Ripe on the Vine: US Startups Between the Coasts
By Jackie Carmel, Managing Director, Endeavor Catalyst
The United States is one of the world’s leaders in fresh tomato production. In 2015, the U.S. produced 2.7 billion pounds of fresh tomatoes, mostly in Florida and California, which only satisfied around 40% of the (growing!) domestic demand.
The United States is also one of the world’s leaders in venture capital investing. Of the $100+ billion deployed into venture capital in the United States last year, nearly 60% was deployed in California alone, with Massachusetts and New York following (not too closely) behind. These three states account for ~75% of all venture capital investment in the United States, but demand for new deals is at an all-time high as venture funds raise record amounts of capital. As our friends at Revolution, who focus on investing in high-potential geographies within the United States, have noted: “while talent is well distributed, opportunity is not” — but these patterns are beginning to change.
Last week, Revolution and Endeavor Catalyst-backed AppHarvest, a high-tech indoor greenhouse grower based out of Morehead, Ky., raised $475 million in a SPAC debut. Just weeks prior, the company started shipping its greenhouse-grown beefsteak tomatoes to Kroger, Walmart, Publix and other grocers. Eventually, AppHarvest plans to ship 45 million pounds of sustainably grown tomatoes each year from its 60-acre indoor farm in Morehead, more than 30 times the yield of a traditional farm! The company has a long way to go before it makes a dent in the global tomato market, but it has begun showing what is possible: growing a traditionally coastal crop in the middle of the country with the help of technology. Similarly, as it surges post-debut, AppHarvest is showing the investment world that high-tech, innovative companies can emerge between the coasts.
In Atlanta, for example, funding has hit a five-year high thanks in part to several homegrown scale-ups. Atlanta has produced at least three unicorns in the past six months, with Greenlight, SalesLoft, and Calendly all reaching or surpassing the $1 billion valuation mark, which is rare for a single city outside of Silicon Valley. Endeavor Catalyst is an investor in SalesLoft, an engagement platform for B2B sales, and also recently invested in Atlanta-based Chime Solutions, a provider of customer contact services. At Endeavor, we’ve always believed in the power of success stories, and creating virtuous cycles to boost entrepreneurial ecosystems globally. Today, Atlanta is experiencing this “gravitational pull” as serial entrepreneur — and Endeavor Atlanta board member — David Cummings, describes.
As we recently predicted, we expect to see more companies scaling up — and getting funded — in cities like Miami, Denver, Atlanta and Detroit, but also further afield in places like Louisville, Kentucky; Birmingham, Alabama; Western New York and Northwest Arkansas. Recent Endeavor Catalyst investments hailing from these cities include Fleetio from Birmingham, Alabama, Squire from Western New York, Bloomscape from Detroit, and Sondermind from Denver.
The most recent Pitchbook 2021 predictions project that Silicon Valley will make up less than 20% of all venture capital deals in 2021. As Fred Wilson from AVC noted in his recent piece The Rise of Everywhere: “The way that happens is not less funding in Silicon Valley. The way that happens is way more funding everywhere else.”
While we will continue to enjoy California tomatoes, we also look forward to purchasing AppHarvest tomatoes at one of our local grocery stores soon. We have no doubt that these delicious tomatoes, and the company that produces them, will change not only the agricultural landscape, but also the venture capital landscape…for the better.
Note: Endeavor-supported companies mentioned in this post are noted in bold.
Jackie Carmel is the Managing Director of Endeavor Catalyst, an innovative, rules-based co-investment fund through which Endeavor invests into its portfolio companies in emerging and underserved markets. Launched in 2012, Endeavor Catalyst has $250M in Assets Under Management (AUM) across three funds and has made 160+ investments across 30 markets to date. You can reach Jackie on LinkedIn here.