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.

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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.

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Investment Projects On Construction And Modernisation of Greenhouse Complexes Will Be Presented At the 6th Annual International Forum Greenhouse Complexes Russia & CIS 2021

Date: 1-3 December 2021

Place: Moscow, Baltschug Kempinski

Organized by: Vostock Capital

Tel.: +44 207 394 3090  

E-mail: Events@vostockcapital.com

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

6th Annual International Forum Greenhouse Complexes Russia & CIS 2021 is an established professional international platform for attracting investment in the Greenhouse Industry of Russia, discussion of industry development strategies, exchanging experience between key market players, and signing new win-win contracts.

The Forum is supported by the Ministry of Agriculture of the Russian Federation.

 Silver sponsors: Svetogor, Gavita. Bronze sponsor: Hortilux.

Industry partner: the Association “Greenhouses of Russia”.

Onsite Visit Partners: Agrokombinat Moskovsky, Podosinki greenhouse complex.

You have the opportunity to become a part of a unique business conference.

Please Note! Vostock Capital company, an organizer of the International Forum in Moscow, assists foreigners interested in the industry development with entering Russia for event participation on the basis of a “green list”. Foreign delegates will be included in this list if they register for the event and submit their documents before August 10.

The event annually brings together over 500 delegates from the largest federal and regional agro holdings, heads of retail chains and service companies, presidents of national unions and associations. Just to name a few: ECO-Culture,  Stavropol Flavour, Greenhouse, Ovoschevod, Grow Group Azerbaijan, Yagodnaya Dolina, Tander, X5 Retail Group, Agricultural Complex Gorkovskiy, Agrocombine Moskovskiy, MC AgroPark Plody s Gryadki, Yug-Agro, ECO-farm Mazilovo, Trading House Vyborgec, Green Farmer, Sun Valley, Growth Technology, Yagodnaya Dolina, Udmurt Flowers, FITO, MWM RUS, Horti XS BV, Pylot, AgroBioTechnology and many others.

Among the speakers and honorary guests 2020: Dzhambulat Khatuov, First Deputy Minister, the Ministry of Agriculture of Russian Federation; Dmitry Aveltsov, CEO, Ministry of Agriculture of the RF Center of Agroanalytics Federal state budgetary organization; Inna Rykova, Head of the Sectorial Economy Centre, The Federal State Budgetary Institution Financial Research Institute of the Ministry of Finance of the Russian Federation; Dmirty Lashin, Chairman of the Board of Directors, Lipetskagro; Alexey Shemetov, Vice-President, Production Operation, Agricultural Holding ECO-Culture; Dmitry Lisnevskiy, Minister, Ministry of Investment Policy of Sakhalin Region; Sharip Sharipov, First Deputy Minister, Ministry of Agriculture and Food of the Republic of Dagestan; Alexander Belkovets, General Director, Trading House Vyborgec, Agrofirma Vyborgec; Andrey Chigin, General Director, Stavropol Flavour and many others.

Forum Highlights 2021:

·      500+ executives of flagship greenhouse complexes and agro holdings from Russia and the CIS – Belarus, Armenia, Kazakhstan, Uzbekistan, Azerbaijan, as well as investors, government representatives, chief agronomists, managers of retail chains and service companies

·      NEW! 2 TECHNICAL VISITS to state-of-the-art greenhouse complexes – Agrokombinat Moskovsky (vegetable farming) and Podosinki (flower cultivation)

·      Leaders' debates: the Ministry of Agriculture of the Russian Federation, agro holdings, investors, initiators. Post-pandemic status of the greenhouse industry

·      Greenhouse investment projects on modernization and construction with the implementation period of 2021-2025 from all Russian regions and the CIS countries

·      NEW! HYDROPONICS AND VERTICAL FARMING. What is the difference from traditional industrial cultivation? Technology development prospects

·      FOCUS SESSION: STRATEGIES TO INCREASE SALES. How to establish interaction between suppliers and retailers for the benefit of all?

·      HOW TO OPTIMISE PRODUCTION WITH THE HELP OF INNOVATIVE GREENHOUSE TECHNOLOGIES. How do innovations boost the development of the greenhouse industry?

·      IMPORTANT! POWER SUPPLY IN THE GREENHOUSE INDUSTRY. Cost optimization methods

·      INCREASE IN YIELD AND RESISTANCE – MODERN APPROACHES TO CULTIVATION. Parallel round tables for agronomists in the following areas: fruit and vegetable and lettuce greenhouses, mushroom complexes, berry greenhouses

·      Presentation of modern equipment and technologies for greenhouse complexes from top companies from the Netherlands, Israel, Germany, Italy, Spain, and other countries

·      Fast and efficient! Roadshow of innovative technologies and equipment by the global leaders

·      EVENING COCKTAIL

Register Now 

           

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.

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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

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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

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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.” 

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

Chris Katje, Benzinga Staff Writer

June 18, 2021

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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)

Vertical Farm Merger Valued At $1.1 Billion

June 18, 2021

HAMILTON, Mont.–(BUSINESS WIRE)–Breakthrough U.S. indoor agriculture company Local Bounti Corporation (Local Bounti) has agreed to go public through a merger with Leo Holdings III Corp. (Leo or Leo Holdings) (NYSE: LIII), a publicly-traded special purpose acquisition company, pursuant to a definitive business combination agreement. The transaction values the combined company at an equity value of $1.1 billion (assuming no redemptions) and upon closing of the transaction, the combined company is expected to remain listed on the New York Stock Exchange under the symbol “LOCL”.

Strategic partners include food and agriculture industry giant Cargill and Sarath Ratanavadi, CEO of Gulf Energy Development Public Company Limited – Thailand’s largest private energy and infrastructure company and one of the world’s leaders in sustainable energy – which are investing in the combined company through a private investment in public equity (PIPE) arrangement. Cargill is also expected to provide $200 million in debt financing to accelerate Local Bounti’s expansion plans. Local Bounti plans to use the capital to build local strategically-located indoor farming facilities across the Western U.S. to provide fresh, superior-tasting, long-lasting and sustainably-grown produce with minimal carbon footprint.

Local Bounti Investment Highlights

Superior unit economics, with high yield and low-cost operations, enabled by unique hybrid facility configuration that addresses the challenges of conventional greenhouse and vertical farming

Producing leafy greens today at initial facility with pipeline to grow to eight facilities and the company expects to have over 30 SKUs by the end of 2025, which extends Local Bounti’s penetration, beginning in the largely untapped Western U.S. market

Superior brand and product that is local and sustainable across a growing number of SKUs, currently in more than 400 retail stores, including Associated Food Stores and URM served retail banners such as Rosauers, Super 1 Foods and Yoke’s

Strong commitment to Environmental, Social and Governance (ESG) practices and standards, including an executive team member who is Global Reporting Initiative (GRI)-certified to ensure aggressively transparent reporting per GRI and Sustainability Accounting Standards Board

Best-in-class, established management team of seasoned veterans at scaling early-stage companies, with Fortune 500 and public company experience

“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,” said Local Bounti Co-Founder and Co-CEO Craig Hurlbert. Based on publicly available market research on CEA, Local Bounti believes the current Western U.S. market opportunity is approximately $10.6 billion, and estimates that the total U.S. market for vegetables and herbs will reach up to $30 billion by 2025.

“We look forward to leveraging our proven business model as we accelerate the building of cutting-edge local production facilities that feature our proprietary IP, referred to as Stack & Flow Technology™, and transforming conventional agriculture practices for the benefit of all our customers, no matter where in the world they’re located,” he said, adding that the company’s growth plans include adding seven new facilities and local leadership in different geographic regions, as well as global expansion of its proprietary technology.

An industry disruptor changing the way food is grown and re-imagining the Farm of the Future™, Local Bounti is a premier controlled environment agriculture (CEA) company redefining ESG standards for indoor agriculture. The company’s unique business model is based on building local facilities, operated by local teams, to deliver the freshest and highest quality produce to local communities while maintaining a limited carbon footprint. Using proprietary technology to grow leafy greens and herbs in a smart, indoor controlled environment – and with a cultivation process that uses 90 percent less water and land than conventional agriculture, free from herbicides or pesticides – Local Bounti delivers high-quality produce that not only has a longer shelf life, but is also superior in taste.

“Local Bounti is set to be a transformational force in the AgTech industry with its demonstrated concept and model in food production and distribution,” said Lyndon Lea, President and CEO of Leo. “Combining Local Bounti’s emphasis on innovation, entrepreneurial spirit, and technology-driven approach with the institutional knowledge of the Leo Holdings team, we are confident in the company’s ability to expand in both reach and consumer offerings.”

Leveraging its innovative proprietary modular and scalable building system, which is designed to easily and efficiently replicate the company’s sustainable indoor farm model, Local Bounti is more than doubling the size of its flagship facility in Hamilton, Montana, and plans to break ground on additional facilities in the Western U.S. before the end of this year.

To learn more about Local Bounti’s unique growing process, diversified product offerings and experienced leadership team, please visit localbounti.com.

Transaction Overview

As a result of the transaction with Leo, Local Bounti will receive up to $400 million in gross proceeds (assuming no redemptions), including $125 million from a fully committed PIPE anchored by existing investors and new investors, including Fidelity Management & Research Company LLC, BNP Paribas Asset Management Ecosystem Restoration Fund and Cargill.

The Boards of Directors of Local Bounti and Leo unanimously approved the transaction, and the transaction will require the approval of the stockholders of both Local Bounti and Leo and is subject to other customary closing conditions. The transaction is expected to close in the second half of 2021.

Additional information about the proposed transaction, including a copy of the merger agreement and investor presentation, will be provided in a Current Report on Form 8-K to be filed by Leo Holdings III with the Securities and Exchange Commission (SEC) and will be available at www.sec.gov. For materials and information, visit the investor section of www.leoholdings.com for Leo, which can be found HERE.

Advisors

Morgan Stanley & Co. LLC, Deutsche Bank Securities Inc., and Nomura Securities International, Inc. served as placement agents on the PIPE and Debevoise & Plimpton LLP served as legal advisor to the placement agents. Kirkland & Ellis LLP served as legal advisor to Leo. Morgan Stanley & Co. LLC and Nomura Greentech served as financial advisors to Local Bounti and Orrick Herrington & Sutcliffe LLP served as legal advisor to Local Bounti.

About Local Bounti

Local Bounti is a premier controlled environment agriculture (CEA) company redefining conversion efficiency and environmental, social and governance (ESG) standards for indoor agriculture. The company operates an advanced indoor growing facility in Hamilton, Montana, within a few hours’ drive of its retail and food service partners. Reaching retail shelves in record time post-harvest, Local Bounti produce is superior in taste and quality compared to traditional field-grown greens. The company’s USDA Harmonized Good Agricultural Practices (GAP Plus+) and non-genetically modified organisms (GMO) produce is sustainably grown using proprietary technology 365 days a year, free of pesticides and herbicides, and using 90 percent less land and water than conventional outdoor farming methods. With a mission to ‘bring our farm to your kitchen in the fewest food miles possible,’ Local Bounti is disrupting the cultivation and delivery of produce. The company is also committed to making meaningful connections and giving back to each of the communities it serves. To find out more, visit localbounti.com or follow the company on LinkedIn for the latest news and developments.

About Leo Holdings III Corp and Leo Holdings

Leo Holdings III Corp is a special purpose acquisition company (SPAC) that seeks to invest in entrepreneurially driven growth companies that seek to disrupt existing industries or business models. The management team has extensive experience owning and operating businesses on a global scale through its private equity vehicle, Lion Capital. Leo Holdings’ management team has collaboratively worked together for over 20 years.

Leo Holdings III Corp is part of a special purpose acquisition company initiative, Leo Holdings, which is focused on investing in disruptive, innovative business models. The initiative seeks businesses positioned to thrive in the evolving digital information age where changing consumer behavior creates the opportunity for outsized returns. In 2020, Leo Holdings Corp entered into a business combination with DMS, a disruptive performance marketing business which delivers high-intent customers while de-risking client advertising spend. Leo Holdings Corp II (LHC) and Leo Holdings III Corp (LIII) are currently listed on the NYSE.

Leo Holdings was formed by the principals of Lion Capital, which is led by Founder and Managing Partner, Lyndon Lea. For more information, visit https://leoholdings.com/.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements included in this Press Release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this Press Release, and on the current expectations of Local Bounti’s and Leo’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Local Bounti and Leo. These forward-looking statements are subject to a number of risks and uncertainties, including changes in domestic and foreign business, market, financial, political and legal conditions; the inability of the parties to successfully or timely consummate the proposed transaction, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the combined company or the expected benefits of the proposed transaction or that the approval of the stockholders of Leo or Local Bounti is not obtained; failure to realize the anticipated benefits of the proposed transaction; risks relating to the uncertainty of the projected financial information with respect to Local Bounti; the effects of competition on Local Bounti’s future business; the impact of the COVID-19 pandemic on Local Bounti’s business; the ability of Leo or the combined company to issue equity or equity-linked securities or obtain debt financing in connection with the proposed transaction or in the future, and those factors discussed in Leo’s final prospectus dated February 25, 2021 under the heading “Risk Factors,” and other documents of Leo filed, or to be filed, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that none of Leo or Local Bounti presently know or that Leo or Local Bounti currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect Leo’s and Local Bounti’s expectations, plans or forecasts of future events and views as of the date of this Press Release. Leo and Local Bounti anticipate that subsequent events and developments will cause Leo’s and Local Bounti’s assessments to change. However, while Leo and Local Bounti may elect to update these forward-looking statements at some point in the future, Leo and Local Bounti specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing Leo’s and Local Bounti’s assessments as of any date subsequent to the date of this Press Release. Accordingly, undue reliance should not be placed upon the forward-looking statements. Certain market data information in this Press Release is based on the estimates of Local Bounti and Leo management. Local Bounti and Leo obtained the industry, market and competitive position data used throughout this Press Release from internal estimates and research as well as from industry publications and research, surveys and studies conducted by third parties. Local Bounti and Leo believe their estimates to be accurate as of the date of this Press Release. However, this information may prove to be inaccurate because of the method by which Local Bounti or Leo obtained some of the data for its estimates or because this information cannot always be verified due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process.

Important Information

In connection with the proposed transaction, Leo intends to file a registration statement on Form S-4, including a proxy statement/prospectus (the “Registration Statement”), with the SEC, which will include a preliminary proxy statement to be distributed to holders of Leo’s ordinary shares in connection with Leo’s solicitation of proxies for the vote by Leo’s shareholders with respect to the proposed transaction and other matters as will be described in the Registration Statement, and a prospectus relating to, among other things, the offer of the securities to be issued to Local Bounti’s stockholders in connection with the proposed transaction. After the Registration Statement has been declared effective, Leo will mail a definitive proxy statement/prospectus, when available, to its shareholders. Investors and security holders and other interested parties are urged to read the proxy statement/prospectus, and any amendments thereto and any other documents filed with the SEC when they become available, carefully and in their entirety because they contain important information about Leo, Local Bounti and the proposed transaction. Investors and security holders may obtain free copies of the preliminary proxy statement/prospectus and definitive proxy statement/prospectus (when available) and other documents filed with the SEC by Leo through the website maintained by the SEC at http://www.sec.gov. These documents (when they are available) can also be obtained free of charge from Leo upon written request to Leo by emailing brown@leo.holdings or by directing a request to Leo’s secretary at c/o Leo Holdings III Corp, 21 Grosvenor Pl, London SW1X 7HF, United Kingdom.

Participants in the Solicitation

Leo and Local Bounti and their respective directors and certain of their respective executive officers and other members of management and employees may be considered participants in the solicitation of proxies with respect to the proposed transaction. Information about the directors and executive officers of Leo in its final prospectus dated February 25, 2021. Additional information regarding the participants in the proxy solicitation and a description of their direct interests, by security holdings or otherwise, will be set forth in the Registration Statement and other relevant materials to be filed with the SEC regarding the proposed transaction. Stockholders, potential investors, and other interested persons should read the Registration Statement carefully before making any voting or investment decisions. These documents, when available, can be obtained free of charge from the sources indicated above.

No Offer or Solicitation

This communication is for informational purposes only and is not intended to and shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy or subscribe for any securities or a solicitation of any vote of approval, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Tagged mergers & acquisitions, vertical farming

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

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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

Widespread Investment In CEA Is An Important Piece of The Food Security Puzzle

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Article Source

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Sky Kurtz, CEO, and Co-Founder, Pure Harvest Smart Farms

There is a commonly quoted statistic estimating that by 2050, we will have nearly 10 billion people on the planet and, in turn, 10 billion hungry mouths to feed. Aside from population factors, the world’s climate is changing in ways human beings have never seen before. Across the globe, our water sources are being diminished and arable landmasses are shrinking. Food security and sustainability is becoming an ever-more pressing issue. There are a number of pioneering companies worldwide working hard to address these critical issues.

The Problem with Traditional Agriculture
It has become increasingly clear that traditional agriculture is simply not meeting the food demands of the future. Food production is heavily driven by significant freshwater consumption and can be both labour intensive and inefficient. Alongside this, changes in climate are negatively impacting yields. This is being witnessed across the board by the food production industry, investors, and governments alike.

The Power of the Consumer
Increased awareness of these issues has led to changes in consumer demands. Consumers have become more discerning about the quality of the products they buy, specifically when it comes to pesticide use, sustainability, freshness, food safety, variety, and brands. They are ever more interested in having knowledge of and creating a relationship with the foods they consume. This is evidenced by the huge organic growth rates of organics over the past 10 years. People care about quality and are voting strongly with their wallets.

Cultural and socio-economic demographics heavily influence what can and should be grown. Some crops such as premium quality leafy greens tend to target more affluent demographics and palates, whereas tomatoes, cucumbers, and a number of other greenhouse vegetables are staples of many diets and can be produced affordably in most places in the world.

The Promise of Controlled-Environment Agriculture
Controlled-Environment Agriculture (CEA) facilitates the growth of sustainable, high-quality produce but not at the expense of the consumer. CEA allows for consistent, high quality production by eliminating the environmental impacts on food production, allowing for more localized production, and reducing, or even eliminating, the use of pesticides.

Reducing Risk
Since early 2020, COVID-19 has woken the world to the risks and fragility of global fresh fruit and vegetable supply chains. Given perishability, the fruit & vegetable market is uniquely vulnerable vs. other crops e.g. the likes of corn, wheat, rice which can be stored & siloed. Controlled-environment agriculture is a solution that addresses these issues facilitating more localized production and supply, offering high output, resource-efficient production capabilities, while meeting the consumer’s changing demands.

In March, the world’s gaze turned to the Suez Canal where a container ship, the Ever Given, became lodged, blocking the canal. On a daily basis, the Suez Canal carries 12% of global trade, around one million barrels of oil and roughly 8% of liquefied natural gas. The cost of the blockage was reportedly $14m-$15m every day!

The Local Promise
The local unique selling point (USP) is now possible pretty much anywhere. Solutions like ours at Pure Harvest Smart Farms have made it possible to affordably produce year-round, even in the harshest climates in the world for example, the UAE, Kuwait, and Malaysia serving Singapore.

Large-scale solutions are necessary for the food to be economic, due to economies of scale in what is ultimately a manufacturing process. Large-scale greenhouses are particularly suitable for dense urban populations, as just 1 or 2 large production sites within 100 – 500 kilometers of the city or town can serve a large group of people affordably.

Unfortunately for more distributed, rural populations, this becomes more challenging. If you scale-down the solutions to hyper-localize, you often lose efficiency (in terms of both capital expenditure/ m2 and operational expenditure/ m2 for production. With more of the world’s population urbanizing, this is another trend that supports widespread investment in CEA as an important piece of the puzzle to serve future food demands.

The Future
The challenge of feeding nearly 10 billion people by 2050 MUST be solved on both the supply side and demand side. From the supply side, adopting technologies that augment output and resource-efficient growing methods. From the demand side, via changing what we consume, reducing waste, and environmental consciousness. Addressing these issues means we can produce more food with less and less resources.

High-tech agriculture presents a multi-decade investment opportunity to contribute to food security, water conservation, economic diversification, and a more sustainable future for all.

Join Sky at the virtual Indoor AgTech Innovation Summit on June 24 and tune into his live panel discussion on ‘Scaling at Speed: Delivering the Promises of a Mission-Led Industry’ at 16.50 EST.

For more information about Pure Harvest Smart Farms, follow them on Facebook, LinkedIn, Instagram and Twitter.

Recent Posts

Indoor AgTech Investment Landscape

Interview with Bowery Farming on Rapidly Growing the Indoor Farming Sector through Investment and CEA

Widespread Investment in CEA is an Important Piece of the Food Security Puzzle

Workshop: Food for the Next Frontier

Connecting Retailers, Buyers, and Growers Across Indoor Farming

IGS enters UAE market, signing deal with Madar Farms to enhance food security in the GCC region

Archive

2021 2020

Twitter: @IndoorAgTech
LinkedIn: Indoor AgTech
Hashtag: #IndoorAgTech

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

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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.

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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.

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Hugo Claver

Web editor for Future Farming

Barton Breeze Launches Bank Guarantee For Hydroponic Farms

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New Delhi | April 21, 2021

TV Jayan

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In an attempt to make hydroponic farming attractive to those interested in farming, Barton Breeze, a Gurugram-based agritech firm, has come up with an assured return plan with a bank guarantee.

“A prospective investor will be able to get an assured annual return of 30 percent on his capital expenditure. We would operate the farm for them and sell the produce for them. If there is a shortfall in this return, the deficit would be paid by banks with whom we have entered into an agreement,” said Shivendra Singh, Founder, and CEO of the commercial hydroponic farming venture, which set up shop in India in 2017 after a successful run in West Asia.

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Singh said the firm has already tied up with the State Bank of India and HDFC Bank for the bank guarantee scheme. Explaining the model further, Singh said not only progressive farmers, but HNIs and corporates would be able to reap benefits from this scheme.

“Hydroponic has several benefits for commercial farms. However, many customers are not completely aware of the environmental and financial contribution of it that makes them skeptical of investing in a hydroponic set-up. Our approach of providing a bank guarantee to B2B customers ensures a risk-free transaction. With this strategic step, we look forward to strengthening our relationship with customers,” said Singh.

“This a bit similar to contract farming, except that in this case, we take care of everything, including running of the farm. Unlike in contract farming where the farmer is having the liability and responsibility of growing the crop, we ensure that the crop is grown properly by being present at the farm on a continuous basis,” Singh told BusinessLine.

According to him, the capital expenditure involved in setting a one-acre hydroponic farm is around ₹1.1 crore, and with the government subsidies, this comes further down to around ₹85 lakh.

To make this attractive for urban dwellers interested in investing in farming, Barton Breeze plans to make it possible to invest as little as ₹5 lakh. He said a bunch of people can together and start a hydroponic farm, which his firm can help set up. There is no need to purchase the land as it can be taken on long lease, say, of 10 to 12 years. “We will ensure that they would get 30 percent or more returns on the investment annually,” said Singh. The bank guarantee will be available to the investors for three years initially, but this can be further renewed.

He said already a few farms are being planned in Delhi-NCR, Kolkata, and Indore in Madhya Pradesh under the bank guarantee scheme.

Singh said his young company has been growing exponentially in the last few years. Starting from a low base, the firm grew by eight times in 2017, six times each in two subsequent years. “Even in 2020, which was hit by Covid-19, we grew by 300 per cent,” he claimed.

Barton Breeze, which introduced hydroponic kits that can be used by city dwellers to grow vegetables in their terraces and balconies in the country a couple of years ago, normally grows off-season vegetables and greens to fetch a better price for their farmer customers.

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Fashion Giant Makes Foray Into Leafy Greens

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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

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A New Searchable Directory Focuses On Women Innovators In Agrifoodtech

Connie Bowen & Amy Wu

Image credit: Women in Agriculture Summit

Editor’s note: Amy Wu is the founder of From Farms to Incubators in Salinas, California, and Connie Bowen is the director of innovation and investment at AgLaunch in Memphis, Tennessee. 

Despite a global pandemic, agrifoodtech startups received $30.5 billion in investment in 2020 – a big increase from the $20.2 billion raised in 2019, according to AgFunder’s 2021 Agrifoodtech Investment Report. Previously emerging technology trends rapidly accelerated in the midst of increasing pressures on global food supply chains. These include everything from robotics and automation to fill the gap of human labor, to business models that enable producers to capture a higher percentage of dollars by selling their product directly to consumers.

Innovations and technologies are also tackling big impact issues such as food security and food waste. This is excellent news for investors, entrepreneurs, and growers who debated the viability of what was once a fledgeling sector.

But everywhere we look, the gender inequity in the distribution of opportunities and resources is painfully obvious. Looking at the 10 largest agrifoodtech financings in 2020, 100% of the founders of these 10 companies are men. Of the top 20 financings, just two are known to have women co-founders.

In 2019, only 7% of investment money that went into agrifoodtech deals went to startups founded by women, according to a 2019 report — ‘Money Where Our Mouths Are’ (MWOMA) — released by AgFunder, Karen Karp & Partners, and The Counter in collaboration with S2G Ventures. The data aren’t yet available for 2020 – but watch this space! 

The bottom line is that while the number of women founders, leaders, and innovators in the agrifoodtech sector — which extends into agbio and foodbio — continues to grow, the voices (and exposure) of women in the industry remain few and far between.

Challenge often creates opportunity and this is what a handful of women in agrifoodtech saw when they independently began collecting the names of women in the sector into a list simply because no such list existed. The women included agtech entrepreneurs, investors, and journalists who write about agrifoodtech. In 2020, they became aware of each others’ lists and decided to combine forces and merge them into a single directory.

Today, we’re launching the ‘Womxn in AgTech Directory’ – a searchable Airtable directory that lists the names and social media platforms of womxn founders and leaders in agrifoodtech in the US and internationally. This list is the result of a collaboration between women leaders in agtech including Connie Bowen (AgLaunch Initiative), Amy Wu (From Farms to Incubators), Allison Kopf (Artemis Ag), Pam Marrone (Marrone Bio Innovations), and Louisa Burwood-Taylor (AgFunder, AFN, MWOMA), and we hope that you’ll get involved, too.

Alison Kopf, the founder and CEO of Artemis Ag, says she was motivated to start a list in 2018 “because we have a stark vacancy of diverse voices on panels and events in our industry and wanted to elevate women to the table, especially when in ag — mostly corporate ag — there are already strong women voices at the top.”

“I want to see more women and black, indigenous, and other people of color starting companies in ag and in general,” she added.

Pam Marrone, the founder of Marrone Bio Innovations, a Nasdaq-listed company in the agbio space, had an Excel sheet where she’d been compiling whatever names she came across. Over the years it has evolved from handfuls to dozens.

“With more and more women jumping into agtech and starting companies, it is critical to track the progress and to network with each other and provide support and mentoring. In addition, this list can help those organizing conferences who are looking to diversify the speakers and panels,” Marrone said.

Louisa Burwood-Taylor says that, as a journalist, she wants to contribute to building a solid data set that connects agtech with gender to solutions to gender inequality. While there are articles, columns, and anecdotal evidence that shed light on this topic, unfortunately, there is a lack of statistics.

“There’s so little data to prove how or why gender biases persist, so I’m keen to create a community where more can be shared, learned, and reported to help change that,” she said. Through MWOMA, Burwood-Taylor is working on bringing more data to light to help change investor and entrepreneur behaviors.

We hope that this directory can serve as a one-stop-shop for entrepreneurs — in and outside of agtech — for growers and investors to connect with, learn from, hire, and invest in women in agtech.

We hope that conference organizers will find it and consider adding more women as speakers, that investors and VC firms will find the list and take a deep dive into the companies, and growers will connect with founders through this portal. Finally, we believe that by working as a collective we can create a paradigm shift – more women can enter this space and will be encouraged to enter this space.

The directory will be made live today on From Farms to Incubators and is visible here. Women can add (or update) their names and info through a short survey here.

Is AppHarvest the Future of Farming?

Special purpose acquisition companies, or SPACs, are red-hot right now, with investors clamoring to get into promising young companies.

In this video from Motley Fool Live, recorded on Jan. 28, Industry Focus host Nick Sciple and Motley Fool contributor Lou Whiteman discuss AppHarvest, one such SPAC that is looking to disrupt the agriculture industry. Here are the details on what AppHarvest wants to do, and a look at whether the company represents the future of farming.

Nick Sciple: One last company I wanted to talk about, Lou, and this is one I think it's -- you pay attention to, but not one I'm super excited to run in and buy. It was a company called AppHarvest. It's coming public via a [SPAC] this year. This vertical farming space. We talked about Gladstone Land buying traditional farmland. AppHarvest is taking a very different approach, trying to lean into some of the ESG-type movements.

Lou Whiteman: Yeah. Let's look at this. It probably wouldn't surprise you that the U.S. is the biggest global farm exporter as we said, but it might surprise you that the Netherlands, the tiny little country, is No. 2. The way they do that is tech: Greenhouse farm structure. AppHarvest has taken that model and brought it to the U.S. They have, I believe, three farms in Appalachia. The pitches can produce 30x the yields using 90% less water. Right now, it's mostly tomatoes and it is early-stage. I don't own this stock either. I love this idea. There's some reasons that I'm not buying in right now that we can get into. But this is fascinating to me. We talked about making the world a better place. This is the company that we need to be successful to make the world a better place. The warning on it is that it is a SPAC. So it's not public yet. Right now, I believe N-O-V-S. That deal should close soon. [Editor's note: The deal has since closed.] I'm not the only one excited about it. I tend not to like to buy IPOs and new companies anyway. I think the caution around buying into the excitement applies here. There is a Martha Stewart video on their website talking up the company, which I love Martha Stewart, but that's a hype level that makes me want to just watch and see what they produce. This is just three little farms in Appalachia right now and a great idea. This was all over my watchlist. I would imagine I would love to hold it at some point, but just be careful because this is, as we saw SPACs last year in other areas, people are very excited about this.

Sciple: Yeah. I think, like we've said, for a lot of these companies, the prospects are great. I think when you look at the reduced water usage, better, environmentally friendly, all those sorts of things. I like that they are in Appalachia. As someone who is from the South, I like it when more rural areas get some people actually investing money there. But again, there's a lot of execution between now and really getting to a place where this is the future of farming and they're going to reach scale and all those sorts of things. But this is a company I'm definitely going to have my radar on and pay attention to as they continue to report earnings. Because you can tell yourself a story about how this type of vertical farming, indoor farming disrupts this traditional model, can be more efficient, cleaner, etc. Something to continue paying attention to as we have more information, because this company, like you said, Lou, isn't all the way public yet. We still got to have this SPAC deal finalized and then we get all our fun SEC filings and quarterly calls and all those sorts of things. Once we have that, I will be very much looking forward to seeing what the company has to say.

Whiteman: Right. Just to finish up along too, the interesting thing here is that it is a proven concept because it has worked elsewhere. The downside of that is that it needed to work there. Netherlands just doesn't have -- and this is an expensive proposition to get started, to get going. There's potential there, but in a country blessed with almost seemingly unlimited farmland for now, for long term it makes sense. But in the short term, it could be a hard thing to really get up and running. I think you're right, just one to watch.