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Next to the last steel mill in town, a robotic farm grows backed by Pritzker billions

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Currently less than 1% of fresh produce is grown through hydroponics systems versus open-field agriculture, but this segment is forecast by Mordor Intelligence to grow by nearly 11,% or about $600 million, by 2025.

Fifth Season

Next to the last steel mill in the poor industrial town of Braddock along the Monongahela River just nine miles from Pittsburgh’s U.S. Steel Tower, a vertical farming business backed by billionaire Nicholas Pritzker’s Tao Capital is sprouting as an agritech innovator.

The start-up, founded in 2016 as RoBotany by MBA student Austin Webb and incubated at Carnegie Mellon University, is aiming to disrupt the $60 billion U.S. produce market. Now named the more consumer-friendly sounding Fifth Season, the emerging business is leveraging advanced technology, $75 million in venture capital, increased distribution, a planned new Columbus, Ohio, facility, and an expanded management team to score in the fast-growth vertical farming market. CEO Webb confidently projects Fifth Season could be a $15 million business in Pittsburgh within five years and $500 million through geographic expansion plans, and estimates sales will hit a double-digit revenue rate this year and a 600% revenue increase.   

“Our smart manufacturing facility improves the yield, taste and texture of the vegetables, and does that with 95% less water, 95% less land, and uses no pesticides or chemicals,” said Webb, who is 33. Fifth Season’s automated proprietary system grows fresh produce year-round indoors in vertical trays, relying on artificial intelligence, robotics and data to control light, water and nutrients, and harvest leafy greens.

Hydroponics is growing quickly as food source

Currently less than 1% of fresh produce is grown through hydroponics systems versus open-field agriculture, but this segment is forecast by Mordor Intelligence to grow by nearly 11% yearly to about $600 million by 2025. “There’s tremendous runway as the price comes down and more reliable operations remove the risk,” said Brian Holland, managing director of Cowen & Co. in New York.  “It’s a race to scale with potentially multiple winners who can prove the economic model for automatic, robotic growing,” he added. “Fifth Season is more advanced, if not the most advanced, in the market in marrying technology and robotics to grow vegetables indoors at a lower cost.”

Fifth Season is competing in a capital intensive, highly fragmented market with more than 2,000, mostly smaller farms and a handful of larger scale players. Among the largest is San Francisco-based Plenty Unlimited, which recently inked $400 million in strategic funding from Walmart and plans to sell its fresh produce from its Compton facility at the retailer’s California stores. Another major rival is AeroFarms in Newark, New Jersey, which scrapped a SPAC deal to go public in October 2021 and is continuing to build out capacity at a Danville, Virginia farm. 

“Market leadership is just a function of time and a function of capital,” said Webb.

Racing to build out its business and keep pace with competitors, Fifth Season plans to construct its second indoor growing farm in 2023, and is negotiating for a land parcel in Columbus, Ohio, near the John Glenn Airport. Through a partnership with hummus maker Sabra in December 2021, the company also has introduced a new product line of co-branded, grab ‘n go salad kits, priced at $6 to $8. Distribution of its products are being expanded this March at more Giant Eagle outlets as well as Kroger and ShopRite across 10 states and 1,000 locations, with a goal of reaching 3,000 grocery stores in 2023. In its initial year of commercial operation in 2000, some 500,000 pounds of its produce were supplied to nearby restaurants and campus dining locations from its 60,000-square foot growing space on a half-acre of land.

More from CNBC’s Small Business Playbook

A new Rust Belt boom

Fifth Season’s growth spurt signals a new high-tech era for the former steel-making capital. Dozens of regional tech start-ups are emerging in Pittsburgh and throughout the former Rust Belt as blue-collar factory worker transitions to technical jobs and older, industrial towns are rebooted.

“The tech multiplier doesn’t lift all boats but it is spreading in the heartland,” said Congressman Ro Khanna of Silicon Valley, author of “Dignity In A Digital Age.”

“The factory workers and technicians know how to make things and have an extraordinary work ethnic and sense of community. They are defying past conventions,” he said.

Gearing up, Fifth Season expanded its leadership team in January, while employee count is expected to increase to 100 next year from 80 now.  Finance and tech veteran Brian Griffiths came on board as CFO from semiconductor company Skorpios Technologies with experience at Credit Suisse and Guggenheim Partners. Varun Khanna was hired as vice president of food products from leadership posts at Chobani and Sabra. Glenn Wells joined as senior vice present of sales and previously worked at Quaker Oats, Welch’s and Dole.   

Another prong in its growth strategy is a planned $70 million expenditure on a new Columbus vertical farm that is three times larger than the $27 million Braddock plant, including real estate development for land, a building and equipment. The company’s highly automated farms only require 35 to 50 production workers. The Pittsburgh plant makes four million salad meals annually, while the larger central Ohio location is expected to produce 15 million. Fifth Season is working with economic development groups One Columbus and Jobs Ohio on the new location.

The Carnegie Mellon connection

The foundation for Fifth Season’s game-changing business comes from the intellectual power at Carnegie Mellon University and Pittsburgh’s tech entrepreneurial cluster in computer science, robotics and engineering. Webb developed a prototype in his last year of the MBA program and launched the business upon graduation with co-founder Austin Lawrence, an environmental scientist and mechanical engineer he met on campus.  

A third co-founder, Webb’s brother Brac, is CTO. He designed the production software. The system was stress-tested for two years in a converted steel mill on the south side of Pittsburgh before the Braddock farm started operations in 2020.    

Webb was mentored by Dave Mawhinney, executive director of CMU’s Schwartz Center for Entrepreneurship, who helped him connect with investors and role models such as serial entrepreneur Luis von Ahn, the Pittsburgh-based founder of Nasdaq-listed edtech company Duolingo.  He also introduced MBA student, Grant Vandenbussche, a former General Mills global strategy coordinator, who joined the team in 2018 as a business development manager and is now chief category officer. “Fifth Season is a testament to CMU’s ability to attract very talented young people and grow entrepreneurs through its MBA program,” said Mawhinney. “It’s all about the network.”

Fifth Season CEO Austin Webb

Fifth Season

Even before graduating in 2017, Webb lined up capital from angel investors, most of them connected to CMU. The network effect also played out as Mawhinney introduced Webb to the Columbus-based VC firm Drive Capital, which seeded the start-up with $1 million in 2017 and led a $35 million round in 2019 as it came out of stealth mode, changed its name from RoBotany, and Drive partner Chris Olsen joined as a board member.

“Chris has pushed us to be thoughtful about the market and to think bigger nationally, not just locally or regionally, and to build a long-lasting company and a new product line,” said Vandenbussche.

The $75 million it has raised to date from investors includes not only Pritzker’s Tao Capital Partners in San Francisco but eight different investor groups that joined in during 2021.

“Pittsburgh is coming together as an ecosystem. One of the reasons it’s doubling down is because of its strengths in AI, machine learning and legacy with biosciences,” said Kit Mueller, who heads community networking group RustBuilt and recently became vice president of crypto asset company Stronghold Digital Mining in Pittsburgh.

No longer dependent on steel, iron, and its rivers as competitive advantages, the city is transitioning from gritty industries and robotics start-ups are crowding into the so-called Silicon Strip of former warehouses. This mid-sized city of 303,000, less than half its peak population of 677,000 in 1950, has emerged as a technology testbed for self-driving technology from Ford-invested Argo AI and Amazon-backed Aurora, and Uber’s technology unit acquired by Aurora. It’s also an anchor for R&D labs at Facebook, Apple, Google, Zoom, and Intel.  

A lingering issue facing Midwestern start-ups is a shortage of venture capital. California, New York and Boston logged about two-thirds of $329.9 billion in start-up investments in 2021. This imbalance is beginning to shift toward specialized inland hubs as strongholds take shape such as Pittsburgh with robotics as well as Cleveland with biotech and Indianapolis with SaaS.

Improved lifestyle amenities, increased opportunities and the lower costs of living are draws for millennial tech talent to inland hubs. The co-founders of Fifth Season, and many others, came to Pittsburgh to pursue entrepreneurship and have stayed. 

“The only ones who don’t like Pittsburgh are those who never came here and those who left but never came back,” said Lynsie Campbell, a serial founder who bounced around New York, Los Angeles, and San Francisco but returned home as a Pittsburgh-based partner with The Fund Midwest, and is a leader in city’s venture capital and start-up sphere.

To learn more and to sign up for CNBC’s Small Business Playbook event, click here.

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Trump media company subpoenaed in federal criminal probe of SPAC deal

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Former U.S. President Donald Trump gives the keynote address at the Faith & Freedom Coalition during their annual “Road To Majority Policy Conference” at the Gaylord Opryland Resort & Convention Center June 17, 2022 in Nashville, Tennessee.

Seth Herald | Getty Images

Donald Trump’s media company was subpoenaed by a federal grand jury in connection with a criminal probe, according to the company with which the former president’s firm plans to merge.

Digital World Acquisition Corp. said in a filing Friday that Trump Media and Technology Group received a subpoena from the grand jury in Manhattan on Thursday. The Trump company also received a subpoena from the Securities and Exchange Commission regarding a civil probe on Monday, DWAC said.

DWAC also said some current and former TMTG employees have also recently received grand jury subpoenas.

The filing came days after DWAC said the government investigations could delay or even prevent its merger with Trump’s newly formed company, which includes Truth Social, a social media app intended to be an alternative to Twitter.

Neither TMTG nor a spokeswoman for Trump immediately responded to CNBC’s requests for comment.

The Justice Department and the SEC, which regulates the stock market, are investigating the deal between DWAC and Trump Media. By merging with DWAC, which is a kind of shell company called a special purpose acquisition company, or SPAC, Trump’s firm would gain access to potentially billions of dollars on public equities markets.

Trump established Truth Social months after Twitter banned him for his tweets on Jan. 6, 2021, when hundreds of his supporters stormed the U.S. Capitol in a bid to overturn Joe Biden’s victory in the presidential election. Trump Media’s CEO is former Rep. Devin Nunes, one of the former president’s most ardent loyalists in the Republican Party. Trump is also considering whether to run for president in the 2024 election.

Trump has continued to spread the lie that the election was stolen from him. His alleged involvement in the Jan. 6 insurrection is being probed by a House select committee that has accused the former president of being at the center of a multipronged conspiracy to block the peaceful transfer of power to Biden.

Early criticism of the Trump-DWAC deal came from Sen. Elizabeth Warren, D-Mass. In calling for an investigation, she wrote to SEC Chair Gary Gensler in November, telling him that DWAC “may have committed securities violations by holding private and undisclosed discussions about the merger as early as May 2021, while omitting this information in [SEC] filing and other public statements.”

DWAC shares are far off their highs, closing Friday at $24.20. The stock had surged above $90 in October, after the deal with Trump’s group was announced.

DWAC on Monday revealed in a securities filing that it learned June 16 that each member of its board of directors received subpoenas from the same federal grand jury.

The grand jury sought documents similar to those the SEC already requested as part of its civil probe, DWAC said. The company itself was served with a subpoena a week ago with similar requests, along with other requests relating to communications, individuals and information involving Rocket One Capital.

DWAC also revealed Monday that a board member, Bruce J. Garelick, had told management that he would quit the board during the previous week. Garelick said his resignation “was not the result of any disagreement with Digital World’s operations, policies or practices,” according to the company filing.

— CNBC’s Kevin Breuninger and Thomas Franck contributed to this story.

This is breaking news. Please check back for updates.

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Walmart is working on a response to the Supreme Court’s abortion decision, CEO says in memo

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Walmart CEO Doug McMillon speaks at the CNBC Evolve conference November 19th in Los Angeles.

Jesse Grant | CNBC

Walmart CEO Doug McMillon told employees on Friday that the company is weighing how to respond to a Supreme Court decision that ended the federal right to an abortion.

“We are working thoughtfully and diligently to figure out the best path forward, guided by our desire to support our associates, all of our associates,” he said in a memo sent to employees on Friday. “We will share details on our actions as soon as possible, recognizing that time is of the essence.”

He did not say what changes the company is considering, such as if it may cover travel expenses for workers who must travel to another state where abortion is available.

The memo was previously reported by The Wall Street Journal.

Arkansas, home to Walmart’s headquarters, is one of several states with severe limits or bans on abortions that went into affect after the high court’s ruling.

Walmart is also the country’s largest private employer. It has about 1.6 million employees across the country, including many who live and work in states across the Sunbelt with abortion restrictions such as Texas, Oklahoma and Florida.

Since the Supreme Court reversed Roe v. Wade, companies across the country have had a mix of reactions. Some, including JPMorgan Chase, Dick’s Sporting Goods and Target, have announced new plans to cover employee travel to other states for abortions. Others, such as Kroger and Apple, said they already cover travel for medical treatments and reproductive health care. And still others have remained quiet.

Amazon, the second-largest private employer in the country, said in May that it would pay up to $4,000 in travel expenses each year for non-life-threatening medical treatments, including abortions.

Walmart already covers employee travel for some medical procedures, such as certain heart surgeries, cancer treatments and organ transplants.

Walmart health benefits cover only some abortions. According to the company’s employee handbook, charges for “procedures, services, drugs and supplies related to abortions or termination of pregnancy are not covered, except when the health of the mother would be in danger if the fetus were carried to term, the fetus could not survive the birthing process, or death would be imminent after birth.”

Plan B, an over-the-counter form of contraception, is covered only if the person gets a prescription. The pill, often called the “morning after pill,” works by preventing ovulation or preventing a fertilized egg from attaching to the womb. It can be taken after unprotected sex or when contraception fails.

Other forms of contraception are also covered with a prescription, including birth control pills, injections and intrauterine devices, or IUDs. Some anti-abortion activists also oppose IUDs because they can stop a fertilized egg from implanting in the uterus.

In Friday’s memo, McMillon said Walmart has gathered input from employees as it decides what to do. He also alluded to the size and diversity of both the company and its customer base.

“We know our associates and customers hold a variety of views on the issue, and this is a sensitive topic about which many of us feel strongly,” he said. “We want you to know that we see you, all of you. No matter what your position on this topic is, we want you to feel respected, valued and supported.”

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FCC authorizes SpaceX to provide mobile Starlink internet service to boats, planes and trucks

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The Starlink logo is seen in the background of a silhouetted woman holding a mobile phone.

Sopa Images | Lightrocket | Getty Images

The Federal Communications Commission authorized SpaceX to provide Starlink satellite internet to vehicles in motion, a key step for Elon Musk’s company to further expand the service.

“Authorizing a new class of [customer] terminals for SpaceX’s satellite system will expand the range of broadband capabilities to meet the growing user demands that now require connectivity while on the move, whether driving an RV across the country, moving a freighter from Europe to a U.S. port, or while on a domestic or international flight,” FCC international bureau chief Tom Sullivan wrote in the authorization posted Thursday.

SpaceX did not immediately respond to CNBC’s request for comment on the FCC decision.

Starlink is SpaceX’s network of satellites in low Earth orbit, designed to deliver high-speed internet anywhere on the globe. SpaceX has launched about 2,700 satellites to support the global network, with the base price of the service costing users $110 a month. As of May, SpaceX told the FCC that Starlink had more than 400,000 subscribers.

SpaceX has signed early deals with commercial air carriers in preparation for this decision: It has pacts with Hawaiian Airlines and semi-private charter provider JSX to provide Wi-Fi on planes. Up until now SpaceX has been approved to conduct a limited amount of inflight testing, seeing the aviation Wi-Fi market as “ripe for an overhaul.”

The FCC’s authorization also includes connecting to ships and vehicles like semi-trucks and RVs, with SpaceX having last year requested to expand from servicing stationary customers. SpaceX had already deployed a version of its service called “Starlink for RVs,” with an additional “portability” fee. But portability is not the same as mobility, which the FCC’s decision now allows.

The FCC imposed conditions on in-motion Starlink service. SpaceX is required to “accept any interference received from both current and future services authorized,” and further investment in Starlink will “assume the risk that operations may be subject to additional conditions or requirements” from the FCC.

The ruling did not resolve a broader SpaceX regulatory dispute with Dish Network and RS Access, an entity backed by billionaire Michael Dell, over the use of 12-gigahertz band – a range of frequency used for broadband communications. The FCC continues to analyze whether the band can support both ground-based and space-based services, with SpaceX pushing for the regulator to make a ruling.

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