Square Peg-backed cleaning products startup Zero Co is shutting down

Zero Co, the cleaning products startup will close at the end of the month with founder and CEO Mike Smith pulling down the shutters because they can’t find a pathway to profitability.

The six-year-old startup set records in 2021 when it raised a record $5 million in just six hours on the Birchal crowd-sourced funding (CSF) platform. Zero Co also scored $6 million in venture funding from Square Peg and others as the CSF campaign got underway. It raised a further $2 million in 2024 from crowdfunding on Birchal.

“The goal from day one was to build a profitable business, with the aim of scaling to $100 million per year in revenue and contributing 1% of that revenue to ocean cleanups,” Smith said, announcing the decision on Tuesday evening.

“Sadly, we have not been able to realise that business vision despite years of blood, sweat and tears (and a bunch of smiles and laughs along the way too). We’ve tried a number of different strategies and tactics over the years to put the business on a sustainable growth trajectory but, unfortunately, have been unable to do so.”

Trade will cease on April 30. The business remains solvent.

Smith said launching a paper-based packaging system last year “was intended to be the solution to many of our problems”, but created issues that many customers experienced. Despite spending the last six months attempting to resolve the issues and turn things around “unfortunately we’ve been unable to do so”.

Having begun life in Byron Bay, Smith moved the HQ to Melbourne.

When Zero Co launched it originally supplied refillable pouches that users posted back to the company, the business spent two years rethinking its approach, redesigning and reformulating several products and also changing the packaging to a system that called ForeverFill, launched in October last year.

Shareholder returns

Zero Co ended the financial year with $10.8 million in revenue, down from around $11.38m in FY23, with $8.94m in cash on hand and short-term investments. Share capital sat at around $15 million.

Losses after income tax fell from $575,700 in FY23 to a $385,141 loss in FY2024.

Smith said in the annual report that “we are now in a position to unlock rapid global expansion in line with our strategy to grow revenue to $100,000,000 annually over the next 5 years”.

But problems with the ForeverFill launch surfaced in December when he posted about seals breaking on the laundry and dish liquid containers, during delivery. Zero Co provided refunds.

“Having spent six months exploring many possible ways to turn things around for Zero Co, including trying to fix our product and packaging problems, rebuilding our marketing systems, and trying to find a buyer for the business, the sober reality is that we have not found a path forward that offers a better outcome than closing down the company,” Smith said

The always upbeat CEO said the alongside his fellow directors, they came to “the difficult decision that the best course of action is to close down the company on a solvent basis and facilitate the return to shareholders of the company’s remaining net funds”.

While it was news to the nearly 4000 investors who backed the Birchal CSF raises, Smith said decision had the backing of a “the majority shareholders”.

The cap table also includes Kim Jackson’s Skip Capital, former St George Bank boss Rob Chapman, Kanbay International founder Raymond Spence, Koala cofounders Dany Milham and Mitch Taylor, and Right Click Capital founder Ari Klinger.

Square Peg investor and Zero Co director Dan Krasnostein said that while the startup didn’t achieve the success they’d hoped for, “failure is a difficult but normal part of venture investing”.

We continue to have tremendous empathy for Mike and the Zero Co team under these difficult circumstances,” he said.

We respect Mike’s decision to wind down the business now, at a time when the company can return some capital to investors. As this part of the journey comes to an end, Mike will continue to pursue his mission to reduce plastic waste in other ways.”

Following a closing down sale to empty the warehouse and company’s closure, he plans to return the remaining capital to shareholders.

He conceded the decision “will come as a shock to many of you, and I know that many of you will be upset”, adding that he is “incredibly sorry”.

“To be honest, I’m not yet at peace with this decision. I’ve poured everything I have into this business and our shared mission to untrash the planet,” he said.

“The brutal truth is that this really sucks and it hurts and it makes me sad that this is how things are ending.”

Smith said Zero had removed rubbish from oceans, beaches and rivers globally equal to more than 45 million water bottles.

“Together, we’ve had an incredible impact, and I’m deeply proud of the work we’ve done to reduce plastic waste at home and pollution in our oceans,” he said.

Throughout the startup’s life, Smith has placed the emphasis of Zero Co’s environmental work and campaigns to “untrash the planet”. That ambition remains.

“I’m not exactly sure what the mission looks like for me personally moving forward but my intention is to keep pushing until one billion bottles have been removed from the ocean,” he said.