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Smallhold's Mushroom Farm Files for Bankruptcy, Facing Industry Challenges

Updated: Feb 24

On February 18, 2024, Smallhold, a Brooklyn-based mushroom vertical farming company, shocked the industry by filing for bankruptcy in the US Bankruptcy Court for the District of Delaware. The court documents revealed that the company was in more dire financial straits than previously disclosed. It became clear that sustaining all of its farms was no longer feasible, leading to an orderly shutdown of operations in Texas and New York, along with workforce reductions.

Established in 2017, Smallhold had been operating indoor mushroom farms in key locations like NYC, Los Angeles, and Austin, Texas. The company employed patented technology to optimize growing conditions, controlling temperature, humidity, and other climate elements.

Despite its announcement of a nationwide expansion in collaboration with Whole Foods stores and a growing retail presence, Smallhold faced challenges. Court documents highlighted a significant downturn in the venture capital fundraising market and a stagnant fresh mushroom category over the past year, hindering the company's fundraising efforts.

As of the bankruptcy filing, Smallhold just short of a 100 employees. Notably, it joined the ranks of other indoor agriculture companies that filed for bankruptcy in 2023, such as AeroFarms, AppHarvest, Iron Ox, and several others. The common reasons cited for these closures included the high operational costs of indoor farms and struggles to achieve positive unit economics.

The turning point for Smallhold came on February 7 when private equity firm Monomyth Group, initially a minority investor, acquired the shares of another major shareholder, securing 90.77% of Smallhold's common stock. Subsequently, both founders resigned from the board, and Monomyth appointed interim CEO Gustavo Reichmann and interim CFO Tariq Jawad.

While the farms in Texas and New York faced temporary closures, the Los Angeles farms remained fully operational, serving as a bridge to Smallhold's interim business strategy. The company expressed optimism about exploring restructuring alternatives to right-size its balance sheet.

[Source: Andrew Carter / AgFunder News]


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