cent revenue growth month-on-month in July and consecutive growth over the past two quarters.

"I don't think there's any example really of a startup that has so much tech and biology behind it being profitable at this stage. Our plan was to continue to achieve incredible technology milestones, progress the tech, continue to bring the cost of production down through those innovations, whilst launching products on the market, delivering on carbon credits and starting to build up revenue through multiple channels," Gardner explains.

However, she says the general sentiment from existing investors was that in the current climate it didn't seem possible to grow at such a rapid rate at the expense of profitability.

"But it was possible for us to pull in our burn, and we were actually in an extremely fortunate position to be able to even make a run at profitability which we are now very, very close to and on track to hit," she says.

Gardner says the company is technically profitable now after the staff cuts, but more meaningful profits are expected in November as a result of upgrades.

"In line with the lay-offs, we’ve reduced production in some areas of our facility so that we can complete infrastructure upgrades, allowing us to go from 10 tonnes a day or 50 tonnes a week, to 300 tonnes per week," Gardner explains.

"Whilst we’re making those upgrades, we’re currently signing up and taking on many more food waste collection customers across Victoria including restaurant chains, hotels, hospitals, schools, major shopping centres.

"That facility upgrade will enable us to not only be profitable at this slightly scaled back scale, but that upgrade will allow us to be profitable at a much larger operating scale, and that's all set up for November."

The startup's backers include Blackbird Ventures, Archangel Ventures, January Capital, and Possible Ventures.

"They’ve all been very supportive of us and what we’re doing, and I think that while we weren’t able to avoid these lay-offs, I think everyone wants to see Bardee succeed through this," the co-founder says.

"It’s such a sustainable amazing solution. We’ve brought it to market, but now we just want to see it stand on its own two feet commercially, and I think that’s the best pathway for us to ensure we can continue this positive impact. I think we’re really close, so we’ll be grinding it out."

(Updated 4 August, 2023) Since this story was published, Business News Australia has received an allegation from an anonymous source that a portion of the staff who were made redundant in May - in two rounds - have not been paid since April.

"I am almost certain nobody has received redundancy, notice period, or annual leave payments," the source said.

Gardner disputed the claim that there were former staff who hadn't been paid since April, and issued a statement highlighting the company's "committed to ensuring that all employees receive their full entitlements".

"In the past, there have been some instances where payments have been delayed up to two weeks. These situations have been taken seriously and resolved," she said.

"Bardee has worked with external and reputable accountants to maintain and improve internal systems as we build the startup.

"In relation to recent layoffs in May this year, we are working in earnest to ensure all entitlements are paid in full to our team."

She said that as soon as the shift in the company's financial position became apparent, management acted quickly to reduce operating costs and team size.

"Unfortunately, we have experienced unforeseeable delays, however, we are confident that all entitlements will be paid in full by September."

In addition, former and existing team members have been grieving the loss of a colleague who passed away during a collection, shortly after the lay-offs had been announced.

"We suffered a deeply tragic loss in our team in June, and our team both past and present, and the wider community have come together to grieve and pay respects," Gardner said.

"This incident is being fully and thoroughly investigated by WorkSafe, and Bardee has at all times been cooperating fully with this investigation."

Goterra raises $10 million

Bardee's challenges are in contrast to the latest news from Canberra-based Goterra, another company that converts black soldier fly (BSF) larvae into insect protein. Founded by Olympia Yarger, an ACT 2023 Australian of the Year, Goterra recently completed a $10 million bridging round ahead of a Series B round that will open in September.

Goterra's business model is different to Bardee's given its deployment of modular units that are installed at waste sites, and the fact it doesn't have much of a product development component.

Earlier this week, the company announced it would soon unveil a state-of-the-art facility in Sydney's Wetherill Park with Woolworths Group (ASX: WOW) as the site's foundation customer, sending food waste that's not fit for hunger relief charities from its stores across the Sydney region to Goterra's high-tech, shipping container-sized units dubbed ‘Maggot Robots'.

Woolworths has been utilising Goterra’s technology in a small-scale trial across its ACT stores since 2020.

The Sydney site is expected to process more than 100 tonnes every week and will immediately create 12 new jobs.

"For too long, food waste has languished in toxic landfills hundreds of kilometres from our cities. Our partnership with forward-thinking partners like Woolworths is helping change that," Yarger says.