Freight Farms Emerges As Global AgTech Leader With Small-Scale Solutions
IPO Edge
November 30, 2023
Freight Farms merging with blank-check company Agrinam Acquisition Corp. (TSX: AGRI.U)
AgTech startup provides hydroponic farming solutions, with over 600 farms in operation across 40 countries
Has the largest network of IoT-connected farms globally
Hydroponic technology delivers a staggering 100 times higher yield compared to traditional soil farming
Outstanding management led by CEO Rick Vanzura, previously executive at Wahlburgers, Panera
Patented software driving a successful recurring revenue business model
Focused on being a technology provider, not a grower as seen in some other models
Sales to nearly triple between 2023 and 2025
Trades at reasonable multiple of 3.7 times 2024 expected revenue, well beneath comparable companies
By Jarrett Banks and John Jannarone
In the mining industry, investors are often better off owning the picks and shovels rather than the metal itself. That logic can also be applied to the agriculture technology boom.
Meet Freight Farms, an AgTech startup founded in 2012 that provides hydroponic farming solutions in shipping containers. The company plans to merge with blank-check company Agrinam Acquisition Corp. (TSX: AGRI.U).
Freight Farms boasts the largest network of IoT-connected farms globally, with its software driving a successful recurring revenue business model. And with over 600 farms and a footprint in 40 countries, the company has a significant backlog of near-term orders.
The company’s commitment to eco-friendly farming practices, including water and energy conservation and pesticide-free farming also underscores its dedication to making a positive impact. With a mission to democratize and decentralize the local production of fresh, healthy food, the company has made significant strides since its inception.
Freight Farms has a strong hold on its IP, with 13 patents on its container offerings such as the Greenery, which is designed to maximize space efficiency while utilizing vertical hydroponic technology, allowing crops to flourish in a controlled environment.
This marks a significant step towards overcoming traditional agricultural limitations, enabling the cultivation of fresh produce in a variety of settings, regardless of geographical constraints. It also delivers a staggering 100 times higher yield compared to traditional soil farming.
Meanwhile, its Farmhand operating system ensures remote monitoring, climate control, and production planning, creating a community for knowledge sharing and collaboration.
The company also has a broad and diverse customer base. Those range from small-scale farmers to corporate entities who stock cafeterias with fresh produce, hospitality providers, educational institutions, nonprofit organizations like the YMCA and Boys & Girls Clubs of America, and grocers like Iowa-based Hy-Vee. In Iowa, a homeless shelter recently added more units after finding great success with its original order.
Freight Farms is also contributing to the larger goal of creating a sustainable and resilient food supply chain. The Greenery container farm’s adaptability allows it to thrive in urban environments, providing a local and fresh food source for communities around the world.
The integration of IoT technology further enhances the efficiency and productivity of these container farms. Real-time monitoring and data-driven insights empower farmers to optimize crop growth, resource utilization, and overall operational performance.
Freight Farms’s outstanding management team is led by Chief Executive Officer Rick Vanzura, a Harvard MBA and successful brand builder with a background including executive positions at Wahlburgers and Panera Bread.
Known for driving value across various sectors, Vanzura is passionate about issues like urban land scarcity and the need for hyper-local food production. He has spoken often about the need to simplify supply chains and ensure reliable access to healthy, traceable food at a local level has become more crucial for communities worldwide.
The recently unveiled ‘Garden’ model is poised to make smart farming more accessible, offering automation and benefits similar to the Greenery at a lower upfront cost. Additionally, large-scale projects beckon as Freight Farms explores the use of its technology in expansive warehouse environments.
With the successful deployment of the Greenery container farm and its widespread adoption across various sectors, Freight Farms is not just cultivating crops; it is sowing the seeds of a sustainable future for food production.
It’s critical for investors to see the distinction between Freight Farms and other AgTech players who have struggled. The trouble with some models is that they tried to operate massive infrastructure projects that became difficult to fund as capital markets tightened up.
Just look at AppHarvest, once a highflier but a few months ago filed for bankruptcy. Another, AeroFarms, pulled its plans to go public and later went bankrupt, though it emerged several weeks ago.
Freight Farms stands to be far more resilient. In essence, the company is a technology provider not a grower itself. Customers purchase equipment as their own upfront investment ($150,000 for the Greenery model) and then subscription-based fees for ongoing support in the form of software and consumables.
Savvy investors will zero in on the latter revenue stream, which should command superior margins, as it continues to grow in importance. Recurring sales have grown from 3% of total revenue a few years ago to 9% in the year through June 2023.
Total revenue is growing at a blistering pace, with sales expected to nearly triple to $60 million in 2025 from $22.4 million in 2023. And those forecasts are anchored by real customer orders: Roughly half of the 2024 sales forecast is already accounted for by backlog.
Importantly, Freight Farms is priced conservatively, trading at an implied 3.7 times 2024 revenue. By comparison, Celsius Holdings, Inc. trades at 6.5 times 2024 consensus sales while Ginkgo Bioworks Holdings, Inc. commands a multiple of 6.7 times, according to Sentieo, an AI-enabled research platform.
Investors who buy now will join the company of leading AgTech investors including Aliaxis SA, Ospraie Ag Science, Spark Capital, Stage 1 Ventures, and Alkaline Partners. That group invested $17.5 million in a private funding round last year. In total, the company has raised $47 million to date, a strong sign of support from serious backers.
Investors who do a little digging should quickly see the connection between picks and shovels, and software and containers.
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