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Mushroom Boom leads Brooklyn grower to plant organic farms in the west

IInside Smallhold’s Texas farm-warehouses, mushrooms like giant royal trumpets, blue oysters, and nearly hairy lion’s mane mushrooms loom up from blocks of sawdust. These fungi are found in incubation tanks tinted with ultraviolet rays, the humidity and temperature of which are controlled. Within days, the mushrooms are harvested and packaged for local restaurants and grocery stores.

Retailers like Whole Foods and HEB of Texas have pushed Brooklyn-based Smallhold to increase production, as sales of specialty mushrooms in U.S. grocery stores have increased by about 20% in the past year, according to the Mushroom Council. Smallhold’s mushrooms, now sold in 250 locations in ten states, as well as Amazon Fresh and Misfits Market, are particularly in demand because they are organic and provide customers with specialty varieties that are rarely sold.

Co-founder and CEO Andrew Carter believes mushroom consumption will only increase as consumers experience better and different mushrooms, at more affordable prices than those offered by imported competitors.

“The plan is to build these farms everywhere,” says Carter, whose team has grown from 13 employees to over 70. “It’s a quality farmer’s market product at an affordable price. A lot of retailers don’t have access to the mushrooms we grow.

To further develop its network of technically managed mushroom farms, Smallhold has raised a $ 25 million Series A, led by Astanor Ventures, a European investment firm formed in 2017, alongside Energy Impact Partners and the group. Wheatsheaf and other existing investors including AlleyCorp and the David Barber Fund. Overview of the almanac.

“These guys are ahead of the gun. They are culture experts, ”says Barber, who also recently joined Astanor as a partner to accelerate funding for change in the food system. “The situation is becoming quite dramatic and capital is not playing its role enough. Where he’s playing a role, I don’t think he’s playing the right role. We’re leveraging the most important elements of deploying dollars in a future food system, but with a team of people who can do it faster. “

Investors are betting that consumer trends in favor of supporting local supply chains, climate-friendly meatless diets and industrial waste recycling will all converge in the mushroom industry and, in particular, in startups. like Smallhold. Mushroom funding is only a fraction of the billions that alternative protein startups have taken from investors in recent years. According to Pitchbook, investment in mushroom-related startups reached a record $ 100 million in total funding in 2020 and is on track to surpass it for 2021.

The market is wide open: American farms, mostly in Pennsylvania, produce 1.2 billion pounds of mushrooms each year, and the vast majority are button mushrooms.

Smallhold’s Series A will take its operations to the West Coast. Since January, Smallhold has increased its production by more than 500%. The startup has streamlined the construction time for its warehouse farms, so it now only takes six months to put a facility into service. There are now three: one in Brooklyn and two in Texas. A fourth in Los Angeles will open next year.

Founded in 2017 by Andrew Carter and Adam DeMartino, Smallhold started out as a storage container in Brooklyn. Friends at the University of Vermont quickly turned to selling a complete growing system using patented technology that could be plugged into restaurants and grocery stores like Whole Foods in Gowanus. Amid the pandemic and skyrocketing demand, Smallhold figured out how to open larger warehouse farms to fill orders from larger grocery chains.

Mini-farms for grocery stores or restaurants are now a smaller part of Smallhold’s business. The Central Texas Market has always been a big hit, and three chain-owned stores now have their own proprietary Smallhold mini-farms set up so shoppers can watch mushrooms grow while picking produce.

After losing most of its restaurant patrons in March 2020, Smallhold has once again featured prominently on some of America’s most coveted menus, from Eleven Madison Park, Maison Yaki and Olmsted in New York to Uchi in Austin.

That list will grow as Smallhold prepares for a big launch in California in 2022. Texas and California still import from Pennsylvania and overseas, Carter adds.

“The more mushrooms people eat, the less people eat other things,” says Carter. “Building farms as fast as possible and getting our mushrooms out as much as possible is the most important thing. “

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