The Midwest is booming. Where are the opportunities?


September 9, 2020

PLUS: This AI chef will jazz up your leftover food.
September 9, 2020
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According to Billboard, 2020’s official summer song was DaBaby’s “Rockstar,” featuring Roddy Ricch. While it’s a fine track (and we appreciate Roddy’s affinity for the letter “c”), the Justin Bieber version of Luis Fonsi’s “Despacito” remains the greatest summer jam ever.

The Big Idea

The multibillion-dollar school-bus business is hurting

The wheels on the school bus are not going round and round. 

With tons of in-person classes canceled, districts are cutting their contacts with their private bus partners — and the industry is veering toward disaster.

One New York company called Tonche Transit has lost $750k of its $2m a year in revenue. Others, like Baumann Bus Company, have gone out of business, sidelining hundreds of drivers.

Wait, what, there are school-bus companies? 

According to IBISWorld, most public school districts own and operate their own fleets. But ~⅓ outsource to private companies — and that figure has been growing as education budgets have shrunk. 

The school-bus biz is now a $13.5B industry. 

Hundreds of small school-bus companies are scattered across the US, but here are the biggest players: 

  • First Student is part of the busing behemoth FirstGroup, which also works with companies like Greyhound: ~$2.8B revenue, or 20.3% market share
  • National Express is the school-focused arm of a UK transport titan: ~$1.8B, or 13.2%
  • Student Transport Inc is focused on suburban and rural areas: ~$816m, or 6% 

(All stats via IBISWorld) 

What’s the problem right now?

School-bus companies make their money through contracts, which means their income tends to be all or nothing. 

Even in places where in-person school is happening, some of the extra payouts that bus companies depend on — like after-school or summer service — have gotten the ax. 

Wondering if your district uses private buses?

From the outside, you can’t actually tell. All school buses are required to look the same, no matter who runs them — the length, the colors, and the aisle width were all standardized back in the 1930s

Your chance of having private buses goes down if you live in a rural area. Those bus routes are pricey, so your school district is probably the one footing the bill. 

School-bus companies love densely populated cities: More kids + less distance between home and school = more profit. 

When kids do go back to school, that might create an odd disparity: In high-population areas, there might not be a bus to greet them.

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Snippets
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Q&A

‘We are seeing the boomerang of talent back into the Midwest’

As we wrote in a recent article, the Midwest’s ~$4T economy is larger than that of Germany’s or the UK’s. Yet the region’s business prowess remains underrated.  

To find out more on opportunities in the Midwest, we spoke with David Hall, managing partner of Revolution’s Rise of the Rest fund, which invests in startups outside of Boston, New York, and Silicon Valley.

How real is this startup movement away from Silicon Valley?

We’ve long been spotting a trend that we call the “boomerang of talent.” Think of someone from the Midwest who graduates from the University of Michigan, works in Silicon Valley, and — after gaining experience — returns home to Ann Arbor.

Someone might go home to be closer to family, for a better cost of living, or to pursue a different career path. COVID is a unique catalyst for this movement. 

What’s a good example of a Midwest tech hub? 

One of the best examples is Indianapolis. ExactTarget — a provider of on-demand email marketing solutions — was founded there in 2000. It sold to Salesforce in 2013 for $2.5B.

This exit established Indianapolis as a B2B software hub, a sector that did not need close proximity to the coastal cities. Since then, dozens of startups have been launched by ExactTarget alums.

Which Midwest-specific industries do you see trending?

Here are some industries with related examples:

  • Agtech:120Water (Zionsville, Indiana) was founded by a concerned mom after the Flint water crisis. She wanted a better way to monitor lead and other heavy metals in the water supply.”
  • Logistics: “There’s lots of trucking through the Midwest, so we’re seeing companies that help get things from A to B like Dispatch (Minneapolis, Minnesota), a last-mile delivery platform.”
  • The future of work: “The Rust Belt has seen a lot of disruption in the labor markets. There is a shortage of workers who can run machinery. FactoryFix (Madison, Wisconsin) is a staffing platform for skilled manufacturers trying to solve this issue.”

Do you have a request for a startup?

There’s a very big opportunity in urban farming and next-gen vertical farming solutions. It is only in inning 2 of this trend, and we’ve already invested in AppHarvest, which is building the world’s largest greenhouse. 

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A global pandemic, social uprising, political unrest. (At least we’re not connecting pigs to the cloud… ahem, Elon). 

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Pantry Cleaning

This AI chef is designing recipes based on your leftovers

The worst part of cooking isn’t the cleanup. It’s figuring out what the hell you’re going to do with that tin of pumpkin-pie spice you bought on a whim 3 years ago.

Enter Plant Jammer, a Denmark-based AI-powered app that dishes out recipes based on what you have lying around your kitchen.

Over 10k European households use it — and this spring, as lockdown lulled us all into a cooking-induced madness, downloads jumped 3x.

Plant Jammer started as a basic web-scraping tool

In an earlier version of the app, you’d enter the ingredients/spices you had on hand, and the AI tool would comb through existing recipes to find options.

Fresh off a €4m (~$4.7m USD) funding round, the app is now using AI to  whip up its own recipes from scratch. 

Cherry tomatoes, leeks, and cinnamon might not seem like they go together — but the bot may be able to work something out.

There are just a few downsides

When a BBC reporter tried a Plant Jammer original recipe, her sweet-potato patties came out overcooked — and with a strong, er… oat flavor? 

But Plant Jammer is ready to learn from mistakes like these. 

After she finished cooking, the app asked her to submit feedback. An hour later, the instructions changed.

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Money Trees

Australian charity experiment could be right on the money

No money? No biggie. You can always make more of the damn stuff.

As we’ve reported, some US towns have started printing their own currency to help low-income residents purchase essentials from local businesses…

Now, an entire continent is in it to mint it

The Royal Australian Mint is casting 25m “Donation Dollars” — the first coin of its kind in the world — to encourage altruism among Aussies.

These coins are legal tender: They can be spent just like any other $1 coin, and will be treated by businesses as any other form of cash. But the government’s hope is that Australians will donate the coins to charity.

Analysts estimate that if each citizen gave away 1 Donation Dollar/month, the government would circulate $300m/year for charities.

It’s been a rough year Down Under

In January, wildfires decimated 72k square miles of land. Then, the pandemic hit, barrelling Australia into its first recession in nearly 3 decades.

New numbers from the Australian Generosity Report show that 1 in 5 Australians will need some type of assistance in the next 12 months. 

Fellow Aussies are ready to step up, with nearly 3 in 5 saying they’re inclined to give a Donation Dollar if they find one clinking around in their pocket change.

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Today’s email was brought to you by Michael Waters, Caroline Dohack, Trung Phan, and Bobby Durben.
Editing by: Zachary “Next stop” Crockett, Mischa Turnov (Backseat Driver).

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