Investors Eye Growth In Vertical Farms

Source: Streetwise Reports  (7/29/21)

AeroFarms grows leafy greens in vertical farms using data science and technology; its upcoming acquisition by SPAC Spring Valley could grow its equity value.

Vertical farming is taking root. The market share of large-scale farms was estimated at $3.3 billion by Precedence Research in 2020 and is anticipated to increase nearly ten-fold, reaching $31.6 billion by 2030.

One vertical farm enterprise, AeroFarms, plans to go public in a special purpose acquisition company (SPAC) business combination in mid-2021. The company got started in 2004 and was cofounded by CEO David Rosenberg along with Chief Marketing Officer Marc Oshima and Chief Science Officer Ed Harwood, PhD. It is a certified B Corporation and public benefit corporation and has earned spots on Fast Company's World's Most Innovative Companies, Time Inc.'s Best Inventions, INC magazine's 25 Most Disruptive Companies, and a first-place ranking on the FoodTech 500 list.

Click here for more information on SPACs.

A pioneer in the vertical farming space, AeroFarms is on a mission "to grow the best plants possible for the betterment of humanity," with a focus on doing more with less by growing produce using fewer resources, zero pesticides, and less spoilage. "We look for inefficiencies and solve them using data science. We use our proprietary, fully controlled technology platform to better understand plants, optimize farms, improve quality and reduce costs," Rosenberg said.

AeroFarms leafy greens are grown in an approximately 70,000 square-foot facility—a former steel mill—in Newark, New Jersey. Its wide variety of greens are sold throughout the Northeast U.S. at major retailers, including Whole Foods Market, ShopRite, Amazon Fresh, and FreshDirect. In April 2021, AeroFarms broke ground in Danville, Virginia, on a new 136,000 square foot commercial farm that, according to the company, will be the world's largest indoor aeroponic vertical farm of its kind.

According to the company, it has a $1.9 trillion total addressable market and is expanding that through strategic partnerships, such as one with Chile's Hortifrut S.A. Together, the two companies will explore blueberry and cranberry production. "New Jersey is where blueberries were first domesticated in 1910," Rosenberg said. "With Hortifrut, we will be pioneering the next chapter by domesticating blueberries again in New Jersey—this time in a fully controlled environment."

International interest is demonstrated by AeroFarms' inclusion in Abu Dhabi Investment Office's $150 million investment in agricultural technology. AeroFarms' research center in Abu Dhabi will feature an advanced speed-breeding center and laboratories dedicated to R&D in precision phenotyping—studying the observable characteristics of an organism—machine vision and machine learning, robotics, and automation.

AeroFarms is also doing more with less in its entry into the public market. Rather than a time- and resource-consuming IPO, it will go public through a business combination with Spring Valley Acquisition Corp. (SV:NASDAQ), a SPAC. Click here for more information on SPACs.

Vertical Farming Attracts Investor Interest

"Our banker at J.P. Morgan introduced us to Spring Valley. A SPAC made sense for us because it gives us an easier platform to tell our story to investors," said Rosenberg. "We share a long-term vision regarding sustainability and align in our concern for environmental issues." In addition, he notes that Spring Valley has a track record of bringing other companies public at a stage similar to AeroFarms.

Spring Valley (NASDAQ:SV), sponsored by Pearl Energy Investments, was formed for the purpose of acquiring a $1+/- billion enterprise value company in the sustainability sector. The total gross proceeds of Spring Valley's own IPO in 2020 were $230 million (23 million units at $10 per unit). J.P. Morgan Securities LLC is acting as the exclusive financial advisor to AeroFarms, while Cowen & Co. is the financial advisor to Spring Valley. It would not be unusual for these firms to initiate coverage on AeroFarms after the completion of the SPAC transaction.

AeroFarms has roughly $75.5 million in cash and will be 65% owned by existing shareholders after the merger. Revenue of $13 million is anticipated in fiscal 2022, jumping to $553 million by fiscal 2026, when EBITDA is expected to reach $193 million. All stockholders will roll 100% of their equity holdings into the new public company, according to Investor Place.

The business combination with Spring Valley is expected to provide up to $357 million in gross proceeds to AeroFarms, composed of Spring Valley's $232 million cash held in trust (assuming no redemptions by its shareholders) and a $125 million fully committed public investment in private equity (PIPE) at $10 per share. This includes investments from leading institutional investors, AeroFarms insiders and Pearl Energy Investments, Spring Valley's sponsor.

The "de-SPACing" is expected in summer 2021, at which point AeroFarms will have an estimated pro forma equity value of $1.2 billion. It will remain listed on Nasdaq under the new ticker symbol ARFM.

Lake Street Capital Markets initiated coverage on AeroFarms on June 15 with a Buy rating and $20 price target. Senior research analyst Ben Klieve wrote, "Representing a leader in next-generation production methods with a significant sustainability benefit, we view AeroFarms as a high conviction Buy opportunity for investors targeting investments redefining food production for decades to come."

The analyst noted that AeroFarms "will enter the public market following a SPAC merger with considerable upside potential from the current level. We see multiple expansion and capacity ramp as alpha drivers."

Venture capital interest in the controlled environment agriculture space—which includes greenhouses or container farms, in addition to vertical farms—has exploded. The Food Institute estimates, using data from PitchBook, that global VC investments in the sector tripled from 2019 to 2020, nearing $2 billion. Investor Place recently named several leading stocks in the space, including Kalera (OTCMKTS:KSLLF), Appharvest (NASDAQ:APPH), Hydrofarm Holdings (NASDAQ:HYFM), Village Farms International (NASDAQ:VFF), GP Solutions (OTCMKTS:GWPD) and Cubicfarm Systems (OTCMKTS:CUBXF), as well as Spring Valley–AeroFarms.

Cutting Edge Technology

AeroFarms grows plants using aeroponics, where a plant's roots are misted with water, nutrients and oxygen. Instead of dirt or water, the plants are grown on a cloth that can be sanitized and reused. Grown indoors under LED light, the controlled environment stymies pests, eliminating the need for pesticides, herbicides and fungicides. Rosenberg says the company can harvest in one acre what would require up to 390 acres outdoors by a farm in New Jersey, using up to 95% less water.

"We are the most vertically integrated tech company in the space," Rosenberg said. "Our proprietary agSTACK technology creates a fully connected and digitally controlled farm that integrates hardware, automation, intelligent controls and sensors, machine vision, supervisory control and data acquisition, and our manufacturing execution system to create a powerful data loop." The company holds 15 patents and has 38 more pending. "The result is clean, nutritious, flavorful produce grown year-round that is ready to eat with no washing needed."

The lure of vertical farming—the practice of growing crops in vertically stacked layers, typically in a controlled environment—has both economic and environmental benefits. Traditional field agriculture produces significant greenhouse gases, takes up half the U.S. landmass, and accounts for more than half of the country's fresh-water usage. A recent report by EY highlighted some of the economic reasons for the sector's growth, ranging from higher yields per acre to reduced transportation costs for crops grown closer to consumers in cities, to the availability of consistent supply at predictable prices.

A recent report by McAlinden Research Partners contends that efficient vertical farming is poised to surge as an increasingly popular investment as a result of the mounting pressures on traditional agriculture. "A report from Big Think recently found that vertical farms are incredibly efficient when it comes to water usage, requiring 95% less irrigation than soil-grown plants. Nate Storey, co-founder of vertical farming startup Plenty, Inc., has highlighted the efficiency of vertical farming, noting that 99% of moisture transpired by plants can be recaptured and reused in a vertical farming system. . . As climate shifts continue to affect the global agriculture industry, indoor farming provides an efficient and sustainable way to produce more crops with fewer resources," the report stated.

McAlinden noted that AeroFarms is "rapidly expanding its distribution operations in the Northeast, collaborating with Whole Foods Market, Amazon Fresh, and FreshDirect, according to Supermarket News."

"It will likely be several years before vertical farming technologies begin tapping their true potential, but a scaling of the industry is becoming increasingly likely as a counter to climate change and diminishing water availability," McAlinden concluded.

Want to be the first to know about interesting Special Situations and Technology investment ideas? Sign up to receive the FREE Streetwise Reports newsletter. Subscribe

Disclosure:
1) Diane Fraser compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She and/or members of her household own securities of the following companies mentioned in the article: None. She and/or members of her household are paid by the following companies mentioned in this article: None. Her company has a financial relationship with the following companies referred to in this article: None.
2) The following companies mentioned in this interview are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services, or securities of any company mentioned on Streetwise Reports.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees, or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees, or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of AeroFarms, a company mentioned in this article.

Additional Disclosures:

Lake Street Capital Markets, AeroFarms, June 15, 2021.

RESEARCH DISCLOSURES
Lake Street Capital Markets, or its affiliates, intends to seek or expects to receive compensation for investment banking services from the subject issuer in the next three months.
The authoring analysts who are responsible for the preparation of this investment research are eligible for compensation based on the total revenue and general profitability of Lake Street Capital Markets, which includes investment banking revenue.
However, such authoring analyst will not receive compensation that is directly based on or linked to specific investment banking transactions.

ANALYST CERTIFICATION – REGULATION AC
Each authoring analyst of Lake Street Capital Markets whose name appears on the front page of this investment research hereby certifies that (1) the recommendations and opinions expressed in this investment research accurately reflect the authoring analyst's personal, independent, and objective views about any and all of the subject investments or issuers discussed herein; and (2) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analysts.

Lake Street Capital Markets may effect transactions as a principal or agent in the securities mentioned herein.

McAlinden Research Partners:
This report has been prepared solely for informational purposes and is not an offer to buy/sell/endorse or a solicitation of an offer to buy/sell/endorse Interests or any other security or instrument or to participate in any trading or investment strategy. No representation or warranty (express or implied) is made or can be given with respect to the sequence, accuracy, completeness, or timeliness of the information in this Report. Unless otherwise noted, all information is sourced from public data.
McAlinden Research Partners is a division of Catalpa Capital Advisors, LLC (CCA), a Registered Investment Advisor. References to specific securities, asset classes and financial markets discussed herein are for illustrative purposes only and should not be interpreted as recommendations to purchase or sell such securities. CCA, MRP, employees and direct affiliates of the firm may or may not own any of the securities mentioned in the report at the time of publication.

AppHarvest: Firing On All Cylinders

Written by Jamie Louko

July 12, 2021

AppHarvest, Inc. (APPH)

Summary

• AppHarvest is trying to reimagine how consumers see produce.

• With sustainability as one of their key focuses, AppHarvest separates itself from the pack of traditional farmers, and its size, scalability, and offering selection separate itself from other agtech players.

• In this article, I am going to examine some of the most recent news AppHarvest has shared with investors, as well as looking back at AppHarvest compared with other agtech players.

AnnaStills/iStock via Getty Images

Investment Thesis

The agtech and sustainable farming industry has proved to be more efficient and sustainable compared to traditional farming. However, the difference and competitive edge lie between each sustainable farming business. These agtech businesses achieve similar sustainability and efficiency goals, so the competitive advantage comes in other forms. AppHarvest's (APPH) competitive advantage comes in the form of the size and scale potential of their farms, as well as their broad expansion of product offerings. Because of this, AppHarvest is one of the stronger players in the agtech space, and investors who want to play in this industry should be considering AppHarvest before other competitors.

Where We Last Left Off, and What's New

In my last article about AppHarvest, a large-scale indoor farming business operating in central Appalachia, I focused on the competitive advantages over traditional farming operations. Since then, other indoor farming businesses similar to AppHarvest have come out of the woodwork and announced plans to trade as public companies. Some of these businesses include AeroFarms (SV, will become ARFM), a sustainable farmer focused on vertical farming, Local Bounti (LIII, will become LOCL), an indoor farming business located in the pacific northwest, and Infarm, a German-based distributor who has become the world-leader in indoor farming. Infarm has rumored to becoming public via SPAC with Kernel Group Holdings Inc. (KRNL), but nothing definitive has been reached.

As these businesses show their superiority, they all claim similar sustainability and efficiency metrics. Most businesses claim that their use of water is extremely efficient, as is their optimization for crop growth, and their LEDs allow for optimal sunlight. Simply, all of these businesses have very similar technology that makes them superior to traditional farming, but this does not mean success for any individual business within the agtech industry. They all show that the agtech industry is superior, but rather they should focus on what makes their business superior to other agtech players.

View fullsize

Source: Investor Presentation

In my opinion, traditional farming is a dying industry, and it is sensible that sustainable farming and greenhouses will be the future of farming. Therefore, it is sensible that the agtech business should be demonstrating its competitive advantages over other agtech competitors, rather than traditional farming.

AppHarvest, even in this sense, does stand out from the competition. They are slowly becoming a bigger player in this space, and one that is starting to run ahead of the pack. While other agtech businesses are busy constructing their first farm, AppHarvest has jumped ahead with the production of its next 4 farms. While its competitors are starting small with only 1-2-acre farms, AppHarvest has positioned itself well with 15-60-acre farms. AppHarvest's competitors are currently focusing on one product category, yet AppHarvest is rapidly expanding its product offerings.

In an industry that is growing rapidly, AppHarvest is executing everywhere it needs to, and it is allowing for AppHarvest to set itself apart from the competition.

Competitive Advantages Over Agtech Businesses

AppHarvest has three quality characteristics that show it is stronger than most of its agtech competitors. Due to the size and scalability of its farms, expansion in offerings, and consistent execution, AppHarvest is proving to investors that they are one of the stronger players in this industry.

Size and Scale of Farms

One of AppHarvest's strongest competitive advantages within the agtech space is the size of its facilities. These facilities are absolutely massive, with their first facility 60 acres in size. This allows for mass production of sustainable-grown produce at a scale that no other agtech business has. These facilities can often take longer to construct, but once constructed, there is a long runway for growth and full-scale operations for it. It would take substantially less time to fully scale a farm this size compared to building and scaling 60 1-acre greenhouses.

The second option is what Local Bounti is doing, for their facilities are only 1-2-acre facilities. They plan on constructing 9 facilities by 2025, 8 of which will be roughly 5 acres, which would only lead to a maximum growing capacity of 42 acres. This goal of 42 acres would be less than AppHarvest's currently operating growing capacity.

Clearly, the size of AppHarvest's farms is a massive advantage for them. The scalability of these farms gives them an even greater lead. AppHarvest expects production of their first facility in Morehead, Kentucky to be fully scaled by the end of 2021, whereas Local Bounti's 42 acres would not be fully operational and scaled until at least 2025. AppHarvest would then have 4 years of fully-scaled operations to build a brand, strengthen the balance sheet, and fuel more growth for AppHarvest.

The scalability shows itself through guidance estimates for FY 2021 as well. By the year's end, at full-production, AppHarvest expects to make $21 million in revenue, whereas Local Bounti only expects to make $13 million by the end of 2022. The size and scalability of AppHarvest's farms are simply unmatched by its competitors, and as they build more farms (I will dive into that shortly), these size and scale advantages will only become more prevalent.

Offering Expansion

Compared to its competitors, AppHarvest is planning to expand its product offerings at a faster rate. One of the keys to success for these agtech businesses is having a successful brand, and one way to grow a brand is to put it in the eyes of more customers. One way to do this is by expanding the products offered. That way, both salad enthusiasts can eat the leafy greens and tomatoes produced, while berry lovers (like myself) can also recognize the brand. If a business were to only focus on leafy greens, then they would not achieve brand recognition from people like me as much.

AppHarvest's offering expansion is happening fast, and it will only be a matter of time before AppHarvest can offer products in various categories, rather than simply tomatoes. Their primary facility in Morehead, KY, solely produces tomatoes, but they have 4 facilities under operation that will be producing a wide variety of offerings. Here are the 4 facilities being constructed, along with what they will be producing:

Facility LocationProduction CategoryAcreageExpected Construction Completion DateBerea KYLeafy Greens15Q3 2022Richmond KYVine Crops60Q4 2022Somerset KYBerries30Q4 2022Morehead KYLeafy Greens15Q4 2022

View fullsize

Source: Press Release

Considering that AppHarvest currently focuses solely on tomatoes, expansion into 3 other product categories is a wonderful step in growing its brand recognition. This is something that few of its competitors are doing. Local Bounti does not have any structural plans on expansion out of leafy greens, and AeroFarms has plans to expand into berries for its primary leafy greens production.

As previously mentioned, I believe that offering expansion is important to the brand growth for these agtech businesses. As they expand their offerings, they will be able to get their products and their name in front of more consumers. AppHarvest has started showing signs of doing this well, where its competitors have failed to do the same.

Signs of Execution

One of the risks I mentioned in my last article was about the ability of management to meet or exceed guidance they put out for themselves. This included construction guidance. In their investor presentation, they expected to have 4 facilities up and running by the end of 2022, including their main facility in Morehead. Recently, they announced plans to construct two additional facilities, meaning that they are now expecting to have 5 facilities up and running by the end of 2022.

This seems small on the surface, but this is the exact type of execution proof that I look for in small businesses like AppHarvest. The fact that management was able to start construction on more farms than expected and thus increase their timeline shows that they are executing and exceeding the guidance they set out for themselves.

For investors, this should demonstrate that AppHarvest management can be trusted, for their guidance was beaten. Management was able to beat their own guidance, and that should show investors that AppHarvest is not just a pipe dream, but it actually has something tangible to run with and build.

A Look at My Risks: What Risks are Still Present, and What Risks Have Grown

In my last article, I noted many risks that are potential with the business:

• AppHarvest is unable to grow its factories at or faster than projections.

• Their Mastronardi partnership goes awry.

• They are unable to educate the broader public on what makes them special.

• AppHarvest is unable to lower prices.

• Management leaves the company.

For the most part, all of these risks are still prevalent today, if not even more important. Although they have begun to prove they can beat their own guidance, they will still need to continue to prove this, both in quarterly and yearly financial estimates, but also through construction estimates.

Their Mastronardi partnership is still fragile, and if anything were to happen with that partnership AppHarvest would have no way of distributing its product to local grocers, which could potentially decimate this business.

Although the offering expansion will make it easier to gain brand recognition and thus educate the broader public about their business, this will likely always remain a risk as long as traditional farming produce dominates grocery store shelves. Gaining brand recognition will also go a long way in being able to lower prices. So, while their offering expansion has the potential to increase brand recognition for AppHarvest, risks still remain and likely will remain for a long time.

Even though management seems very happy at AppHarvest, and loss of a major figure, Jonathan Webb specifically, would greatly damage their business. Management is the face of the business until they are able to bring products to shelves at a very large scale, so management impressing investors is largely how they will gain capital to subsidize the financing of their farm construction. If the face of AppHarvest were to leave, it could hurt their ability to receive financing and thus their ability to develop their facilities.

After seeing many agtech businesses come to the market via SPAC, there has been more concern about competition in this space. Because of this, I would likely add competition as a risk to AppHarvest. While many of its competitors are pre-revenue and are not far along on facility construction, they do have a competitor that is much larger than AppHarvest. Infarm is a German-based sustainable food producer that sells its product internationally, with the U.S. being its most recent expansion area. They have expanded broadly in Europe, and they seem to have their eyes set on the United States. This could pose a tremendous risk for AppHarvest, for there is no agtech player that comes close to the size of Infarm. They have $19 million in sales across the world compared to AppHarvest's $2 million last quarter.

AppHarvest's competition is fierce, and there is no doubt that the competitive threats will slow as time goes on. Therefore, I am confident to say that AppHarvest will have to fight against fierce competition in order to gain market share in the U.S., but their competitive advantages listed above will be able to help them do so.

Recent Stock Decline: Buying Opportunity?

AppHarvest's stock price has plunged in recent months, falling roughly 58% since February 2021.

Data by YCharts

This has put AppHarvest's market cap roughly around $1.5 billion and dropped their valuation down from extremely high multiples to still high, but comparatively lower multiples. Currently, it is trading over 600x sales, but it is trading at 73x forward sales if investors are looking at FY 2021 revenue estimates.

A business that just got its first revenue in Q1 of 2020 is obviously going to have extremely high valuation multiples, but revenue is growing extremely fast, and it is expected to continue to do so. Considering that the stock price has had a tremendous fall from grace, and revenue is expected to grow rapidly, today could potentially be a wonderful time to invest in this business at a very low price.

Conclusion

As I have said before, an investment in AppHarvest is not for the faint of heart. It is valued at very high multiples, and the number of risks for this business is high. AppHarvest will need to continuously execute at a strong level, for there is little room for slip-ups. With plenty of competition in the agtech market, AppHarvest will need to hold onto its competitive advantages tight if it wants to be a market leader in this industry.

Despite all of this, AppHarvest is one of the better investments for investors who want to get in on the agtech industry. They are one of the few companies with strong competitive advantages, and there are very few companies that could construct what AppHarvest is constructing. Their valuation is high now, but as they grow revenue it is likely that it will rapidly decrease, and it will be much more reasonable in the future. The risks associated with this business are plenty, but management has begun to prove they can efficiently execute.

For risk-tolerant and volatility-tolerant investors who wish to capitalize on the sustainable produce transformation, AppHarvest is one of the best bets to make. Their competitive advantages are strong, and they are one of the only businesses that have proved they have the ability to accomplish what they say they can. Because of this, I am recommending that risk-tolerant and volatility-tolerant investors who wish to invest in agtech should consider AppHarvest before any other competitors.

Lead photo: Source: Investor Presentation

View fullsize

This article was written by

Jamie Louko

I am a college student who has found a deep thirst for learning and investing. Being very young, I have leaned toward very long-term investments and growth stocks, primarily in tech. I do, however, love consumer goods companies as well. Currently, I am studying International Business and Economics.

Long Only, Growth, Long-Term Horizon, Tech

Contributor Since 2021

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

How AppHarvest Is Investing In The First Generation of High-Tech Farmers

By Jennifer Marston

July 6, 2021

Agriculture may have been slower to digitize than other parts of the food sector, but these days a lot of folks would agree artificial intelligence, automation, and other technologies have a role to play in the future of farming. The presence of such things means farming will soon require lots of new skills, which in turn means training a whole new generation on a whole new set of tools. It means, in the words of AppHarvest’s founder and CEO Jonathan Webb (pictured above), “getting young people to really visualize what agriculture is” in a way they haven’t before.

Standing under a tent in the middle of a downpour outside Elliott County High School in Sandy Hook, Kentucky recently, Webb explained to me how his company is training the next generation of farmers while simultaneously investing in the company’s own future as a high-tech agricultural powerhouse.

We, along with with students, parents, teachers, and Kentucky governor Andy Beshear, were at the launch for the latest unit of AppHarvest’s high-tech educational container farm program, which teaches high-tech farming to Eastern Kentucky high-school students. Launched back in 2018, the program retrofits old shipping containers to house controlled-environment vertical farms that grow leafy greens. Farms at each school serve as hands-on agricultural classrooms where students can learn not just horticulture but also how to use the technologies powering the next wave of farming innovations around automation, connectivity, and data.

“What we’re doing here is trying to plant the seeds of what it means to be in an exciting industry and get that groundswell early,” Webb told me. 

He was talking specifically about the container farm program but might as well have been referring to the entire company’s MO. AppHarvest, itself a product of Eastern Kentucky, is both a Public Benefit Corporation and a Certified B Corporation, which means the company has to strike a balance between profit and less measurable purposes like environmental impact, transparency, and social good. 

The company’s main business is headquartered about an hour away from Elliott County High School, in Morehead, Kentucky, where AppHarvest operates a 60-acre high-tech greenhouse that grows different varieties of tomatoes. Two additional farms, one for leafy greens and another for tomatoes, are under construction, and the company just broke ground on a couple more last month. All of these farms provide or will provide produce for restaurants and grocery retailers within a day’s drive. They will also provide jobs for a local community that’s seen unemployment rise as the coal industry declines.

The high school container farms are altogether smaller and somewhat different in terms setup and technical specs, but the idea is the same: grow crops in a controlled environment and use technology to improve plant yield, quality, and nutrition profile. In doing so, people from the community get an opportunity to learn the kinds of skills that will be relevant as agriculture gets more and more digitized.

“We’ve tried to say at AppHarvest we’re not building facilities, we’re building an ecosystem,” said Webb. “Obviously our large production facility is the core critical centerpiece of that, but us investing in a high school education, we’re truly trying to create an ecosystem that includes facilities and the brainpower to be able to operate the facilities.”

This isn’t just feel-good talk, either. Technologies like artificial intelligence, robotics, sensors, and analytics are coming to agriculture in response to multiple problems looming in the near future for the global food system. As McKinsey notes, “Demand for food is growing at the same time the supply side faces constraints in land and farming inputs.” With a population expected to grow to 9.7 billion by 2050, the planet needs to produce around 70 percent more available calories. At the same time, inputs like water supply and arable land are shrinking, raising costs for farming and negatively impacting an already burdened planet.

Part of the promise of controlled environment agriculture formats like high-tech greenhouses and container vertical farms is that they can grow more food faster, at a higher quality, and closer to the buying public. Many of these facilities operate via hydroponics systems that recirculate water, saving on that resource. (AppHarvest’s greenhouse runs off rainwater collected from the facility’s roof.) In the case of vertical farming, less land is required because plants are stacked. AppHarvest’s container farms, for example, can pack three to five acres of leafy greens into a forty-foot-long shipping container. Other large-scale vertical farms a la Kalera or Plenty are growing pounds of greens that number in the millions and also exploring additional crops such as berries.

Most individuals in this industry I’ve spoken to agree that indoor farming isn’t “the savior” that will wholly replace traditional agriculture. Nor was it never meant to be. Rather, greenhouse growers, vertical farm companies, and those operating container farms believe we need all of these formats working together and alongside traditional agriculture practices to try and resolve the above issues.

One of the many things needed to make that a reality is a new generation of young people interested in farming as a career and able to navigate the technical as well as horticultural aspects of agriculture. 

Right now, that’s a challenge. “We don’t have our brightest young people inspired to go into agriculture,” said Webb, adding that the issue is, “How do we inspire them early to get into agriculture and the technology sphere of agriculture?”

AppHarvest started investing in its education program before its main facility was ever complete, spending $200,000 of its initial $1 million investment on the program. “I’m not sure if there’s ever been a venture-backed company that’s taken 20 percent of their raised proceeds early and invested in education,” said Webb.

In 2021, AppHarvest has five different container farm programs operating at Eastern Kentucky high schools, all of them operating independently but also networked together, just as AppHarvest’s larger farms will eventually be networked. 

Students learn a huge range of skills working on these farms, from horticultural-related ones like seeding and harvesting to technology management across multiple farms to food safety, data entry, marketing, packaging, and creating a budget. Via a screen inside the farm, students can learn to track the pH levels of plants, carbon dioxide levels, temperature, humidity, and all the other variables present in a farm. And since farms from every high school are networked together, students can view one another’s activity. Elliott County High can see data from Shelby Valley High School in Pike County and vice versa, for example.

Webb says the farms are also an opportunity for schools and students to collaborate using different skillsets, whether technological, horticultural, or otherwise. “Some students might have more of a background or interest in horticulture. Some students might have more of a background or interest in craftsmanship. All we’re trying to do now is say, ‘Here, it’s your thing, bring it to life, and openly share information.’”

And while there’s no pressure, the hope is that some of these students eventually bring their skillsets to AppHarvest’s main operations and help improve them, along with indoor ag, over the coming years. “Hopefully in four years we have students that might end up at MIT. And then they’re telling us what to do,” said Webb, adding that the ROI here isn’t quick. The true impacts of the company’s investment in school programs probably won’t be seen for another five of six years, which is a few lifetimes when we’re talking about tech. 

“We get judged on quarterly earning calls, [but] that’s not the way I think,” he said. “I want us to think, first decade, second decade, third decade, and these are very long-term investments.”

He hopes to see more tech companies investing in high schools, and AppHarvest isn’t quite the lone wolf when it comes to this. Freight Farms, which deals exclusively in container farms, has a partnership with Sodexo to bring its units to K-12 schools and universities in the U.S. AeroFarms, also a Certified B Corp., has partnerships with various schools and community centers, too.

For AppHarvest, the educational program is is an integral part of the operation, and one tied to the company’s long-term success. “It’s not a ‘nice to have,'” Webb told me. “It’s something we truly believe is going to give our company a competitive advantage medium to long term.” 

Can Vertical Farms Be Profitable?

Earlier this year, we covered a couple of indoor farming companies going public through mergers with special purpose acquisition companies (SPACs). Neither seemed very appetizing for retail investors, with negligible revenues to date. As we predicted, more indoor farming startups (referring to both large-scale greenhouses and vertical farming operations) are jumping on the SPAC crazy train. The latest is a Montana company called Local Bounti that had generated little buzz until this month’s announcement, which included news that Cargill is providing $200 million in debt financing in the deal. 

In this article, we want to take a step back and look a little more closely at the indoor farming industry, sometimes referred to as controlled environment agriculture (CEA), particularly on the vertical farming side of things. Basically, we’re skeptical of both the economics and the save-the-world ethos that many companies preach. We enlisted an industry insider to help us separate the wheat from the chaff.

Saving the World from BS

Mark Korzilius

Mark Korzilius is the founder and chief strategy officer of &ever, a vertical farming startup based in Germany, with its first mega-farm located in the desert of Kuwait. Korzilius was also the co-founder in 2002 of a chain of fast-casual Italian restaurants, Vapiano, with more than 200 locations in about 30 countries. He reached out to us, as founders sometimes do after reading a story that didn’t include them, to tell us about all of the cool things their company is doing. In the case of Korzilius, he also wanted to set the record straight on all of the things that competitors like AeroFarms and other indoor vertical farming companies aren’t doing despite claims to the contrary.

Obviously, Mr. Korzilius is biased, but he also confirmed one of our chief suspicions: Many indoor farming companies claim they are on a mission to help feed the world, which seems incongruous with the fact that most are growing leafy greens, herbs, berries, and maybe tomatoes. Hardly the sorts of staples that are going to keep the estimated 800 million people in the world from going hungry at the end of the day. He also argues that claims of automation using artificial intelligence and sensor-rich environments are also overblown.

“We truly believe to become farmers and to be successful farmers for some crops, we can prove that [vertical farming] is, in the end, a way forward,” he says. “Hopefully, we can find some technologies to really overcome some issues that have been created by others … that will help solve problems that have been the result of technologies that have been created 50 years ago.”

In the second half of that comment, Korzilius is obviously referring to the modern industrial farming system, with its reliance on pesticides, herbicides, and fertilizers that deplete and poison soils and water supplies. That’s why you see so many companies developing natural fertilizers using microbes or biomanufacturing solutions for non-chemical pesticides. Outdoor agriculture is also water intensive, especially for products like almonds, which require one gallon of water per nut. Various technologies are in development to use water more efficiently, from soil sensors to aerial imagery from drones and satellites. Vertical farming gets at the root of the problem by moving the growing operation indoors, employing LED lights and hydroponics to deliver nutrients using only water rather than soil. That eliminates both pesticides and many traditional fertilizers, and reportedly cuts down on water usage by as much as 95%. Let’s take a look at the specific technology behind Korzilius’ company.

Creating the Right Climate for Vertical Farms

Founded in 2015, &ever (formerly known as Farmers Cut) has raised an undisclosed amount of money, originally through bootstrapping and Seed funding, before raising a Series A from partners in Kuwait for its mega-farm, a joint venture with a local investment company called NOX Management. Korzilius said &ever is currently raising a Series B but declined to offer any details. 

There are two key parts to the company’s technology, as we understand it: Dryponics and climate cells. 

Dryponics is a new riff on hydroponics, which involves growing plants without soil. The company uses a proprietary growth substrate to keep the roots dry. In effect, the root system stays on top of the substrate, while absorbing the nutrients in the water. This setup reportedly has several advantages, including using 68% less water than common hydroponic systems and 37% less water than aeroponic systems, which grow plants in the air using a mist environment or similar system. Less water means the basins underneath the substrates are flatter, allowing more compact layering of crops. 

Each crop requires different growing conditions, Korzilius explains, so his team developed climate cells – microenvironments optimized for temperature, light, humidity, and CO2, among other factors. Controlling the environment also helps control energy costs, especially in the large structures that house many of today’s vertical farms, including the company’s flagship facility in Kuwait. 

View fullsize

Credit: &ever

“Within the same premises, we can create different climates. In our Kuwait farm, we have four climate cells next to each other. So, we could potentially create California climate next to Denmark climate next to Singapore climate,” he explains. “By creating climate cells within one premise, we save energy [and] only climatize what needs to be climatized.”

Take spinach, a notoriously difficult plant to grow indoors that took the company two years to figure out the right combination of substrate and climate. But that work has paid off by reducing the amount of growth time by 15%, which translates into 18 grow cycles a year, which is good enough for Popeye to be an investor (if only he hadn’t blown his retirement on canned spinach).

Betting the Farm on Indoor Farming

The value proposition is that products from &ever leave the farm as living plants with the roots intact, continuing to grow while staying fresh and retaining maximum freshness, according to Korzilius. The Kuwait farm is the first large-scale effort to prove the business model, though the company also has smaller grow towers for on-site retail locations like grocery stores, including one in Munich. A second mega-farm is in development in Singapore.

View fullsize

A &ever grow tower. Credit: &ever

The Kuwait farm, which went live shortly before the Rona hit, is designed to grow up to 250 varieties of greens and herbs. The 30,000-square-foot facility can reportedly produce up to 1,200 pounds of  green stuff. Korzilius says the pandemic continues to hinder full-scale operations of the farm, which is overseen by just six employees. However, he claims the vertical farm is profitable from an operations standpoint (in other words, without accounting for the original capital expenditure). “So, we are not selling below cost. Yes, it’s a prototype, but it’s working nicely.” 

View fullsize

Tasty greens from a vertical farm in Kuwait. Credit: &ever

However, there is a reason why the mega-farm is located in Kuwait and not in Munich or elsewhere in Europe. Energy is simply cheaper in the Middle East, so it was a no-brainer to plug into the grid there. In Singapore, where electricity doesn’t come as cheaply, the local government has stepped in with grant money to subsidize the project. Currently, Singapore imports more than 90% of its food, so the government is motivated to find ways to be more self-sufficient, especially in the wake of the pandemic. 

The bigger implication is that vertical farms will require cheap sources of energy to be economically viable. That goes against the current narrative of locating large-scale operations in the middle of big urban centers where electricity is usually pretty expensive. Of course, there are other economics to consider: Centrally located growing facilities will incur lower shipping costs and can theoretically deliver fresher, tastier products to consumers, who may be willing to pay the premium for what Korzilius calls harvest on demand.

“I strongly believe in consumers being at the center of all activities,” he says. “The consumer, in the end, has to pay for this. And, if he doesn’t, then all of this is just a stupid bubble.”

Conclusion

The bubble is certainly ballooning. The three indoor farming companies that are going (or have gone) public that we are aware of are valued at nearly $4 billion. Last year, the top three indoor farming startups in 2020 funding brought in more than $400 million between them, according to AgFunder News. These companies claim to be building a sustainable food system, but it seems unlikely that a business built on microgreens can be sustainable at that scale and cost. As always, the market will decide which model will succeed. 

Tech investing is extremely risky. Minimize your risk with our stock research, investment tools, and portfolios, and find out which tech stocks you should avoid. Become a Nanalyze Premium member and find out today!

A SPAC Deal Sprouts For AgTech Company Local Bounti: What Investors Should Know

Chris Katje, Benzinga Staff Writer

June 18, 2021

View fullsize

Agriculture technology continues to be a hot segment for companies seeking to go public with another SPAC deal in the sector announced Friday morning.

The SPAC Deal: Local Bounti announced a SPAC deal with Leo Holdings III Corp LIII 0.71% valuing the company at $1.1 billion.

One of the company’s key investors is Cargill which is listed as a strategic partner and will invest in the company as part of the SPAC deal. Cargill will also provide a $200 million debt facility to help with Local Bounti’s expansion plans.

Public LIII shareholders will own 24.8% of Local Bounti if the merger is approved. Shares will trade on the NYSE as LOCL.!

About Local Bounti: One of several companies in the controlled environment agriculture segment, Local Bounti is seeking to improve the production of fresh produce across the United States.

Controlled environment agriculture is the future of farming according to Local Bounti’s presentation. This practice includes year-round farming, using 90% less water, zero pesticides, and providing cost-competitive produce.

The company uses proprietary technology to grow leafy greens and herbs in an indoor environment. Current products include cut lettuce, living lettuce and living herbs such as basil and cilantro.

Local Bounti products are currently in more than 400 retail stores, according to the company.

Related Link: Indoor Farming Startup AppHarvest Aims For Wall Street With SPAC Deal

Growth Ahead: Local Bounti will use capital from the SPAC deal to build out its indoor farming facilities across the Western U.S.

It plans to double the size of its flagship Hamilton, Montana facility and to break ground on additional facilities by the end of 2021. The company’s pipeline includes eight facilities and a plan for 30 SKUs by the end of 2025.

Local Bounti lists the total addressable market size of $30 billion for vegetables and herbs in the U.S. with a $10.6 billion market in Western U.S.

“Today’s announcement takes Local Bounti to the next level in enabling local, sustainable production and delivery of fresh, delicious and nutritious produce, including in regions that traditionally don’t have access to local supply, starting in the Western U.S. and expanding globally,” Local Bounti co-founder and co-CEO Craig Hurlbert said.

Other long-term growth plans for Local Bounti include international expansion, subscription as a service, new products and franchising and licensing.

Local Bounti joins companies like Appharvest Inc APPH 1.29% and AeroFarms, merging with Spring Valley Acquisition Corp SV 0.1% to choose the SPAC route to go public. 

Financials: Local Bounti highlights its low-cost operations and high yield thanks to a hybrid facility configuration and vertical farming.

The company hit its first revenue in 2020. Projections are for the company to hit $13 million in revenue for fiscal 2022 and $85 million for fiscal 2023.

By 2025, the company expects to hit over $400 million in annual revenue.

LIII Price Action: LIII shares are up 1.44% to $9.87 on Friday morning at publication.

(Photo: Local Bounti)

Pure Harvest Aims To Change The Face of Fresh Food

Having secured $60 million in funding, Pure Harvest Smart Farms is looking to expand its operations into Saudi Arabia and Kuwait, using advanced technology to bring food security to the arid Middle Eastern climate.

7 June 2021 

By AfricaMe-Team

Year-round Local Fresh Food

Pure Harvest is a farming startup using hi-tech, fully climate-controlled greenhouses and a coconut shaving hydroponic solution. Their aim is to provide year-round fresh food in a region where nearly 90% of food is imported. Having secured $60 million in funding, with a further $100 million earmarked by Kuwait’s International Investment Company (Wafra), Pure Harvest Smart Farms is looking to expand its operations into Saudi Arabia and Kuwait, using advanced technology to bring food security to the arid Middle Eastern climate. CEO and co-founder Sky Kurtz described their pilot project in Abu Dhabi as showing promising results with the “potential for year-round local production at very high quality and at a very good cost structure.”

Taming the Desert with High Tech Solutions

Farming consumes huge amounts of water, leading to water scarcity even in temperate regions such as Europe and America. In the arid, dry desert wasting even a drop of water is inconceivable, and Pure Harvest Smart Farms claims their self-contained greenhouses offer a level of efficiency 30 times greater than traditional field farms.

This model of controlled-environment agriculture (CEA) uses greenhouses that go far beyond glass walls to isolate plants. A climate chamber removes heat and humidity from the outside air; this humidity is condensed and fed to the plants inside. There is no soil as plants are grown inside a nutrient rich solution and monitored by sensors to keep the plants healthy. Triple-paned smart glass windows and over-pressurized airflow help manage temperatures to within a 1 degree Celsius margin and carbon dioxide is added to optimize plant growth. 

Kurtz claims that Pure Harvest is expecting a yield of six to eight times more food per meter than other greenhouse farms, while using only one-seventh the amount of water. It will produce 17 to 23 times more food per meter than a traditional field farm.

A Large Market but Pure Harvest struggles to Gain Funding

Despite the success of the pilot, Pure Harvest has a long way to go. According to Kurtz, once they are producing at a scale of 30,000 square meters the produce should be 20-40% cheaper than imported fresh food giving them a very promising market.

But even with the investment of $60 million, and the $100 million soon to follow, Pure Harvest has struggled to secure the funding to expand. The industry is extremely capital intensive, and the Middle East venture capital market is less developed than in other countries. The company has managed to raise $50 million through bonds known as “Sukuk,” Shariah law compliant Islamic bonds, with a further $10 million investment from a January fundraising round led by Sancta Capital.

With the additional $100 million from Wafra, the total sum might appear to be significant, but compared to comparable ventures it is low. Recently a vertical farming firm in the U.S., Plenty, raised more than $500 million in funding.

A Promising Future for Local Food

With global supply chains heavily disrupted by the Covid-19 pandemic and further shaken by the blockage of the Suez Canal by the Ever Given in March 2021, the UAE region has become increasingly concerned about securing a food supply. If Pure Harvest can deliver on their promises, they stand to benefit handsomely. At the moment there is no reason to suspect otherwise as the company moves forward with expansion plans. Already the Pure Harvest has reached a $35 million agreement with The Sultan Centre in Kuwait to build a farm stretching across 80,000 square meters that can produce millions of kilograms of fresh fruit and vegetables, well past the size that Kurtz marks for profitability.

Photos: findwonder.abudhabi / agfstorage.blob.core.windows.net

AeroFarms: An Unproven Business With Enormous Risk

View fullsize

June 13, 2021

Written by Jamie Louko

Spring Valley Acquisition Corp. (SV) APPHSVSVU

Summary

• AeroFarms is a SPAC that is being brought to the market by Spring Valley Acquisition Corp. The deal was announced on March 26.

• AeroFarms runs and operates vertical greenhouse farms. Unlike most greenhouses, AeroFarms' greenhouses take up little horizontal space, which allows them to pay less in expenses.

• AeroFarms's mission is to grow the best plants possible for the betterment of humanity.

• Currently, AeroFarms is not a buy, but it should be on a watchlist for investors to watch closely to see how well they can execute.

sompong_tom/iStock via Getty Images

Investment Thesis

AeroFarms (SV will become NASDAQ: ARFM) is a business that has high hopes, but with little edge from their other tech-savvy competitors, I struggle to see how they will be able to achieve the immense growth they are claiming. With poor financials and only $2.5 million in revenue, this business has not yet shown that it can achieve these expectations. Until AeroFarms can consistently show investors they are able to meet the guidance they set for themselves, it should be avoided by long-term investors.

SPAC Details

AeroFarms is being brought to the market by Spring Valley Acquisition Corp. This was announced on March 26. AeroFarms is expected to receive $317 million in cash from the deal, and the deal is expected to close in the second quarter of 2021, which would assume that AeroFarms would branch off into their Nasdaq listing, ARFM, within the month. However, SPACs usually take 4-6 months from announcement to go public, which would pin AeroFarms around July-September. September is on the longer side of this estimate, and considering estimates from Spring Valley and AeroFarms, a September target is likely inaccurate. I would expect that AeroFarms will go public sometime between late June and late July.

This process would estimate AeroFarms' equity value to be roughly $1.2 billion, which is slightly lower than another competitor that recently SPAC'ed in 2021, AppHarvest (NASDAQ: APPH). After the SPAC process, AeroFarms expects to nominate two of Spring Valley's existing directors, Debora Frodl and Patrick Wood, III, to its Board of Directors. Now that we have the basic details of the SPAC out of the way, let us dive into what AeroFarms does and why they are coming to the public markets.

AeroFarms' Mission

AeroFarms is a vertical greenhouse that is trying to change how Americans create sustainable food. This Certified B-Corp uses vertical farming, AI, and biological sciences to improve the way fresh produce is grown and distributed locally and globally. Their product, Dream Greens, "wins on quality, flavor, taste, and texture," and they sell in many major distributors like Whole Foods, ShopRite, Amazon Fresh, and FreshDirect.

AeroFarms was founded in 2004, and it became a B Corp in 2017. AeroFarms is trying to solve issues brought on by the megatrends of population growth, water scarcity, arable land loss, and climate change.

Source: Analyst Day Presentation

Currently, AeroFarms focuses on leafy greens, primarily bok choy, kale, micro broccoli, and arugula. AeroFarms' reason for existing today is to meet the need to solve issues brought on by climate change and other environmental issues. Due to strong droughts and water scarcity, water will be needed more and more if our world continues to use water at the pace we do today. AeroFarms uses 95% less water than traditional farms, which allows them to be less reliant on these problems, as well as open up water that would have been used to go towards other needs. This lack of water has also caused droughts, which can, in turn, lead to food shortages. Because AeroFarms' greenhouses are not as reliant on water, as well as the fact that they are indoors, these droughts are not as impactful to AeroFarms' business.

View fullsize

Source: Analyst Day Presentation

Simply put, AeroFarms sees great problems with our future if we continue to farm the way we do today, and they are trying to preemptively solve these problems.

Both co-founders are still involved, one as the CEO and the other as the CMO. Considering that AeroFarms was founded in 2004, it is clear that the founders are very dedicated to the vision and the mission of AeroFarms, and they will likely stay with the business for the long haul. If they founded this business simply to make a quick buck, the founders likely would have moved on already instead of dedicating 17 years of their lives to this business. This is a very good sign in my book. However, management is still extremely important for a business like this. If management were to cash out within a year of coming public, that would show me that the founders were not as dedicated as I thought, which would lower my conviction in this business to a more bearish conviction.

Being a SPAC, they were allowed to project revenues and estimates out to 2026. Therefore, it should come as no surprise that this company sees massive growth potential. They expect that vertical farming alone will be a $12.7 billion business by 2026, growing at over 22% 5-year CAGR. They also expect global fresh produce to become a $1.8 trillion industry by 2023, and leafy greens alone will contribute $108 billion to that large TAM. Clearly, this sort of farming is going to grow due to increases in demand (as the population increases). I have some skepticism as to whether it will be this large come 2023, but there is no doubt that the industry will be growing.

Quite frankly, it is near-impossible to correctly estimate how big this market will get. If it gets as big as AeroFarms claims it will, then AeroFarms will definitely have room to fight for market share and they will have vast opportunities to grow and become an amazing business. However, a 22% 5-Year CAGR in vertical farming is definitely aggressive. I worry that AeroFarms may be estimating on the extreme side, and that vertical farming will not grow that fast. If this is the case, then AeroFarms' potential will noticeably decrease, and it would make it a much less interesting investment.

Also, I am a firm believer that the world is going to need more greenhouses as it becomes harder to grow outdoors due to climate change and other sub-optimal weather conditions. There have been many recent droughts and other disasters that make it hard to count on reliable crops from outdoor farms, and greenhouses can minimize the impact that Mother Nature is having on our crop yields.

The sustainability of greenhouses is also a major benefit to society. The water usage is drastically lowered in greenhouses like AeroFarms, and so are emissions. These negative impacts are greatly reduced compared to traditional farms, so AeroFarms is not only helping create a sustainable supply of food, but they are also doing in a very environmentally friendly manner.

Their mission and drive to make our world better is the reason that I am writing about this stock today. I believe that AeroFarms and companies like it are trying to solve a major future problem for our world, and I am happy to give them attention for it. As I have mentioned a few times already, they have tons of competition. This competition is fierce, and it definitely has the potential to make AeroFarms fight for this market share.

Competition Concerns

As I have mentioned many times already, AeroFarms has some steep competition in the greenhouse space they are playing in. Although no major competitors are actively engaging in vertical farming (excluding one), they still have plenty of competition in the sustainable farming space.

Probably the company that first comes to mind is AppHarvest. I have written an article that dives deep into AppHarvest, but I will go over it quickly for anyone who is not extremely interested in AppHarvest. AppHarvest is a business that is based out of Kentucky and Appalachia. Unlike AeroFarms, which primarily focuses on growing leafy greens, AppHarvest's current focus is tomatoes. AppHarvest has plans in place to expand into leafy greens in a major way in the next 5 years, however. With their 60-acre farm (and 9 more facilities on the way), AppHarvest is planning to ramp up production in a major way.

AeroFarms is not expected to grow as fast as AppHarvest. Currently, the only things they are building is an R&D farm facility in Abu Dhabi, and another farm in Danville. The Abu Dhabi facility plans on breaking ground this month. They do, however, have a total of 3 farms, their biggest and only cash-generating farm bring their vertical farm headquarters in Newark, New Jersey. On April 29, 2021, AeroFarms announced that they are breaking ground and starting construction of their second farm, located in Danville, Virginia. Their third farm is the new facility in Abu Dhabi.

Clearly, both of these businesses are growing at a very fast rate. and there is no doubt that it will continue. Although they are not directly competing currently, they will likely be competing in the leafy greens area quite soon. In terms of technology, they are using similar kinds of tech, although I believe that AppHarvest has a very slight edge.

Source: Investor Presentation

The main thing that gives AeroFarms an edge over AppHarvest is how they commercialize their product. One of the weaknesses I have with AppHarvest is how they sell their product. Simply, AppHarvest partners with a distributor, Mastronardi, who then is the sole buyer of AppHarvest's product and they distribute it out to larger companies. This results in a customer concentration for them. AeroFarms does not do this, but rather they partner directly with large businesses like Whole Foods. I like AeroFarms' distribution model much more than AppHarvest's.

I would be remiss if I did not briefly mention some of the private competitors. First, Bowery Farms, another vertical farming company that is private, is a major threat to AeroFarms. First, they are roughly double the size of AeroFarms. Second, they are operating in the same rough geographical region that AeroFarms is selling in. Bowery operates in New York, with plans to expand into Pennsylvania.

View fullsize

Source: Bowery Website

Bowery has 2 operating farms compared to just one for AeroFarms, and they are building one more today. These farms are in New Jersey and Maryland, which is quite intrusive on AeroFarms' market. Bowery also is planning on expanding into berries, tomatoes, and carrots, while they currently grow leafy greens. Due to greater size, they have been able to reach better economies of scale than AeroFarms, so their prices are actually lower currently. Bowery also sells in 850 grocery stores. Like AppHarvest and AeroFarms, Bowery is using a similar structure of technology that enables sustainability and limits pesticides in their farming.

Another strong (and private) competitor is Gotham Greens. They operate a very unique business model: instead of building large facilities, Gotham builds its greenhouses on the rooftops of its customers. This enables extreme freshness for its customer and nearby customers.

View fullsize

Source: Gotham Greens Website

Gotham Greens obviously has more greenhouses built and producing crops than any of the businesses mentioned. They have 8 greenhouses, encapsulating the Northeast, as well as the West of the U.S. Currently, they are operating and selling in 40 U.S. states. Freshness is clearly Gotham's edge over AeroFarms, however, their business model can be both a blessing and a curse. Gotham is limited to small greenhouses, whereas large, 60-acre greenhouses like AppHarvest's are much more cost-effective. AeroFarms sits in the middle of these sizes for its facilities.

All of these businesses have their own edge, and it is still unknown which will make the greatest difference. However, farming is by no means a winner-take-all market. There will be many winners in this space, and potentially even all of these competitors could be successful along with AeroFarms. To quickly summarize, each company has benefits that separate them from the pack. AppHarvest has its central location (Kentucky), Bowery has strong economies of scale due to its size, and Gotham has its ability to deliver the freshest products. Now, I am going to take a look at what makes AeroFarms special compared to some of its competitors.

The Edge

Compared to traditional farming, AeroFarms' technology and sustainability is what separates them. Due to the nature of greenhouses, AeroFarms can have tight control on conditions that the plants experience, so AeroFarms can create the most optimal environment for the plants to grow faster, and be of the highest quality. They also excel at full automation of their farm. Everything from seeding to packaging their produce is fully automated.

View fullsize

Source: Investor Presentation

AeroFarms uses data science and a fully-controlled technology platform that enables it to better understand plants and optimize farms while improving quality and reducing costs. Simply, they are analyzing plant biology to optimize the growth of these plants.

Teams of plant scientists develop custom algorithms to precisely define the conditions each plant needs to thrive. This understanding allows AeroFarms to optimize performance, cultivate new varieties, improve quality, lower costs and optimize efficiency.

Source: Investor Presentation

This understanding of the biology of plants is extremely important for AeroFarms. One of the primary benefits they have over traditional farming is that they can create the best-looking and tasting produce. Understanding exactly how plants thrive and do this is crucial. If they were to expand into different products, such as berries or tomatoes, they would have to do this again. This knowledge may take time to learn, and if they are testing environments to see which one produces the best crops, it could take a while. However, once learned, this can be easily replicated in dozens, if not hundreds, of other facilities. Once AeroFarms learns that leafy greens thrive under (and these numbers/metrics are not accurate but for the example) 75-degree heat with high sun exposure and light water levels, they can replicate those conditions in whatever facility they grow leafy greens in. This intellect is somewhat time-consuming to learn, but once it is learned, it gives the company a massive advantage.

Through the integration of these disciplines, AeroFarms achieves up to 390 times greater productivity per square foot annually versus traditional field farming while using up to 95% less water and zero pesticides. Therefore, due to the productivity, clearly the knowledge that they learned from the data and plant biology is paying off.

View fullsize

Source: Investor Presentation

Another thing that most traditional famers do not have is data. AeroFarms can create lasting network effects and benefit greatly from scale if they can efficiently use and act on data they receive from their facilities.

Lastly, AeroFarms has been creating a strong library of IP since its founding. With over 250 invention disclosures and a vast library of data collected over 15 years of operations, AeroFarms is continually improving its systems to understand plants at unprecedented levels and solve agriculture-related supply chain issues. Currently, AeroFarms has 15 granted patents, with 38 more pending approval. They also have 46 designated trade secrets. The vast amount of trade secrets show that they want to keep its operations relatively unknown to its competitors, so they do not elaborate much on what those secrets entail. However, their strong number of patents show that they have actual technology that is working effectively and it is independent to them. No other greenhouse or direct competitor could do the same thing AeroFarms is doing in some of its capacities.

AeroFarms plans on bringing these trade secrets to future facilities, with plans to start construction on three farms, none of which have been announced or actually planned yet, by the start of 2023. AeroFarms also sees strawberries as a major growth avenue. Strawberries are highly cyclical due to growing conditions and they carry lots of pesticides, both of which AeroFarms is trying to solve in the farming universe.

AeroFarms has a clear edge above traditional farming, just as AppHarvest, Gotham, and Bowery do. Where I struggle to find an edge is between the technology of these businesses. After looking at the technology for all of these businesses, the results seem to be the same: more efficient production and productivity, better tasting produce, less use of water, greater sustainability. Also, all of these businesses have some sorts of patents that make their business stand out. Personally, I believe that it is not the technology that gives AeroFarms an edge over its competition, nor do I think it is vertical farming (itself).

Vertical farming alone does not provide any greater benefits over non-vertical farms in terms of quality of produce. However, I believe the optionality that comes from vertical farming when it comes to growth is the edge for AeroFarms. Unlike AppHarvest, where they need 60 acres of land to have a 60-acre farm, AeroFarms only needs a small portion of that land. With even a 48-towered farm, AeroFarms could theoretically create the same sized farm in a fraction of the horizontal size of one of AppHarvest's farms. This is beneficial in one primary way: AeroFarms would be able to go to places AppHarvest would not. For example: AeroFarms' HQ is in Newark, New Jersey. AppHarvest could never find a large enough space in that city to build a farm, but AeroFarms can.

Simply, AeroFarms has the agility in its farms to travel to cities and more urbanized geographies that competitors like AppHarvest cannot. This can give them an edge, for if both AppHarvest and AeroFarms are selling in the same city, but AeroFarms actually has a greenhouse in the city, grocers would likely sell more AeroFarms' products because of locality and freshness.

Financials and Valuation

Financially, AeroFarms is quite lacking. AeroFarms has over $48 million in cash and no long-term debt, which is wonderful, but that is just about where the good news stops. Their net revenues were $2.5 million for the FY 2020, yet their cost of goods sold was almost $8 million, resulting in a gross profit loss of $5.4 million. As they continue to scale, at least for a while, this number can get worse too. AeroFarms is spending a whopping $17 million in SG&A compared to only $1 million in R&D. This is exactly the opposite of what I want to see in a business. I want their R&D expenses to be high, because it shows me that they are heavily investing in the future of their business.

All of this combines for a grand net income loss of over $25 million. However, as most SPACs do, they are projecting monstrous growth.

View fullsize

Source: Investor Presentation

They are expecting their current one farm to grow to 16 farms and their revenue to grow to $553 million (from the $4 million today) by 2026. They also expect their gross margins to be roughly 50% by 2026, which is high for any farming business. EBITDA margin is also expected to reach a whopping 35%. AeroFarms is clearly spinning an optimistic story with these growth projections, and I am not sure how confident I am that they can get that done. Transitioning from negative to positive gross margin is going to be hard enough for them, and I think it will take at least until 2023 for them to do that. Therefore, the fact that they believe that they will have margins of 50% just 3 years after turning their gross profit positive is a bit of a stretch to me. I have no doubt that this company will grow, but I do doubt that they will be able to grow at such a high rate.

Also, they project that they will be able to get 3 new farms up and running and producing every single year until 2026. That is extremely optimistic growth. AeroFarms only broke ground on 2 farms recently, and they are expecting to build both of those up to production capacity in 1.5 years? That is quite aggressive. Not to mention that they would still need to find another area to build a farm, build it, and start producing crops in that same time frame. That is an extremely tall order, just to meet 2022 estimates. Then they have to do that again, and again, until 2026, just to meet guidance. Not exceed, just meet.

Clearly, I am quite skeptical about how rapidly they will be able to grow. Personally, I do not think they will be able to do this, and for me, a company that does not meet their own expectations is not worth an investment. For me, missing expectations gives me a lack of confidence in the ability of management, and therefore I lose trust. AeroFarms has not missed any expectations yet, but they have a tall order ahead of them, and any small slip in any form would likely cause consistent misses on growth estimates.

Considering that this business has not become its own public company yet, the valuation metrics are slim. Also considering that this business is gross profit negative, operating income negative, EBITDA negative, and net income negative, the only valuation metric available is Price-to-Sales Ratios.

Valued at $1.2 billion, AeroFarms has $2.5 million in sales (let's say $3 million to be super generous). At these metrics, AeroFarms' P/S Ratio would be 400. This is absolutely ludicrous. Even at AppHarvest's insanely optimistic revenue estimates, their forward 2023 P/S Ratio is over 22.

It does not help that I am skeptical on AeroFarms' own estimates for the success of their business, but 22x forward sales is quite an expensive multiple. At those high forward multiples, I would stay far away and make sure they execute and (hopefully) beat their expectations. If they can meet or beat their revenue guidance, maybe these valuations can be justified, but until they prove my skepticism wrong, this company is extremely highly valued for no good reason at all.

Why I'm Not Buying Today

Today, this business should not be touched with a 10-foot pole. The reasoning for this ultimately comes down to two concepts: Their technology is not drastically different than its direct competitors, and their financial situation is simply miserable. The first one is going to be hard to fix, which is why I am likely to remain bearish on the business, but the second one could change within the next 2-3 years. In which case, I would likely take another look at this business and rethink my thesis. For the meantime, while they are still gross profit negative, investors should definitely stay away.

Lastly, I must mention again that the valuation and AeroFarms' guidance are insane. AeroFarms' guidance assumes some of the largest growth we have seen in any modern day company, within only 5 years. These growth estimates might be accurate if they were placed out 7-10 years in the future, but 5 years for this business to go from its first sales to fully-scaled economics is highly unlikely. Even if we assume these drastic growth rates, their valuation is still quite high.

Investors should stay away from AeroFarms for now, but watch it closely for the next 2-3 years. As this business operates, we can watch to see how they prove themselves out. If they can consistently meet their own guidance and expectations, then AeroFarms' might be investment material. Until, however, they have some time to prove themselves out, AeroFarms is merely a company with little edge that is hopeful to grow at astronomical rates. Today, this business is not worth the high risk of investment.

This article was written by

Jamie Louko

Long Only, Growth, Long-Term Horizon, Tech

Contributor Since 2021

I am a college student who has found a deep thirst for learning and investing. Being very young, I have leaned toward very long-term investments and growth stocks, primarily in tech. I do, however, love consumer goods companies as well. Currently, I am studying International Business and Economics.

Disclosure: I am/we are long APPH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Spread, Chubu Electric Power And ES-CON JAPAN Enter An Investor Agreement, Plan To Construct Techno Farm Fukuroi, World’s Largest Vertical Farm To Produce 10 Tons Daily

Spread Co. Produce 

June 11, 2021

Spread Co., Ltd., Chubu Electric Power Co., Inc., ES-CON JAPAN Ltd., announced today that they have entered into an investor agreement regarding the establishment of TSUNAGU Community Farm LLC to construct and operate vertical farms.

Expectations are high for vertical farms for stable production of pesticide-free agricultural products through precise control of the cultivation environment.

Many hope that vertical farms will provide a solution for a number of problems, such as growing consumer needs for food safety, a decrease in farming population, as well as food supply instability, and price fluctuations due to extreme weather.

View fullsize

Based on the agreement, Spread, Chubu Electric Power, and ES-CON JAPAN will jointly establish the new company that will construct and operate vertical farms, in July 2021.

As its first initiative, the new company is planning to build an automated vertical farm Techno Farm Fukuroi” in Fukuroi city (Shizuoka, Japan), which will be the world’s largest automated vertical farm, capable of producing 10 tons of lettuce per day.

The construction will start in October this year, while the production start is planned for January 2024.

The integration of Chubu Electric Power’s energy management know-how, ES-CON JAPAN’s real estate development capabilities, and Spread’s cultivation technologies will allow for the efficient and stable production of pesticide-free, safe and clean vegetables.

Spread, Chubu Electric Power, and ES-CON JAPAN aim to solve the issues affecting food and agriculture through vertical farming, while actively utilizing renewable energy and effectively using CO2 in the cultivation process to achieve a sustainable society and the delivery of SDGs through decarbonization.

About Spread
Since its establishment in 2006, Spread has been promoting vertical farming with the goal of creating a sustainable society.

In 2018, Spread started shipping from the large-scale automated Techno Farm Keihanna in Kizugawa, Kyoto which is the first facility to employ Spread’s next-generation food production system Techno Farm?. In less than 2 years from the start, Techno Farm Keihanna reached a stable operating rate of 99%. Spread will further refine Techno Farm? technologies that allow stable production anywhere at any time, and plans to reach 100 tons of daily production domestically by 2030, while pursuing various business opportunities both in Japan and overseas. Under the concept of “Sustainable Vegetable”, Spread delivers its own vertically farmed vegetables brand Vegetus to approximately 4,000 stores in Japan. Since the start of the brand in 2008, Spread has sold over 70 million packs in total*1.

Spread is excited to enter the investor agreement with Chubu Electric Power and ES-CON JAPAN, as all partners share the same vision and values of sustainable agriculture, and each partner is bringing their own unique strengths to the partnership.

Unique Features of Techno Farm Fukuroi
Largest vertical farm in the world, capable of producing 10 tons of lettuce per day
Standardized, efficient operations via automated cultivation
Even more precise environmental control
Recycling of the water used for cultivation
Energy-saving due to in-house developed LED lighting specifically for vertical farming
IoT-based cultivation management system
Pesticide-free, stable production, not influenced by the weather
Utilization of renewable energy

Spread will continue to pursue further business opportunities through technological innovation both in Japan and overseas.

Spread aims to provide solutions for the global problems of climate change and food security and the delivery of a truly sustainable society.

Techno Farm Fukuroi’s Specification
Construction site: Fukuroi-shi, Shizuoka Prefecture, Japan Farm type: Indoor Vertical Farm using Artificial Lighting Site area: Approximately 24,400㎡

Product: Leafy greens（Lettuce）
Production capability: 10 tons per day / 3,650 tons per year Production start: January 2024

Overview of TSUNAGU Community Farm LLC
Established: July 2021 (scheduled)

Location: 1, Higashi-shincho, Higashi-ku, Nagoya-shi, Aichi Prefecture Managing partners: Chubu Electric Power (representative member), ES-CON JAPAN, Spread

Investment: Chubu Electric Power: 51%, ES-CON JAPAN: 48%, Spread: 1%
Business: Production and sale of agricultural products through the operation of vertical farms, utilizing fully artificial light

Overview of Chubu Electric Power Co., Inc.
President & Director：Kingo Hayashi
Business：Renewable energy business, Nuclear power business, Overseas business, Community support infrastructure-related business, Etc.

Overview of ES-CON JAPAN Ltd.
President & Representative Director：Takatoshi Ito
Business：Real estate sale, Real estate leasing, Real estate planning, brokerage, and consultation

Overview of Spread Co., Ltd.
Chief Executive Officer ：Shinji Inada
Business：Vertical farming operation, management, and sales of the products

Bowery Farming Secures $300 Million To Continue US Expansion

Bowery Farming has secured $300 million to continue the expansion of its network of indoor farms across the United States. The company has secured more than $472 million in funding to date, bringing its valuation to $2.3 billion. 

The funding will provide resources to accelerate advancements in farm design and the BoweryOS, enabling more and more communities access to a reliable supply of locally-grown produce, year-round.

View fullsize

Accelerating technologies
“This infusion of new capital from Fidelity, other new investors, and the additional support of our long-term investor partners is an acknowledgment of the critical need for new solutions to our current agricultural system," said Irving Fain, CEO and Founder of Bowery Farming.

"Next to that, it's the enormous economic opportunity that comes with supporting our mission. This funding not only fuels our continued expansion but the ongoing development of our proprietary technology, which sits at the core of our business and our ability to rapidly and efficiently scale towards an increasingly important opportunity in front of us.” 

“Bowery’s approach to indoor farming represents a meaningful disruption to the traditional produce supply chain, and its systems-based approach to engineering and farm design is unparalleled,” said Andy Wheeler, General Partner at GV. “I look forward to continuing to partner with the Bowery team as they build and scale the largest indoor farming network in the U.S. and bring more sustainable produce to consumers.”

Rapid growth
Now in over 850 grocery stores, Bowery has experienced more than 750% growth since January 2020 at brick-and-mortar retailers like Albertsons Companies, Giant Food, Walmart and Whole Foods Market, and more than quadrupled e-commerce sales through e-commerce platforms, including Amazon Fresh.

In January 2021, Injong Rhee (formerly VP at Google and CTO of Samsung Mobile) joined Bowery as Chief Technology Officer to oversee the seamless integration and ongoing development of technology across the growing network.

The Company is currently transforming an industrial site in Bethlehem, PA into its largest, most technologically advanced and sustainable farm yet, expanding its reach further into the Northeast and Pennsylvania region. Bowery will be breaking ground on additional large-scale commercial farms this year, and is actively engaged in identifying new farm locations in the United States with an eye towards global expansion. 

25 May 2021

What’s A Hydroponic Farm Start Up Cost? Know What To Expect

Is a typical hydroponic farm start-up cost very steep?

Or is it something that’s affordable and easy to manage?

If you are looking into starting with hydroponic farming, you may be quite eager to know the overhead and upfront cost.

So, get to know more about the necessary cost you should include in your budget as you read along. Here are the typical expenses to take note of when starting a hydroponic farm.

View fullsize

Hydroponic Farm Start Up Cost You Should Know

When determining an average hydroponic farm start up cost, you need to also take into account having a greenhouse. you can buy or even build. The size of your greenhouse impacts the overall cost of your hydroponic farm.

Moreover, the size depends on how many crops you are planning to cultivate and grow.

If you want to build a greenhouse that’s about a few thousand square feet, you can expect to pay about $11,000 USD. But this is the standard size for commercial greenhouses.

The price significantly goes down the smaller your greenhouse gets.

Read more: Is PVC Safe for Hydroponics? Behind the Safety of These Plastics

Materials and Equipment

Next up, let’s talk about the equipment you need. These include your growing tunnels, water solvent, racks, lighting, nutrient reservoirs, UV filtration, and seeds.

For these items, we are looking at a few thousand dollars in addition to the figure we have mentioned earlier for the greenhouse price.

Recurring Expenses

Setting up a hydroponic farm is not all about the upfront cost. There are also recurring bills to think about, which are basically your electric and water expenses. Expect to pay about $500 per month since your farm would need ample light and water to sustain the growth and development of your crops.

View fullsize

Lettuce plant growing in vegetable hydroponic farm.

Indoor Hydroponic Farm Cost

There are some people who may opt to do indoor hydroponic farming. The cost is also dependent on the size of the farm and any other materials you need.

For instance, a 500 square feet hydroponic farm should cost about $110,000, which is just for the unit and the components such as 192 towers, 15 racks, 2 lighting racks, 48 lighting units, and a 330-gallon reservoir for nutrients, complete with automated nutrient management and UV filtration.

With all of these things in place, you already have a very production hydroponic vertical farm that you can place indoors – measuring 500 square feet.

Hydroponic Systems

There are different tiers for hydroponic systems, which include the low-tech or DIY, which should cost you about $50 up to $200.

But if you opt for mid-tech, you can easily purchase these at suppliers. They come with higher-end lighting technology and even water flow control in some cases. The cost can go from $300 to as much as $1000, and it all depends on the features and size.

As for the high-tech ones, there is complete system control for higher volume production. In this case, we are talking tens of thousands of dollars upfront.

Bringing The Cost Down

Is it possible to bring down the cost of a hydroponic farm?

It is possible but this all depends on the equipment you use. If you opt to create a DIY farm, then it will be cheaper but may be risky if the systems are not working well.

Thus, you should determine your goals, your budget, and what your intentions are for setting up your hydroponic farm. You can also start small, if you are uncertain if you want to go in it full time. Or, you can choose low-tech hydroponic systems at the onset and slowly invest in higher tech systems.

The choice is all up to you, so go ahead and consider these tips, run the numbers in your head, and enjoy the world of hydroponics!

Global Investment In Agri-Food-Tech Surged To $ 22.3 Billion

View fullsize

5 May 2021

Finistere Ventures report reveals $ 5 billion invested in Agtech and $ 17.3 billion invested in Foodtech in 2020. Finistere Ventures expects 2021 to dwarf 2020 numbers as capital continues to flood into agtech.

According to Finistere Ventures’ 2020 AgriFood Tech Investment Review, a report developed in collaboration with PitchBook Data, total global investment in agrifood tech companies in 2020 surged to $ 22.3 billion – $ 5B in ag-tech and $ 17.3B in food-tech – continuing to grow at 50% CAGR (2010-2020); Finistere expects 2021 to exceed this record year based on early investment data.

Fear of missing out

“While 2020 presented some interesting and, at times, surprising outcomes for the agrifood sector, we saw fear turn into fear of missing out (FOMO) with favorable results for startups, particularly those in later stage situations with meaningful revenue and strong growth stories,” said Arama Kukutai, co-founder and partner, Finistere Ventures.

According to Kukutai, low interest rates and a soaring equity market have provided a backdrop unseen in the relatively short history of the sector. “Investors attracted to the potential disruption of massive total addressable markets fueled increases in investment across all stages and segments,” he said.

Race for innovation access is heating up

Based on the report, the race for innovation access is heating up and creating a new level for agrifood investing. A renewed focus on climate change and carbon offsets is gaining momentum, and rising ESG interest is spilling over into venture-backed companies across agrifood.

Involvement from new or non-traditional players – family offices, large pension and sovereign wealth groups, late-stage PE – swelled and the role of CVCs across the space continued to grow. 2020 saw 8054 unique investors participate across over 9000 transactions in the agri-food space.

Key ag-tech findings include:

• Due to the industry’s successful adaptation in the midst of the pandemic, investment into ag-tech continued to expand at a staggering pace through the end of 2020, with the $ 5B total capital invested comprising almost one-third of the $ 15.9B raised across ag-tech sectors since 2010

• Late-stage deals and mega-rounds proliferated as investors rallied to support existing portfolio companies and the composition of investors continued to diversify, fueling sustained growth with the median for late-stage deals reaching record heights at $ 67.6M

• CVCs considerably increased activity in the ag-tech arena in 2020, participating in 107 funding rounds

• Biotech kept its stronghold as the top ag-tech investment area, attracting $ 1.3B in 2020, and starting off 2021 strong with $ 268.2M secured in the first quarter.

• Interest in indoor ag spiked, driven by supply chain and sustainability factors, as well as growing consumer preference for local, fresh produce with superior taste and quality –reaching $ 1.3B in funding for 2020, more than doubling YoY from $ 601M raised in 2019

• Due in large part to pandemic pressures, animal tech investment exploded in 2020 reaching $ 847.8M after lackluster interest over recent years

• Subsectors including digital technologies, precision agriculture, plant sciences, ag marketplace, and fintech also broke investment records in 2020 as stakeholders made their commitment to help growers manage climate change and overcome mounting sustainability pressures clear.

Investments and profits booming

According to Finister Ventures investments and profits are booming. “We expect 2021 to dwarf 2020 numbers as capital continues to flood into the technology categories with absolutely massive disruption potential like indoor ag, supply chain technologies, animal health, novel ingredients and alternative proteins,” said Kukutai.

Substantial consolidation and rise of distinct market leaders

“Valuations, deal totals and market sizes will continue to climb thanks to low interest rates, free-flowing capital, and trillions of dollars of pent-up consumer spending power. However, as the market inevitably right sizes and new categories of innovation emerge to meet these monumental shifts, we also expect substantial consolidation and the rise of distinct market leaders.”

• Finistere-Ventures-2020-AgriFood-Tech-Investment-Review

Hugo Claver

Web editor for Future Farming

VIDEO: Tortuga Raises $ 20m To Build Hundreds of Harvesting Robots

23-04-2021

Future Farming

Harvest automation start-up Tortuga completed a $ 20 million Series A funding. The money will be used to build hundreds of robots to deploy in 2022.

Last year Tortuga launched a strawberry harvesting robot. This platform is flexible, according to Tortuga it can be adapted to work on other crops like indoor-grown tomatoes or outdoor table grapes.

Picking robots

“For many years, the story behind harvesting robotics has been a lot of promise but really companies have struggled to deliver on that promise for the customer. That’s because this is one of the hardest problems there is to solve,” Eric Adamson, co-founder of Tortuga AgTech told AgFunder News. “Not only are we doing autonomous robotics but we are also doing picking robotics and we are doing them together in really unstructured environments.”

Robots-as-a-service

The $ 20 million in new capital will be used to build hundreds of robots to deploy in 2022. Some of the funding will also go towards building out the operating model and making sure there are enough employees to operate the robot fleets.

Tortuga currently offers its technology through a robots-as-a-service model, getting paid by the kilo for the produce that its robots pick.

View fullsize

Additional services

“On top of that, as we provide other services that are close to harvest, like data-driven forecasting and other types of cultivation services, those will also be service-based although they may not be quite so specific to a kilogram. We are charging for some of these additional services on a monthly or per-hectare basis,” Adamson told AFN.

View fullsize

Hugo Claver

Web editor for Future Farming

Why Indoor Farming Funding Is Heating Up

View fullsize

Jim Giles, GreenBiz.com

23 April 2021

Investment is flowing into the indoor farming and regenerative agricultural sector as businesses seek to bolster yields and curb emissions

The billions of dollars flowing into indoor ag, followed by news of a big announcement in regenerative farming, is yet more evidence of the furious pace of change we're seeing in food production.

On the indoor side, the update comes in the form of details on a big vertical farm that the startup Plenty is building in Compton, California. The plans are impressive:

• The 95,000 square feet facility will be as productive as 700 acres of farmland, according to CNN. In terms of land use, that's more than 200 times as efficient.

• A crop of leafy greens in the facility can go from seedling to harvest in two to three weeks, Plenty co-founder Nate Storey told LAist last year. That's significantly faster than a regular outdoor growing schedule.

• The facility will supply 100 grocery stores when production begins later this year.

This activity is partly the result of a $140m investment Plenty announced last year, just one of a slew of similar deals in the indoor ag sector. Close to $2bn will have been invested in controlled environment agriculture (CEA) between the fourth quarter of 2020 and the middle of this year, estimates David Ceaser, lead agronomist at Agritecture, an indoor ag consulting firm based in Brooklyn. Most of that is going to large automated greenhouses, he adds, but vertical farm companies such as InFarm, Oishii, and AeroFarms also have raised rounds.

"Consumer demand is fueling investment in CEA," Ceaser explained by email. "Consumers want consistent access to clean, high-quality produce, year-round. CEA production provides this and appeals to investors due to consistent revenue streams and reduced risk of interruptions compared to field-based production."   

In addition to using less land, vertical farms require fewer chemical inputs and consume far less water than conventional farms. But remember that these facilities are, to an extent, only as green as the grid they plug into: Studies have shown that using fossil fuels to power vertical farms undermines the other environmental benefits. This isn't really an argument against indoor ag in general, just a reminder that we need to decarbonize our grid as fast as possible. (For more on how that's happening and how your company can get involved, check out GreenBiz Group's new VERGE Electrify event. It runs May 25-26 and is free to attend.)

Another notable deal saw $87m funneled into Gotham Greens, which operates high-tech greenhouses. Some of that will be used to farm lettuce and herbs at a new 10-acre greenhouse in Solano County, California. The facility is co-located with the University of California, Davis, a notable agricultural research hub. Among other things, Gotham will collaborate with Davis scientists on efforts to develop new indoor varieties.

The Solano facility also feels like a statement of intent. Just a few hour’s drive south are the lettuce farms that supply much of the US market. Gotham setting up shop in Solano is like an upstart grocery chain opening in a Walmart parking lot. It signals that the newcomer believes it can take the incumbent on at its own game.

Moving outdoors, the news is that PepsiCo has committed to spreading regenerative practices on seven million acres of US farmland - roughly the size of its entire agricultural footprint - by 2030. I'll state the obvious: seven million acres is a lot of land. To put it in context, it's only two years since General Mills committed to transitioning one million acres to regenerative agriculture, which at the time felt like a step change in the spread of no-till, cover crops and other methods for restoring soil fertility. And the PepsiCo announcement comes just six months after Cargill unveiled plans to implement regenerative practices on 10 million acres. The momentum here is very clear. As well as building soil fertility, these moves potentially could lead to the drawdown of millions of tons of carbon dioxide every year.

This article first appeared at GreenBiz.com

Fashion Giant Makes Foray Into Leafy Greens

View fullsize

Y CHRIS KOMOREK

@ckfruitnet

25th March 2021, London

New Investment In Vertical Farming Company Ljusgårda AB

Comes From Platform Owned By Chairman of H&M

The investment platform owned by H&M chairman, Karl Johan Persson, has invested in Ljusgårda AB, the Swedish vertical farming business based in Tibro.

Reports published by HortNews indicate the vertical farming company is backed by a number of investors, including Philian, which is the investment platform owned by Persson.

Ljusgårda, which produces crispy bagged salads, is planning to use the new investment to expand its production area in order to produce more products.

“We will grow from a cultivation area of 300m2 to 2,500m2, and thus from cultivating two tonnes a month to 60 tonnes when the factory is in full swing after the summer,” Ljusgårda marketing manager Maria Hillerström told reporters. “We will expand with more products this spring.”

Ljusgårda’s chief executive, Andreas Wilhelmsson, added the company is ambitious to expand. “We are looking at a number of possible new locations. As our first factory will soon start producing, it’s time to start financing the growth plans.

“The interest is huge out there. On the one hand, we are joining the sustainability trend, food-tech is starting to become very popular at the same time as this type of company out in the countryside where we are is not so common.”

Lead Image credit: Hort News

Enjoyed this free article from Eurofruit Magazine and its team of editors? Don't miss out on even more in-depth analysis, plus all the latest news from the fresh produce business. Subscribe now to Eurofruit Magazine.

VIDEO: How Max Chizhov, Co-Founder And CEO of iFarm Raised $4M To Build An Indoor Farming Solution Provider In Today’s Urban Environment?

View fullsize

by AsiaTechDaily Writer

PUBLISHED: December 1, 2020

Max Chizhov is the co-founder and CEO of iFarm. The company is an indoor farming solution provider of plug and play automated vertical farms and data-driven software. Easy one-button managed farms from 50 till 5000 sq.m and a wide range of plants to grow are available for customers. Farms can be set in a store, restaurant, warehouse, home, or country house. iFarm allows everyone on Earth to grow their healthy food sustainably and be independent of the supply chain.

View fullsize

iFarm technologies are recognized worldwide: the project is not only included in the TOP 500 food startups of the world and is a member of the EIT Food Accelerator Network; iFarm also became the best agricultural startup in Europe in The Europas Awards 2020, the winner in the category of the best social impact startup of Nordic Startup Awards 2019

In an exclusive interview with AsiaTechDaily, Max Chizhov says:

The main mistake is to lose focus. We have been there too. At first, we wanted to create a whole product line that would meet both the b2b and b2c needs: indoor farms, containers, grow boxes, etc. And in the end, we realized that this would entail additional costs and postpone the launch indefinitely. As a result, we decided to focus on one area, create a high-quality industrial technology, and then develop new formats.

Don’t be afraid to make mistakes. Without them, you cannot become your best self. Also, never cease to learn. It is actually something that should be taught at school — not simply give knowledge, but teach how to find it, interpret and apply.

Read on to know more about Max Chizhov and his journey.

Please tell me about your personal background and What motivated you to get started with your company?

Max Chizhov: In 2017, I was looking for a project that, on the one hand, would be interesting for me from a professional point of view, and on the other, bring tangible benefits to society. I already had experience in the technological field, which is why I focused on that area. At that time, I also met Alex Lyskovsky, who had just finished a course at a culinary school in France. That experience left him wondering whether it was possible to grow high-quality vegetables all year round, regardless of climate conditions and with the least environmental impact, ideally making a profit. His story resonated with me, so I thoroughly researched the topic and realized that I wanted to do something; that’s how iFarm was born.

What is your current main product, and can you share any previous product pivot story to the current product?

Max Chizhov: At first, we wanted to develop as a producer of farm vegetables, herbs, and berries. But having evaluated the scaling prospects, we realized that we were not ready to wait 20 years to become a global supplier. 

Then iFarm focused on developing technological business solutions for growing delicious natural products on vertical farms in today’s urban environment. Since 2018, the iFarm team has created automated vertical farms and an IT platform to manage them. We want to equip farmers worldwide with advanced growing technologies to earn by supplying fresh, tasty, and healthy products.

How much fundraising have you raised in total so far? When was the recent funding round? 

Max Chizhov: This year iFarm closed a $4M investment round. The round was led by Gagarin Capital, which has previously invested in the project. Other investors included Matrix Capital, Impulse VC, IMI.VC and several business angels.

What were the internal decision processes in determining when to begin fundraising, and what were the logistics for this? And how many investors have you met so far and how did you meet these investors, and which channels worked best for you?

Max Chizhov: When we came up with iFarm, we were aimed at multiple growths. Having experience setting up several businesses with a similar strategy, we already knew how to develop companies at high speed and what to focus on. We needed venture capital investments to scale faster, improve the quality of our products and services, and strengthen the team with the best specialists.

The first investors were ourselves — the founders. We created a prototype and received the first money from the sale. Later, investments started to come from friends, acquaintances, and close associates. Thanks to this, we reached stable growth, finalized our target audience, and made the technology’s first sales. That was useful when we began to communicate with venture capital funds, who could give us additional value — help enter new markets and reach potential clients and raise funds in the next rounds.

The funds that have already invested in iFarm provide us with such assistance. We are also looking for new funds that are ready to work with us and help us accelerate the company’s development.

What are the biggest challenges and obstacles that you have faced in the process of fundraising? If you had fundraising, what would you do differently? 

Max Chizhov: We made several pivots during fundraising. Initially, fundraising was different, but we changed it along the way. It was not easy, but it was a conscious decision for us. After a few experiments, we came up with the most efficient and scalable concept and business model.

Not every investor is tolerant to a sudden change of concept in a company’s development, so it was important for us to find funds that would trust us and treat such changes with understanding. Of course, any decision like that has to be supported by analytics and convincing reasoning and backed by a certain reputation of the founders in investors’ eyes.

What are your milestones for the next round? And what are your goals for the future?

Max Chizhov: We are planning to close Round A for € 5 million in the first quarter of 2021. This funding will be used to advance further in Europe and the Middle East, develop iFarm Growtune and update the library of growth recipes with new crops, expand the team, and increase sales. Next year we are also aimed at launching 40,000 square meters of vertical farms under our management.

How have you attracted users, and with what strategy have you grown your company from the start to now?

Max Chizhov: We were our own first clients because, in the first place, we were creating a technology that we wanted to use. The results allowed us to validate the quality and made it clear that we had produced the product we were willing to consume ourselves. 

The next customers came through word of mouth: they contacted us through a recommendation or after tasting the products. For three years, we did not invest anything in advertising or marketing. All clients came thanks to our own activity on social networks, events, and media. 

Entering new markets today, we, of course, launch a sales funnel and aim at our target groups: b2b, enterprise, city-farmers.

What do most startups get wrong about marketing in general?

Max Chizhov: The founders’ biggest mistake is to ignore their customers and end up making a product that the market does not need. The prototype must be shown to the customer as soon as it is ready, then you collect feedback and finalize the product according to it. When entering new markets, it is necessary to conduct cust dev, collect opinions on improvement and customers’ vision for further product development.

How do you plan to expand globally?

Max Chizhov: Next year we will continue our expansion in Europe and the Middle East. In 2022-2024 we plan to enter the North American and Asian markets.

What are the most common mistakes companies make with global expansion?

Max Chizhov: None of us had any experience in this area; we wanted to produce high-quality and tasty products. It was important to go all the way from the idea to the final product, to make all possible mistakes, to realize the shortcomings of the chosen business model, and finally determine that our product would be the vertical farming technology itself, and not greens.

How do you handle this COVID-19 outbreak situation for your company’s survival in the future?

Max Chizhov: Over the last few years, the overall trend in agriculture has been to localize production. This is due to the high rates of urbanization, population growth, and in 2020 the additional impact of the Covid-19 pandemic and the quarantine following it that made the problems of long supply chains and food security even more obvious.

Such conditions make growing vegetables, berries, and greens in the consumer’s immediate vicinity a necessity. Countries have begun to think strategically about food security issues, which brought us, several large customers.

From the point of view of organizing teamwork, we did not face any difficulties. Even before the pandemic, we had been building processes and implementing tools for an effective remote team’s smooth work.

What are the most common mistakes founders make when they start a company? 

Max Chizhov: The main mistake is to lose focus. We have been there too. At first, we wanted to create a whole product line that would meet both the b2b and b2c needs: indoor farms, containers, grow boxes, etc. And in the end, we realized that this would entail additional costs and postpone the launch indefinitely. As a result, we decided to focus on one area, create a high-quality industrial technology, and then develop new formats.

Another mistake is to pay too much attention to details without seeing the bigger picture. For example, in the beginning, we did not think about any high-level process automation. But the further we went, the more clearly we understood the need to reduce human involvement in the production. That is why we developed special software for managing vertical farms — iFarm Growtune launched a drone and continues to create solutions that automate planting, moving trays on racks, assembling, and packaging.

What’s the best advice you’ve ever received? And What advice do you have for someone who is interested in doing similar things like yours or in a similar direction?

Max Chizhov: Launching a project, it is crucially important for the founders and early team members to share the same vision and ambition and make sure they are in tune. This will help you stay focused.

What are the top-three books or movies (TV series) that changed your life and why?

Max Chizhov: My top-3: Ray Dalio – Principles, Tony Hsieh – Delivering happiness, Daniel Kahneman – Thinking, Fast and Slow. These books help me to look at our business from different sides and make my workdays more efficient. 

How do you keep yourself motivated every day?

Max Chizhov: New goals and plans, a global mission that the entire team is guided by, allow you to avoid unnecessary distractions and make sure you work towards your goals. Being involved in development in the food industry, you can see, touch, and taste your work’s tangible results. This also gives additional motivation.

What are the top-three life Lessons that you want your (future) sons and daughters to know?

Max Chizhov: Don’t be afraid to make mistakes. Without them, you cannot become your best self. Also, never cease to learn. It is actually something that should be taught at school — not simply give knowledge, but teach how to find it, interpret and apply.

What would you like to be remembered for?

Max Chizhov: I would like that in a year when you hear about our company or see products grown using our technology, you would remember where we started and what mistakes we made at the very beginning, and that each mistake motivated us to move on.

You can follow Max Chizhov here.

Are you looking to secure investment for your startup or a keen startup enthusiast, keep an eye on our interview section.

Follow Asia Tech Daily to know about the innovative startups and how they are revolutionizing the ecosystem.

in Fundraising, Interviews

SWEDEN: Vinnova Grants Swegreen And Research Partners 9,1 MSEK Funding For An AI-driven Vertical Farming Project

Nov 13, 2020

Swegreen, RISE Research Institutes of Sweden and Mälardalen University team up in an innovation and research cluster named AIFood - From Farm to Fork.

Swedish AgTech rising star Swegreen, together with research partners RISE and Mälardales University, secures funding from Vinnova, for a 9,1 MSEK project aiming to develop further Swegreens’ platform for AI-driven vertical farming and to evolve a digitalized supply chain from farm to fork.

The research partners Swegreen, Mälardalen University and RISE Research Institutes of Sweden, have teamed up together to digitalize the urban farming industry and restructure the urban food industry towards climate neutrality by help of Artificial Intelligence. The core for the partners research is Swegreens’ innovation for hyper-local vertical farming and building connected and circular models for integration of those facilities in host buildings.

The cluster started off earlier this year with the project ‘NeigbourFood’, funded with 2 MSEK by Swedish Innovation Agency Vinnova, to further develop a data-driven monitoring and optimization for precision farming in closed-loop indoor environment for Swegreen’s offer for Farming as a Service FaaS. The clusters' new project, called ‘AIFood’, has now been granted with 9,1 MSEK, corresponding to approx. 1 Million USD, to enhance the local and sustainable food production systems in urban environments with help of digital technologies.

– A data-driven approach on Vertical Farming has been Swegreens’ main focus from day one, and sustainability is embedded in our DNA as a greentech company, Andreas Dahlin, CEO of Swegreen, says.

– Hand in hand with our technological development, our concrete collaboration with the leading research and academic institutions of Sweden gives us the upper hand to lead this industry’s development as a spearhead enterprise – and our partnership with RISE and Mälardalen University keeps our position on the edge of the development, globally speaking, Andreas Dahlin continues.

The call ‘AI in the service of the climate’ has been launched by the Swedish Innovation Agency Vinnova to support initiatives that focus on use of Artificial Intelligence for minimizing various industries' climate-negative impact. The agricultural and food sector accounts for 30% of the global GHG emissions, and vertical farming can create urban symbiosis as a key factor for resource efficiency and integration of farming facilities into urban infrastructure for significant global greenhouse gas emission cutback.

The ‘AIFood’ project runs for two years and focuses on a proof of concept for autonomous orchestration of vertical farming facilities modeling, and on development of an AI-based platform for precision farming, integration of vertical farms into host buildings, and autonomous interaction of the production facilities with the after-harvest actors.

Dr. Baran Cürüklü, from Mälardalen University – a vibrant AI development academic center – is the Project Lead for the cluster.

– AI can go beyond narrow and specific contributions. In this project, our aim is to demonstrate that complex and intricate systems can be orchestrated by AI, and contribute to rapid transition to a more sustainable agriculture, and even innovative services connecting the whole chain from producer to citizens, says Dr. Baran Cürüklü.

The project has a close collaboration with two other national project platforms as reference groups: Sharing Cities Sweden, a national platform for sharing economy with four testbeds in Stockholm, Umeå, Gothenburg, and Lund and a cluster called Fastighetsdatalabb which focuses on data-related advancement of the real-estate sector.

Dr. Charlie Gullström, a senior researcher at RISE, Sweden’s major research institution and head of Sharing Cities Sweden’s Stockholm testbed, plays an indispensable role in this project. She convenes an interdisciplinary climate panel connected to this project including household name researchers who focus on the climate aspect of the project. Dr. Alex Jonsson from RISE is another senior researcher that attends to the needs for the project from a technical perspective.

Dr. Gullström adds:

– I believe that urban food production can speed up climate transition because it has the potential to engage citizens in local consumption and circular business models that both reduce food waste and unnecessary transports. AI allows us to explore how to complement existing agricultural systems by actively involving stakeholders in the value chain as a whole. In this way, AIFOOD really points the way to a new green deal.

Sepehr Mousavi, Chief Innovation Officer of Swegreen remarks:

– We are proud of this collaboration with leading Swedish research institutions and researchers and see it as a successful model for how a private entity could collaborate with academia and offer its assets as a research infrastructure for the good of the whole industry, in a planet and prosperity win-win model.

– This green transformation of the food sector is dependent on empowering factors such as innovation and circularity enhancement, a connectivity-based and data-driven approach through the whole chain; and the application of Artificial Intelligence as an exponential enabler. Autonomous control of the vertical farming facilities for maximum resource efficiency, scalability and preciseness of operations is of extreme and fundamental importance for both the industry and our company to move forward, adds Sepehr Mousavi.

View fullsize

Andreas Dahlin

Press Contact

VD

andreas.dahlin@swegreen.se

View fullsize

Sepehr Mousavi

Chief Innovation Officer

Sepehr.Mousavi@swegreen.se

+46(0)733140043
 

Tags#AI#SweGreen#ArtificialIntelligence#smartcities#foodtech#faas#Viablecities#RISE#MälardalenUniversity#agriculture

Abu Dhabi Investment Office Announces Funding For LED Vertical Farm R&D

AeroFarms, Madar Farms, RNZ, and Responsive Drip Irrigation will receive AgTech-centric funding to further develop vertical farming techniques that can help feed the UAE region.

View fullsize

Maury Wright

Investment in LED-supported vertical farming begins to bloom in the UAE. (Photo credit: Image by Nattanan Kanchanaprat via Pixabay; used under a free license for commercial or noncommercial purposes.)

Apil 23, 2020

The Abu Dhabi Investment Office (ADIO) has announced $100 million in funding for what it calls “AgTech [agricultural technology] Pioneers,” each of which will build new research and/or growing facilities. The four recipients of the funding are AeroFarms, Madar Farms, RNZ, and Responsive Drip Irrigation (RDI), each of which will build new facilities in the Abu Dhabi emirate. The effort will leverage LED-based horticultural lighting and other technologies in an attempt to solve food supply issues in the UAE region and indeed around the globe.

AeroFarms, based in Newark, NJ, is a vertical farming specialist that we first encountered back in 2016. The company uses what it calls aeroponic technology to spray a mist of water and nutrients on the roots of plants. The company has been the beneficiary of other investment capital including $100 million from retailer Ikea’s investment fund.

In Abu Dhabi, AeroFarms will build a 90,000-ft2 facility that the company said will be the largest of its kind in the world. The company didn’t completely explain that statement, but we have noted of late that vertical farms come in different configurations. AeroFarms utilizes racks or shelves of plants stacked high, each with LED lighting directly over the cultivars. Others such as Plenty rely on plants grown in a vertical series of holes in a plastic pipe of sorts where water and nutrients flow top to bottom. Such a configuration has also been adopted by Freight Farms in shipping-container-based installations.

The UAE AeroFarms facility will grow commercial crops and serve in research. The company will focus on:

• Advanced organoleptic research and precision phenotyping laboratory

• Advanced seed breeding center

• Phytochemical analysis laboratory

• Machine vision and machine learning laboratory

• Robotics, automation, and drones laboratory

“Our mission is to grow the best plants possible for the betterment of humanity, and this new cutting-edge R&D facility leverages our agriculture expertise and science-driven roots,” said David Rosenberg, co-founder, and CEO of AeroFarms. “We will be conducting leading research in plant science, vertical farming, and automation, accelerating innovation cycles and commercializing a diverse range of products. We will be partnering with major international companies, local universities, and AgTech startups to help solve some of the most pressing agriculture needs of our time, and AeroFarms is proud to play a pivotal role to help establish the Emirate of Abu Dhabi as a global hub for AgTech innovation.”

Tomatoes and microgreens

Moving to Madar Farms, months ago the company revealed plans to build an indoor LED-lit farm for tomatoes and microgreens in the Abu Dhabi industrial area near the port called Kizad. The grower will presumably turn to vertical farming techniques with tomatoes — an unusual choice. But we learned at our HortiCann Light + Tech Conference last year that cannabis yields have been shown to increase with shorter, more compact plants. Biomass has typically been the goal for both cultivars, which have traditionally been grown very tall — meaning they were not amenable to stacking in layers as they would in a vertical farm arrangement. However, the evaluated vertical farming techniques applied to those high-yield cannabis grow operations might produce similar results for tomato plants.

The remaining two firms will work more in an R&D capacity. RDI is perfecting a water delivery system designed to minimize water usage in sandy soils and on non-arable land. Meanwhile, RNZ, which is based in the region, will build a new R&D center hoping to increase yield.

Our HortiCann Light + Tech Conference is slated for Oct. 20, 2020, in San Jose, CA. Bruce Bugbee of Utah State University will deliver the keynote.

For up-to-the-minute LED and SSL updates, why not follow us on Twitter? You’ll find curated content and commentary, as well as information on industry events, webcasts, and surveys on our LinkedIn Company Page and our Facebook page.

The Research of The Investment Potential of Russian Greenhouse Complexes 2019

The team of analysts from Vostock Capital is preparing a report on the research of Investment Potential of Greenhouse Complexes in Russia 2019. The report will feature:

• new investment projects (greenhouse complexes construction and modernisation)

• development perspective and challenges of the Russian greenhouse industry

• greenhouse products potential at the domestic market in the upcoming future

• global mega-trends, influencing Russian greenhouse industry and a lot more outcomes significant for the industry

Get the report by taking part in a 5-minute survey. 

Fill in the questionnaire here

The report will be prepared prior to the upcoming Forum Greenhouse Complexes Russia 2019 to be held on 4-5 December in Moscow.

4th Annual Forum and Exhibition Greenhouse Complexes Russia 2019 – is an established professional international platform for attracting investment in the Greenhouse Industry of Russia, discussion of industry development strategies, exchanging of experience between key market players and signing new win-win contracts.

Over 700 leaders and senior executives of agricultural holdings, greenhouse complexes, initiators of investment projects, investors, retail chains, government officials, producers and providers of equipment and related services for the greenhouse industry took part in the Greenhouse Complexes Russia Forum 2018.  Delegates from more than 20 countries participated in the event. 500+ business meetings were conducted at the Forum. 

Date: 4-5 December 2019

Organised by: Vostock Capital

Website: https://www.greenhousesforum.com/

Contacts: Elvira Sakhabutdinova, Project Director

+7 495 109 9 509

ESakhabutdinova@vostockcapital.com

Investing In Vertical Farming: Five Take-Aways

View fullsize

April 5, 2019

Erik Kobayashi-Solomon Contributor

“Eyewatering”

That’s the best description for recent capital inflows into the vertical farming industry. Take a look:

• July 2017: Softbank invests $200 million in Plenty.

• August 2017: IKEA and the Sheikh of Dubai invest $40 million in AeroFarms (with $115 million invested in the company over its life)

• December 2018: GV (Google Ventures) invests $90 million in Bowery Farming.

As someone focused on climate change investing, it’s hard not to take note of the scale of capital flows into private vertical farming companies.

As I mentioned in Agriculture is Broken; AgTech Can Fix It, there is a lot to like about the idea of applying modern technological solutions to the problem of food production. The global population is expanding while the earth is heating up. Something must be done to keep us out of the dismal realm of Malthus.

However, I am enough of a contrarian to become circumspect when I see massive cash flowing into a trendy investment area. Getting good information is particularly hard during boom times, because everyone, it seems, is working some angle.

In my quest to find some good, unbiased information about the industry, I struck up a friendship with Dr. Paul Gauthier, a plant physiologist specializing in vertical farming research. Dr. Gauthier runs the Princeton Vertical Farming Project and will soon transfer his lab and research from Princeton University to Delaware Valley University where he has been selected for the K.H. Littlefield Endowed Professorship of Plant Science.

I spent a day with Paul in Princeton and came away with five important take-aways about vertical farming.

View fullsize

Dr. Paul Gauthier at work at the Princeton Vertical Farming Project labs

PRINCETON UNIVERSITY

“You can’t feed the planet with lettuce alone.”

Lettuce, herbs, and microgreens are easy crops to grow indoors, so a lot of indoor farms are focused solely on producing them. Farmers, though, cannot escape two economic facts: 1) markets conform to the dynamics of supply and demand and 2) farm inventories are perishable.

If your vertical farm and three competitors each have enormous warehouses stuffed full of lettuce growing under LEDs and destined for the same metropolitan area, the price of lettuce in that area is likely to fall and / or someone will be trashing a lot of wilting greens.

Other crops can be grown indoors too – Gauthier has grown berries, eggplants, peppers, and even grain in his lab – but it takes an expert understanding of what plants need to grow and thrive and many cycles of trial and error.

View fullsize

Rows of produce grow inside plastic trays at the Bowery Farming Inc. indoor farm in Kearny, New Jersey, U.S., on Tuesday, Aug. 7, 2018. The startup says automation, space-saving vertically stacked crops and a year-round growing season make its operations 100-plus times more productive per square foot than traditional farms. Photographer: David Williams/Bloomberg

© 2018 BLOOMBERG FINANCE LP

More basic science needs to be done

Humans have 12,000 years of experience growing food, but only a generation or so worth of experience growing crops indoors. We are still progressing up the technology learning curve, to the extent that there is a lack of good data about basic questions -- comparing crop yields for plants grown outdoors in soil, inside a greenhouse, and indoors using hydroponics, for instance.

What’s more, traditional farming techniques are based on conditions that are not applicable to vertical farming. Outdoors, food crops are exposed to variations in rainfall, light and wind, and must compete with other plants to scavenge for nutrients in variable-quality soil while exposed to the threat of animal or insect predation.

The fact that vertical farming removes the uncertainties inherent in nature is a positive, but by taking plants from their natural habitats, we are implicitly saying that we understand everything about what a plant needs to thrive. We don’t. Without that understanding, we are left with overproducing crops that are easy to grow indoors: lettuce, herbs, and leafy greens.

The recently passed Farm Bill provides support for research and investment into vertical farms and that’s a big positive for the industry, but we still have further to go. Without taking time to understand the science, though, vertical farming is not likely to be able to live up to its lofty implied promises (or investment valuations).

View fullsize

Photographer: David Williams/Bloomberg

© 2018 BLOOMBERG FINANCE LP

Vertical Farming is not a pie-in-the-sky, but it’s not a lay-up either.

The cost of powering LED grow lights is one of the biggest hurdles a vertical farm must overcome for its produce to be competitive with fruits and vegetables from a traditional farm.

Costs are so high, in fact, that professor emeritus at Cornell, Dr. Louis Albright, has characterized vertical farms as “pie-in-the-sky” ventures. Albright famously calculates, for instance, that the cost of a loaf of bread would be $24 if farmed indoors – price prohibitive to anyone but Ricky Gervais.

Gauthier acknowledges that energy prices are high but points out that that many are experimenting with using less light to grow crops. Scientific work has shown that only about 6% of available sunlight is used in crop photosynthesis, so there may be ways of growing the same plants with less light.

LED technology is continually improving and at some point, governments around the world will decide to stop externalizing the cost of emitting greenhouse gases. Until that time, however, large scale vertical farm profitability is likely to remain low.

View fullsize

Photographer: David Williams/Bloomberg | © 2018 BLOOMBERG FINANCE LP

Vertical farming offers some great sustainability benefits

While energy costs are not a lay-up, vertical farming does create enormous efficiencies in other areas. Water usage may be drastically reduced because the same water can be recycled time and again through the same hydroponic system.

Fertilizer use can be greatly reduced and herbicides and pesticides for weed and pest control are unnecessary. These agricultural chemicals – which are habitually over-applied, only to run off into rivers and lakes – are likely responsible for everything from ocean dead zones to algal blooms to die-offs among pollinating insect.

Factoring in the economic benefits we enjoy as a result of clean oceans and thriving pollinators, it’s clear that vertical farming offers real value to society. As long as the price of carbon emissions and environmental pollution is not priced explicitly, though, it will be difficult for many people to accurately perceive the benefits.

View fullsize

An employee checks lettuce grown in an indoor farm at a Spread Co. plant in Kameoka, Kyoto Prefecture, Japan, on Tuesday, Oct. 2, 2018. Spread is preparing to open the world’s largest automated leaf-vegetable factory. It’s the company’s second vertical farm and could mark a turning point for vertical farming -- bringing the cost low enough to compete with traditional farms on a large scale. Photographer: Tomohiro Ohsumi/Bloomberg

© 2018 BLOOMBERG FINANCE LP

The future is probably hybrid

In some environments – the Middle East, for instance – a move to vertical farming is a no-brainer. An indoor farm in Saudi Arabia, for instance, can use solar energy to power LEDs at low cost without shading out other farmland. At present, virtually all vegetables must be imported into the country, so having locally-grown crops there would be a big win.

In other geographies, though, the expense of establishing a facility places a high bar on growth and profitability that vertical farms have had trouble clearing. For instance, AeroFarms, a large vertical farming and equipment operation mentioned in the introduction, only started generating a (small) profit eight years into its nine-year life.

Facing high capital and operating expenses, I doubt if large, industrial vertical farms can profitably become the primary source of most US consumers’ fruits and vegetables anytime soon.

However, smaller, tuck-in vertical farming installations on presently operating farms could produce countercyclical crops and supply a local alternative to food that is normally imported.

For instance, a farmer in the upper Midwest could build out hydroponics facilities in an old barn or an unused plot of land that would be used to grow strawberries for sale in Chicago and Minneapolis supermarkets in January. Berries fetch a high price mid-winter in this part of the country, and selling fresh local produce into this market could add a nice, countercyclical income stream to the farmer.

Gauthier’s vision is even more local. He adapts Bill Gates’s 1980 vision of a personal computer in every home and predicts that in the future, every home will have its own hydroponic vegetable plot.

View fullsize

Erik Kobayashi-Solomon Contributor

I am the founder of IOI Capital, the manager of a private investment partnership dedicated to investing in public and private companies focusing on ways to help civilization mitigate and adapt to the effects of climate change. My expertise in valuing private and publicly-traded companies has been sought out by top institutions, including the World Bank, and I have appeared on national TV programs such as The Nightly Business Report and in the international media. In 2014, I published The Intelligent Option Investor: Applying Value Investing to the World of Options (McGraw-Hill) and before becoming a Forbes contributor, I worked as a hedge fund risk manager, an investment banker in Tokyo and New York, a Market Strategist for Morningstar and as the Director of Research for a financial data start-up in Chicago.

The Investment Company The World Needs

March 9, 2019

Kyle Baldock

Setting a Higher Standard in AgriTech Investment

Neon Bloom is a venture capital firm that focuses on acquiring innovative agriculture and ancillary technology products and services across the globe. With a suite of flagship investments in Holland and one in South Korea, Neon Bloom has made a strong start for a company that only began in January of this year. Of central importance to their investment strategy is a keen understanding of the holistic nature of the industry: they invest in complimentary companies in order to bring various parts of the value chain under a single umbrella. I interviewed Company Director Werner Huisman about this “Seed to Sale,” approach to investing. He told me:

“The big advantage is bringing knowledge together from many different parts of the world. Having the opportunity to bring so many talented individuals under one brand with the same mission and vision empowers each company within the portfolio.”

Read on to learn more about Neon Bloom’s mission to advance the industry for the betterment of mankind.

Getting to know: Neon Bloom

When did Neon Bloom start operating and why is it focused on AgriTech?

WH: Neon Bloom started the operation beginning this year. We are focused on the three pillars of water, power and food. We believe in “the zero hunger” mission and want to be a part of this mission. After learning about the importance of technology to improve sustainability and reduce the cost of goods we realised the importance of innovation to help with “The Zero Hunger” mission.

What technologies and trends are you most interested in for the coming decade?

WH: I believe in technologies based on natural and sustainable solutions. By the year 2050 the world population is expected to grow to 10 Billion people. This is over a 56% increase of food needed compared to 2010. It is going to take innovative technologies and a group effort to meet the demand. Looking at the solutions we bring in from Holland, they are all natural and sustainable.

Within HollandPlug we produce 100% organic substrates based on jute and PLA. This should replace the environmentally-unfriendly stonewool substrates.

Within Holland Pulse Light we are able to extend the expiration date for food by generating an enormous amount of energy through our pulse light technology- the pulse light flash has a power of 1850 Joule. With the electronic magnetic field and the enormous number of photons we are able to generate we are able to flash the food with the light and eliminate bacteria, fungi and viruses with all-natural products. Our machine utilises mainly UV-A which is able to rupture the cell membranes; whereas UV-C light impacts the DNA which changes the texture and taste of the food.

Within Holland2O we sell water machines which are able to produce HOCl water with a very low ppm value! (<30 ppm). This water has a redox value of around 1000 Orp(V) and an pH of 6.6 which is able to remain stable for a long period of time. With this water, we are able to kill all sorts of bacteria, fungi and viruses using only natural substances.

Where in the world are you seeing the most innovation in your three pillars of power, water and food?

WH: In principle, all around the world. In each part of the world there is a shortage of water; in each part of the world they grow fruit and vegetables and in each part of the world there are problems with fungi, viruses and bacteria. We believe that it will take a global effort to help meet the needs of the world over the next several decades.

Which volume are you in the market for- what is a normal project volume?

WH: Depends on which product you are talking about, but talking about % in the substrate market, we think we can take over 30% in 3 years’ time. We also believe our other technologies will have the capabilities to capture a significant amount of the market share. It is important to us that sustainable technologies lead the way in vertical farming.

What does Neon Bloom look for in potential acquisitions/investments?

WH: The requirements are in general as follows:

• Product should have a relation to power, water or food;

• The product should have a sustainable character;

• It should have international potential;

• The company must share our core values and vision

Does your company do VC or corporate finance? Debt or equity financing? Does Neon Bloom invest its own money?

WH: Neon Bloom is a VC with a focus on sustainable companies operating in power, water or the food industries. Our firm will provide debt or equity financing depending on our clients need. Yes, Neon Bloom invests its own money and is always searching for innovative companies to help us meet the “Zero Hunger” mission.

What advice would you give to AgTech companies that are looking to attract capital?

WH: You can attract capital from anywhere, so I would advise them to take a substantial amount of time defining their mission and vision statements. If your company’s core values and mission don’t align with an investment partner; then I would recommend finding a better fit. Secondly, see how their network and skill set can help grow your company’s footprint as well as impact in the world.

Why did Neon Bloom choose to become a member of the National Cannabis Industry Association? 

WH: We decided to become a member of the National Cannabis Industry Association because of our first-hand experience of seeing the medical benefits the plant provides. This can help veterans dealing with PTSD or individuals with serious diseases. Cannabis is grown naturally and we believe it is a much better medicine than the drugs provided from pharmaceutical companies. It also has had a huge impact on slowing down the opioid crisis.

Why is there no visible investment in any cannabis related tech or producer?

WH: Our substrate technology can be utilised directly when growing cannabis along with our water. Both of these innovative technologies will allow for a product that is free of pesticides. It is the company’s goal to begin working with hemp producers this year. This will help provide food to the world as well as numerous other benefits to other industries.

Why did Neon Bloom join AVF?

WH: We don’t define success based on how much money a company is able to generate. Our firm determines success based on the impact and legacy we can leave on the world. It is crucial for humanity that we begin to implement many of the policies and beliefs of the AVF if we plan on having a sustainable future and to be able to meet the food demand for the ever-growing world population.

Want to find out more?

Visit Neon Bloom on the web: neonbloominc.com

View fullsize

KYLE BALDOCK

VIEW ALL POSTS