"Vertical farming"—growing lettuce with LED lights and automated systems—got nearly $2 billion from investors (and lot of press hype, including from me). But the bottom seems to be falling out of the industry. Let me walk you through our new story:
Here's just some of the recent downturn: Fifth Season closed entirely, AeroFarms pulled out a SPAC, Agricool went into receivership, Infarm and Iron Ox both laid off half their staffs.
This is after investors pumped $1.7 billion into the industry, seemingly hoping for a level of returns that are basically impossible with cheap commodities like lettuce. What did they think they were going to get?
Some of the issues: The startup costs are incredibly high (Fifth Season reportedly spent $27 million on its Braddock farm) and the electric bill for just the LEDs can run into six figures annually, climate control can add even more.
But perhaps most damningly is that the companies sold themselves to investors as tech companies, not ag companies, and so create bespoke automation systems that cost huge amounts to develop and maintain.
This also leads to one major area of bloated costs: Expensive executives. One company called App Harvest spent a significant chunk of its revenue paying $7 million in severance to two of its executives.
It’s also important to note that low-tech, indoor growing is already a key part of our agriculture system, but doesn’t attract the same investment. Perhaps if investors had been less focused on glowing LEDs and more on simple economics, we would be in a different place.
This isn’t just a chance for schadenfreude at investors losing money, though: Vertical farming (in theory) could be an incredibly important part of a post-climate change resilient agricultural system.
There are still some companies struggling to make the process work, and perhaps some will succeed after a major industry contraction. Others are skipping the lettuce and moving directly to berries.
What happens next remains to be seen. Read the whole @FastCompany story from @adele_peters here (with many more juicy bits), and if you know anything else about what’s going on inside any of these companies, please get in touch: fastcompany.com
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