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Gotham Greens Raises $87m Series D Funding To Decentralize Food Production
The round brings Gotham Greens’ total funding to $130 million. Although the Covid-19 pandemic made for a more complicated fundraising process, there was a silver lining, according to the startup’s CEO Viraj Puri. “It revealed opportunities in the food supply chain, which is really the core of what our mission is – to transform how and where fresh produce is grown,” he told AFN
December 9, 2020
Image credit: Gotham Greens
The indoor ag space is on fire this year and Gotham Greens is stoking the coals. The New York-based startup just raised an $87 million equity and debt round led by Colorado VC Manna Tree with participation from Florida real estate and private equity investor The Silverman Group and others.
The round brings Gotham Greens’ total funding to $130 million.
Although the Covid-19 pandemic made for a more complicated fundraising process, there was a silver lining, according to the startup’s CEO Viraj Puri.
“It revealed opportunities in the food supply chain, which is really the core of what our mission is – to transform how and where fresh produce is grown,” he told AFN.
“Supermarket retailers were facing a lot of voids on the shelf and it really provided an opportunity for us to fill some of those voids and be nimble. It was relatively easy for us to move from foodservice customers to food retail customers.”
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Founded in 2009, Gotham Greens operates a network of leafy greens-producing greenhouses across North America. It claims to use 100% renewable energy to power its greenhouses, which use 95% less water and 97% less land than conventional open-field farming.
Greenhouses vs vertical farms
There is quite a bit of tech under the greenhouse hood, as well. Gotham Greens has been ramping up its use of automation and data science in its climate-controlled greenhouses.
When it comes to tech, Puri sees a key differentiator between greenhouse operations and vertical farming businesses.
“We believe that the benefits of greenhouse farming currently outweigh those of vertical farming, which is an exciting extension of modern greenhouse farming. There are still some open questions around the technology and the financial sustainability primarily because fully indoor growing environments rely on artificial light,” he explained.
“Even though they can theoretically offer much higher yields and levels of climate control compared to modern greenhouses, those benefits will come with significantly higher capital and operating costs.”
Gotham Greens sells branded salad greens, herbs, salad dressings, and sauces. It claims to have doubled its revenue over the past year, selling its leafy greens in more than 40 US states and across 2,000 retail stores including Whole Foods, Albertsons, Meijer, Target, and Sprouts. It has doubled its capacity in the past 12 months by opening new greenhouse operations in Chicago, Providence, Baltimore, and Denver.
The new round of funding will be used to fund expansion into new channels and geographic markets, increase capacity, and development of new products. It has recently launched new products including grab-and-go salad bowls, packaged salads, and cooking sauces.
Although one may wonder how many products a startup can derive from a few core crops, Puri said there is plenty of whitespace left to explore.
“There’s channel diversification, there’s pack size diversification. There are just different ways to grow even within that category,” he said.
Can greenhouse startups keep up the pace?
There have been a slew of indoor ag fundings in 2020 despite the pandemic. Kentucky-based greenhouse tomato grower AppHarvest raised $28 million, added Martha Stewart and Impossible Foods’ chief financial officer to its board, and later went public at a $1 billion valuation. New York hydroponic greenhouse startup BrightFarms raised a $100 million Series E while Plenty scooped up a $140 million Series D to research strawberry cultivation with new investor Driscoll’s.
One cannot help but wonder whether consumers or investors will soon have had their fill of leafy greens and micro-herbs, or whether this space has some serious leg room left.
“On balance, I think the momentum is a good thing. I think we still play such a small role in the total addressable market,” Puri said. “If you look at leafy greens alone, it’s estimated to be about a $15 billion category in the US and Canada. Current indoor production is around 1% of that. I think there is a lot of room for growth and multiple winners.”
Chicago-Area Greenhouse BrightFarms Expands As Pandemic Fuels Demand For Local Lettuce, Spinach and Other Greens
BrightFarms’ Rochelle greenhouse, which annually supplies 1 million pounds of lettuce, spinach, arugula, basil and other greens to Mariano’s and other regional grocery stores, is increasing production by 40% by adding more hydroponic ponds to the two-acre facility, CEO Steve Platt said
CHICAGO TRIBUNE | JULY 07, 2020
Silvia Penaran grabs a handful of spring mix to pack in a container at BrightFarms on July 1, 2020, in Rochelle. (Stacey Wescott / Chicago Tribune)
BrightFarms is boosting capacity at its Chicago-area greenhouse as the pandemic-driven rise in cooking at home fuels demand for locally grown greens.
BrightFarms’ Rochelle greenhouse, which annually supplies 1 million pounds of lettuce, spinach, arugula, basil and other greens to Mariano’s and other regional grocery stores, is increasing production by 40% by adding more hydroponic ponds to the two-acre facility, CEO Steve Platt said.
BrightFarms was seeing year-over-year sales growth of about 20% before the COVID-19 pandemic hit the U.S., but in March and April growth jumped to 40% as stay-at-home orders set in and customers flocked to grocery stores, Platt said. The at-home cooking trend has remained steady, with growth now leveled out above 30%.
“We’re seeing really great demand,” said Platt, whose company, based in Irvington, New York, has other greenhouses in Northern Virginia, Ohio, and Pennsylvania and is building one in North Carolina. “The pandemic has supercharged that.”
Baby romaine lettuce fills sections of the greenhouse at BrightFarms on July 1, 2020, in Rochelle. (Stacey Wescott / Chicago Tribune)
Greens grown indoors, either in sprawling sunlit greenhouses or under artificial lights in vertical farms, occupy a tiny niche of the market. But they have been gaining popularity in recent years in the Midwest as consumers opt for more local, pesticide-free produce that doesn’t travel thousands of miles from California or Arizona farms to reach their dinner plates.
In addition to addressing environmental and freshness concerns, growing year-round in a controlled environment guards against bacterial contamination that lead to illness and recalls.
Local greenhouses had an advantage as demand from grocery stores surged during the rush to stockpile food during the pandemic because they could pivot quickly while some of the large operators of field-grown produce couldn’t get enough product to stores shelves quickly enough, Platt said.
“When the customers needed product we were able to deliver it,” Platt said. BrightFarms added 800 stores to its distribution this year and now has 2,000 customers nationwide, he said.
Angelica Vasquez cleans the floors at BrightFarms in Rochelle on July 1, 2020. (Stacey Wescott / Chicago Tribune)
In Chicago, locally grown greens represented 11.5% of the tender leaf packaged salad market during the first half of this year, up from 9.4% last year and 7.9% in 2018, according to data from the market research firm SPINS provided by Bright Farms. Nationally the share is much lower, at 3.2%.
The growing interest fits with a broader trend toward more premium foods, with people willing to pay more for products they perceive as healthier. A clamshell of BrightFarms romaine or spinach is $2.99, twice the cost of the cheapest option though on par with field-grown organic produce, Platt said.
But Platt attributes the growth not only to consumer demand but also retailer demand, as stores try to avoid the disruption of recalls. Last month certain bagged garden salads from Jewel-Osco, Aldi, Hy-Vee, and Walmart were recalled due to suspected contamination of cyclospora, a bacteria found in human feces, and E. coli illnesses have prompted mass recalls of romaine lettuce in recent years.
Other indoor growers also are expanding in response to increased demand.
Gotham Greens last year more than doubled its capacity to serve the Chicago area when it opened a new 100,000-square-foot greenhouse in Pullman, a stone’s throw from its existing 75,000-square-foot greenhouse on the roof of the Method soap manufacturing plant.
MightyVine, which grows hydroponic tomatoes in a greenhouse in Rochelle, is doubling its footprint to 30 acres.
Alexia Elejalde-Ruiz
Alexia Elejalde-Ruiz covers the food industry for the Chicago Tribune's business section. Prior beats include workplace issues, the retail sector and lifestyle features, plus stints at RedEye, the Daily Herald and the City News Service. Alexia grew up in Washington, D.C., and has her degree in international relations from Brown University.