Indoor AgTech Investment Landscape
The indoor agtech investment landscape is hotting up! In the past year, AeroFarms and AppHarvest secured high profile SPACs deals, BrightFarms and Gotham Greens secured their Series E & D rounds, and food giants McCains and IKEA have invested in GoodLeaf Farms and Urban Crop Solutions.
So, what is all this funding leading to? Will we see further acquisitions such as Vindara by Kalera? How are growers building their competitive advantage?
We asked five investors from billion-dollar venture funds at the virtual Indoor AgTech Innovation Summit (June 24-25) about identifying routes to investing in the future of agriculture and how capital can be redistributed into new forms of food, production.
Hans Tung, Managing Partner, GGV CAPITAL, USA: “The dramatic events of 2020 showed us is that our global food supply chain — the thing we count on to live our lives comfortably and in good health — is under increasingly volatile pressure. Start-ups that enable a more efficient, vertically integrated, local, and more affordable food supply chain to meet growing demand for fresh produce and prevent surplus and shortages have a tremendous opportunity to disrupt the current system. Indoor farming continues to innovate in efficiency driven technologies such as the use of LED lighting, water usage, and automation to continue to drive down costs and make fresh food more widespread for the future. An important area of progress has been to locate vertical farms within urban environments, closer to large populations. Optimizing food production reduces supply issues and expands opportunities for food producers with a last-mile delivery. To solve the world’s food security challenges, it will take a hybrid model of technologies that enable intelligent forecasting and modeling, distribution beyond the last-mile and food creation and production. For food production, the key is the combination of technology to drive down costs and enable expansion with a move to local, putting food production closer to the consumer.”
Salvatore Lavallo, Head of Foreign Direct Investment, ADIO, UAE: “ADIO is always looking for innovative companies aiming to provide solutions to agricultural challenges faced in desert and arid climates. Abu Dhabi alone has tens of thousands of traditional farms and more than ten thousand greenhouses, and we know that to feed the region and the globe, CEA will increasingly require players with different technologies. Through the three indoor farming companies that ADIO has supported – Pure Harvest, Madar Farms and Aerofarms – we have seen incredible improvements in the types of cultivars to expand production beyond leafy greens. We have also made strides in sustainability in terms of water and electricity usage. In addition to supporting the existing 24,000 farmers in Abu Dhabi in adopting new technologies for greater output, we are also looking into new production methods like CEA, aquaculture, algae production and cellular based agriculture that may shape the future of food.”
Delphine Descamps, Managing Director, CREADEV, USA: “Given supply chain disruptions during the pandemic, indoor farming has only increased its attractiveness, providing food safety, traceability, and constant supply to retailers. On the technology front, we continue to see robust innovations and improvements around robotics, seed engineering and precision ag. Indoor farming has attracted large amounts of capital from a wide variety of investors, in particular venture capital, private equity funds, sovereign wealth funds, large corporations, family offices and now SPACs. More mature companies in the space have secured large debt financings. Sustainable new forms of production fall into the ESG investment category which is currently very active.”
Sonia Lo, CEO, SENSEI AG, USA: “The key word in this question is collaboration. It is my hope that the indoor agriculture industry will ultimately come together to develop a collective body of knowledge so that financial institutions can risk assess the industry just as they would conventional outdoor agriculture. With this ability to risk assess, local banks will be able to confidently provide the financing needed to spur growth, technology and innovation. Ultimately, as both developed indoor ag companies and emerging start-ups in the sector work together, the industry and its investment opportunities will thrive; we just need to plant the initial seeds of collaboration. The sector progress has been astounding. COVID-19 brought into the global spotlight the importance of improving the health of our food supply chain, reducing food waste and ensuring food security. As a result, over just the past year alone, we saw increased investment into the controlled environment ag space, including debt financing, venture funding and even some of the first companies to jump into the new generation of SPACs, all of which further validate the indoor farming industry’s place in feeding and nourishing our world’s growing population.
Finding innovative and sustainable ways to produce food is the answer to our ability to feed our planet healthy, nutritious meals. Consumers are not just looking for healthy food choices, but also food options in which they can trace their food’s origins and ingredients. As a result, capital investments in food production are being redistributed in ways that support these customer demands. In the past year, we’ve seen companies like Beyond Meat, Impossible Burger and Oatly, each of which have either gone public or announced intentions to list on the stock market, shift the way we think about meat and dairy. We experienced companies like Imperfect Foods, which has raised nearly $100 million in funding, find a home for fruits and vegetables that may otherwise be thrown away by farmers, and we witnessed innovators such as Bayer Crop Science lead the way in developing and researching new seed cultivars that leverage nearly a century of experience in seed treatment and market needs. The pathway to innovation is long and wide, and I am excited to see how additional capital is redistributed into other new forms of food production over the coming years.”
Nigel McCleave, Principal, LIGHTROCK, UK: “The recurring questions around the ‘financial sustainability’ of indoor agriculture have been of particular interest to us. These were key questions that we asked ourselves before investing in the space and remain the key points of focus as we work with our portfolio companies. Our opinion is that there is no doubt that these businesses are not only financially sustainable but can also be attractively profitable. Unit economics work will only get better with time. However, ‘one size’ does not fit all, and as is the case with anything involving agriculture, execution carries a premium.”
Join the investors speaking at the virtual summit including: Sonia Lo at Sensei Ag, Jed Lynch at Barclays, Peter Dawe at McCain’s, Valentine at Baudouin at Founders Future, Nigel McCleave at Lightrock speaking on the panel: ‘Investor Debate: Evolving the Role of Finance in Indoor Agriculture’ at 11.20 EST.
Sanjeev Krishnan at S2G Ventures and Dave Chen at Equilibrium Capital will share their perspectives on a Fireside Chat: ‘Investing in The Future of Agriculture’ on 10.30 EST.
Plus Salvatore Lavallo at ADIO will share his insights on the panel: ‘The Impact of Indoor: Bringing Food to the Heart of Cities’ at 11am EST.