Rescale: A CPG Startup’s Journey Comes to an End

Boston-based startup Rescale, founded by former Trader Joe’s executive Julia Megson, is winding down operations less than a year after successfully raising a $2.3 million seed round. This funding aimed to develop a platform that addressed a significant challenge for Consumer Packaged Goods (CPG) brands: the sourcing, negotiation, and management of external manufacturing partnerships.

The seed funding round was spearheaded by Baukunst, focusing on aiding Megson, the CEO, and co-founder Matthew Kaliara (CTO) in enhancing their online platform designed to assist brands with annual revenues under $100 million in finding co-manufacturers and managing ongoing relationships effectively.

Streamlining Manufacturer Management

The Rescale platform featured a comprehensive dashboard that aimed to accelerate the time-to-market for new products. It focused on simplifying processes such as manufacturer matching, contractual agreements, and ongoing management. Megson, who previously spent four years managing supply chains at Trader Joe’s, emphasized the platform’s potential to improve efficiency for brands.

Challenges and Reflections

Despite successfully pairing numerous food brands with manufacturing partners and achieving peak revenues of $250,000 in annual recurring revenue (ARR), Megson revealed in a recent Substack post that the team faced significant hurdles. “We found clarity through the grit of it all,” she stated. “We tested various hypotheses systematically, but ultimately, there was no product-market fit that overlapped with a viable business model.”

She explained, “In simpler terms, our Total Addressable Market (TAM) was substantially smaller than initially anticipated.” Faced with dwindling runway, Megson articulated the stark reality of the situation: “Pivoting to an adjacent space or closing operations were our only options.” She underscored that pursuing a completely new direction within the limited runway would be a daunting task.

Understanding Market Dynamics

Interestingly, while Keychain, an AI-driven CPG co-manufacturer search platform, has gained traction and investors recently, Megson asserted that competition did not play a role in Rescale’s downfall. “It was solely a matter of a disproven hypothesis and our failure to establish product-market fit for a VC-backable business model,” she explained.

Megson further elaborated, saying, “In the B2B arena, having a strong founder-market fit is a unique advantage. I possess deep experience in the co-manufacturing field, which is what motivated me to launch Rescale initially.” However, she acknowledged that early in the process, she failed to let her expertise inform product development, resulting in a misalignment with the true needs of the target customer.

The Remote Work Challenge

As a parting thought on the startup’s operational structure, Megson reflected on the challenges of running a fully remote team. She commented, “Early-stage startups face significant hurdles when operating remotely. It’s crucial to establish a focused product-market fit, and alignment is often hindered in a fully remote environment.”

She expressed her belief in hybrid work models for early-stage startups, arguing that successful remote work typically comes later when there’s an established culture that can support a geographically dispersed team.

AgFunderNews has reached out to Julia Megson for further comments regarding the lessons learned and future steps.

Further Reading:

For more insights, check out our coverage on Rescale’s early emergence: Exclusive: Rescale emerges from stealth with $2.3 million to address ‘biggest pain point’ for small brands.