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The snacks startup NatureBox laid off a third of its staff — it now needs a new investment to stay afloat

The downside of the subscription box fad.

A spread of NatureBox snacks
A NatureBox spread
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

NatureBox, a heavily funded startup that creates and sells its own line of snacks online and in big retail chains, is in talks to take on a new investment that would likely contain harsh terms for its existing investors, according to multiple sources familiar with the situation.

The startup laid off 20 of its 60 office employees in December, CEO Gautam Gupta told Recode in an interview, and also raised a bridge loan of a few million dollars from current investors like General Catalyst and Canaan Partners around the same time, sources said.

But existing investors, who have so far poured about $60 million into the company, have not wanted to lead a new investment in NatureBox, so Gupta has been trying to corral new funds from an outside investor. Two of the venture capitalists who led previous investment rounds in NatureBox have since left the investment firms where they made the initial investment.

As of last week, Gupta, the co-founder and chief executive, said he was mulling multiple offers from outside investors.

“Should we close one of the term sheets, we have plenty of time to get things done,” Gupta said when asked whether the company was at risk of shutting down. “If we don’t close a deal, the company would be in a really challenging position.”

Sources said any new money would likely come with harsh terms for current investors that would significantly dilute their stakes in NatureBox. In addition to General Catalyst and Canaan Partners, the startup also counts Global Founders Capital as a major shareholder.

NatureBox, which was founded in 2012, was one of a host of startups that was born during the subscription box rush that saw e-commerce businesses try to sell everything from razors to makeup via subscriptions for regularly scheduled, at-home deliveries.

In NatureBox’s case, those products are a wide range of its own branded snacks like Sriracha Roasted Cashews and Hickory Smoked Turkey Jerky that the startup positions as being a healthier choice than some competitor products made by the big consumer-packaged goods giants.

The startup, however, eventually recognized that the subscription model was not sustainable as a standalone business and began focusing on selling its snacks a la carte. It won deals to put its food on the shelves of big retail chains like Target, Safeway and Sprouts and also started selling one-off packages through its own website. But that transition has come with its own set of challenges, according to Gupta.

“I would say that the shift has been positive for us, but it’s taken longer than we thought it would,” he said. “We’re building new muscles; subscription was much more about retention than repeat orders. ... In a la carte, you have to get the customer back to place more orders.”

Another thing that has taken longer than the company anticipated? “[G]etting retailers to make decisions on new products.”

Then, when NatureBox spoke to potential new investors late last year, they seemed more interested in companies that had a fast track to profitability rather than growth at all costs, Gupta said. That realization influenced the decision to cut costs, in part by laying off a third of the staff, and also has the startup attempting to renegotiate contracts with vendors.

“We’ve got to get to profitability within 12 months,” Gupta said.

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