High-tech mushroom farmers in Brooklyn raise $25M with vision for 'the future of food' – Crain's New York Business

Andrew Carter, co-founder and CEO of Smallhold
The royal trumpet mushroom can grow in just two weeks to weigh more than a pound. Chop one up in a food processor and fry it with the right spice mix and the fungi can pack as much umami flavor as chorizo sausage.
That’s according to a new mushroom-focused cookbook curated by the founders of Smallhold, a startup growing the royal trumpet, among several other specialty mushrooms, inside a 3,000-square-foot warehouse in Williamsburg. Mushrooms in the Middle: A Smallhold Cookbook is part of an effort to expand the palate of Americans for specialty fungi.
“To us, mushrooms represent the future of food,” co-founders Andrew Carter and Adam DeMartino wrote in the introduction for the book.
Smallhold in October raised $25 million in a Series A venture capital investment round that will allow it to work toward that vision, expanding its method of sustainably growing mushrooms to more cities. Two new commercial farm have launched this year in Austin, Tex., with plans to build another in Los Angeles next year. Whole Foods, FreshDirect and grocery chains Safeway and Albertsons are among Smallhold’s 250 corporate customers.
Before Smallhold was founded four years ago, Carter worked for indoor-farming startups that largely focused on leafy greens, such as BrightFarms. He saw a gap in the market for rare fungi. The vast majority of mushrooms consumed in the U.S. are white button—the type you might see sliced on top of a pizza. But the diversity of mushroom types means they could serve as more than just a topping.
“They can be either a side dish or sit in the middle of your plate and are overall exceptionally versatile produce,” said Carter, Smallhold’s CEO. “Plus, they’re delicious.”
Smallhold grows the mushrooms—with names such as lion’s mane and yellow oyster—in controlled tanks with LED lighting, connected to Wi-Fi or cellular service that allows for constant monitoring of growing conditions. The need for constant control is driven by “thick-headedness and semi-neurotic perfectionism,” as described on the company’s website. The process also allows for a wider range of commercially viable mushrooms. Drawing from lumber industry waste to plant the roots of the vegetable, Smallhold’s mushrooms are USDA-certified organic.
Royal trumpet mushrooms
The company grew its first fungi in shipping containers in Brooklyn. It has also sold minifarms that grow mushrooms on-site at restaurants and grocery stores, including Maison Yaki in Prospect Heights and the Gowanus Whole Foods.
After Covid-19 sank demand from its restaurant customers, Smallhold last year launched a line of $35 grow-at-home kits.
“It turns out that mushrooms are the perfect thing to grow during quarantine,” Carter said.
FOUNDED 2017
MANAGEMENT Andrew Carter, co-founder and CEO; Adam DeMartino, co-founder and COO
FULL-TIME EMPLOYEES 75
FUNDING Smallhold has raised $32.5 million from venture capital investors in two deals.
PRODUCT MIX The company has indoor farms in Williamsburg and Austin, Texas, where it grows a range of mushrooms indoors, as well as mini indoor mushroom farms inside restaurants. Smallhold also sells at-home mushroom-growing kits through its website. 
GROWTH STRATEGY The company is opening microfarms across the country and partnering with local restaurants in each city. The next small indoor farm will open in Los Angeles next year. 
WEBSITE smallhold.com

The startup has raised just under $29 million from a list of backers that includes Astanor Ventures, a European venture capital firm focused on innovation in the global food system. AlleyCorp, an investment firm and startup incubator based in Manhattan, invested in Smallhold’s seed and Series A rounds. Smallhold has the potential to be the first global farming company launched in New York, said Kevin Ryan, AlleyCorp’s CEO and co-founder of MongoDB, Zola and Gilt Groupe, among other companies.
Smallhold has “developed both new technology for growing mushrooms and a brand—which has never existed in this space before,” Ryan said. “This has the potential to be a global brand doing hundreds of millions of dollars in revenues.”
Tech-driven agriculture as a whole has grown quickly in response to the pandemic, headlined by startups including Bowery Farming, which has raised nearly $500 million from venture investors toward growing leafy greens indoors, including just outside of the city in Kearny, N.J.
“Efficient supply chains, water consumption and land use are necessary for us to exist as a species,” Carter said. “Investors are catching on to this and see the opportunity to feed the world with these newly emerging technologies.”
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