After announcing its closure, food-waste startup Obeo will 'customer fund' for its survival

The company hopes to re-invent itself as an online-only business after struggling to make ends meet.

By Conor McMahon Deputy editor, Fora

FOOD-WASTE STARTUP OBEO has launched a campaign to “customer fund” its next production run as part of a bid to revive the business as an online-only operation.

Six weeks ago, founders Kate Purcell and Liz Fingleton emailed customers to say they planned to shut up shop as rising production costs and ever-decreasing margins made the business unsustainable.

“From the outside, we were doing brilliantly,” Purcell told Fora. “But like most other small businesses, it was a cash-flow problem.

“We had enough to run the company or for a production run, but we didn’t have the funds to do both. We got to the point where we’d exhausted all options and had to tell customers.”

Following the closure announcement, Purcell said Obeo – which makes water-resistant, compost-friendly waste boxes – received some 380 emails from customers and stakeholders expressing their disappointment.

“They just kept coming. It was quite emotional trying to reply to everybody. We were both completely taken aback by the response.”

Among the hundreds of emails was a message from one of the founders’ former mentors.

“He sat down with us and said, ‘It’s kind of unheard that you’d get 380 replies from customers. That obviously means something,’” Purcell said.

As a result, the pair have invited customers to pre-order a year’s supply of Obeo boxes for €120 through the company’s website. The money will be used to help fund its next production run, after which the firm will pivot to a purely online operation.

Purcell declined to disclose how much Obeo is looking to raise but said the outfit has secured about a third of the funds required.

Kate Purcell and Liz Fingleton founders of Obeo Obeo's Kate Purcell and Elizabeth Fingleton
Source: Lensmen Photographic Agency

Online-only business

If the campaign is a success, Obeo - which was stocked in dozens of convenience stores across the country - will become an online-only operation, offering subscriptions and one-off sales through its website.

“Our focus is on simply getting as many online customers as possible and building that base … I guess what we’re doing now is a very focused attempt on online where our margins are a lot better than retail,” Purcell said.

“We made the mistake of hanging on to retail too long. It wasn’t bringing in the margins we needed. Retail is great for a lot of things. Dunnes Stores gave us our first break, and we’re forever grateful to them, with SuperValu following suit.”

However, she said the time it took to push in-store sales, as well as distribution and retailer costs, took their toll on the business: “We were working hard, but it wasn’t benefiting the business.”

When asked how the company plans to sustain itself beyond the initial funding campaign, Purcell said she is confident that Obeo can survive as an online-only operation because “the brand is better known” than when it first launched in 2014.

“We do have more of a chance of making an online-only business work,” she said.

Obeo featured on a 2016 episode of the Irish version of Dragons’ Den. Although it didn’t secure backing, the startup received generally positive feedback on the programme.

Documents published by the Companies Registration Office show that the firm raised about €458,600 since it was established four years ago. It was sitting on accumulated losses of €337,000 at the end of 2016.

It secured investment from a mixture of UK and Irish investors. State-backed agency Enterprise Ireland put a total of €255,500 into the company.

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