Jan 2, 2018
by Sierra Clark
Vertical farming is an industry with enormous potential to change the way we eat. By saving resources and producing local food, vertical farming may alleviate many of the concerns facing traditional agriculture. However, to become a thriving, sustainable industry will require funding. This means venture capitalists, angel investors, crowdfunders, and government must demonstrate enough interest to dedicate money to vertical farming ventures. Without proper funding, a future with vertical farming, and other indoor agriculture methods, will not be possible.
Funding for vertical farming has grown
Luckily for the vertical farming industry, funding is on the rise. In 2017, two major methods of funding saw rapid growth. From 2016 to 2017, venture capital funding for vertical farming increased by 653% from 36 million to 271 million. Most of this funding was funneled to a few large companies with strong tech initiatives (read: Plenty). Additionally, crowdfunding for a variety of indoor agriculture initiatives, on sites such as Kickstarter and Indiegogo, increased by 900% from 2.8 to 28 million.
Plenty raised $226 million
Plenty received the largest amount of funding for a vertical farming venture to date. In July 2017, their Series B of $200 million was led by Japanese billionaire Masayoshi Son with SoftBank Vision Fund and notable investment funds for Alphabet’s Eric Schmidt and Amazon’s Jeff Bezos. Already Plenty has a vertical farm in South San Francisco, and a testing facility in Wyoming. With recent funds they plan to expand to a 100,000 square foot farm in Washington, twice the size of their San Francisco farm, and globally.
Multiple companies raised tens of millions this year
Other indoor agriculture companies have also seen major increases in funding. AeroFarms, an urban ag and clean tech company in New Jersey, has raised $142.9 million to date. In November 2017, they closed a $40 million Series D round to increase staff and expand globally. Bright Farms, a greenhouse company in New York, has raised $57.9 million to date. In September 2016 they completed a $30 million Series C round led by Catalyst Investors to expand nationally. Bowery, a vertical farm company in New York, has raised $31 million to date. In June 2017, their Series A of $20 million was led by General Catalyst.
Predictions
By 2022, the vertical farming industry will have developed and matured. We believe that the industry is here to stay. In growing numbers, people are demanding local food. Led by this major trend, we expect to see two major advances in the industry within the next five years.
Sources of funding will increase and diversify
Not all vertical farming or indoor agriculture companies are receiving millions in funding. In fact, funding is still a major issue for many vertical farmers. However, where leaders go the rest may follow. Since respected influencers like Schmidt and Bezos are betting on the industry, we can expect interest and funding opportunities to grow. Expect to see investment firms dedicate funds specifically for vertical farming and controlled environment agriculture. We see this already in firms like Equilibrium and Contain Inc.
While government is typically slower to act than private companies, expect to see more grants and dedication to the sustainable farming space. Cities like Atlanta already have focused urban agriculture initiatives, such as the AgLanta Conference and Urban Food Forest.
Robots and automation will become more integrated in the industry
Labor is one of the largest operational costs (around 25%, following electricity at 26%) for a vertical farm. By reducing labor costs companies can reduce product cost and increase margins, ideally with the aim to provide local food to everyone. Certain countries, such as Holland and Japan have been using automation and robots in indoor agriculture practices for years. Holland is known for acres of fully automated greenhouses, while Japan has over 240 plant factories (comparably, the US has 50), many of which utilize robots instead of traditional labor. Both countries have mature indoor agriculture industries, and likely serve as an example of what is to come in the United States. Already, Plenty has integrated robots into their system using small robots, called Schleppers, to transplant seedlings.
This year the indoor ag industry has received more funding than ever before. We expect that funding opportunities will continue to grow, as will technological advances in the space. For now, we must continue to innovate, discover, and raise the industry forward. The future of the world depends on it.