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Interview with Niko Kivioja at Netled
As we gear up towards the virtual Indoor AgTech Innovation Summit, Niko Kivioja, CEO at Netled shares his analysis about the summit key themes and how they benefit the indoor farming industry.
RETAIL INSIGHTS: Understanding the drivers behind consumer demand
We are seeing more products produced in vertical farms on shop shelves. Are consumers ready for products that have never seen sunlight?
Public opinion is already positive. In Finland, consumers would not reject a product that has never seen sunlight. In midwinter, a greenhouse grown vegetable hasn’t seen sunlight at all, and this has been the mainstream of growing for 30 years now. So, in that perspective the growing philosophy change is not that big for Finnish consumers.
Our Instore Growing Cabinets have received a great response from consumers. The ability to harvest leafy greens and herbs that are still growing directly off the shelf is something that consumers really appreciate, and this should be provided to them. However, as industry experts we understand that we cannot produce bulk products efficiently or ecologically directly in store, meaning that while offering the consumer experience, market insiders must provide and take care of the mass production efficiently in industrial production facilities. There is also the sustainability aspect to take into consideration. Finnish consumers are incredibly environmentally conscious, and the fact that these products are grown either in-store or in a vertical farm next door with extremely low growing and logistics emissions is a consideration that directly affects the purchase decisions. Also, once they taste the flavor and freshness of the products, there is no going back.
NEW CROPS: Mapping a pathway to mass production
Plants currently grown in vertical farms are typically small plants, like lettuce and herbs. How can vertical farming develop to include taller plants?
The racking of the production system is only a small portion of the overall efficiency of production. There are other elements that are plant size and shape agnostic, such as lighting, climate management, irrigation, and so on. Racking aside, it is very likely that high-wire crops will be produced in a closed environment sooner than we think. For example, the Natural Resources Institute Finland has developed a “Cucumber factory” concept for the vertical farming of tall production plants.
PROFITABILITY AT SCALE: The technology driving down OPEX
There is a lot of talk in the industry about the profitability of vertical farming. Capex is generally high, Opex is generally low. What are the obstacles to profitability in vertical farming?
Capex is currently driven by the fact that most of the designs are actually made for greenhouses, which early adopters have desperately tried to adapt into vertical farming. However, the method is very far from that of traditional greenhouses, leading to expensive and suboptimal designs. There are operators, however, that are pursuing optimal designs by throwing the old-school tech out of the window and designing all components specifically to fit vertical farming, thus constantly driving down the cost while enhancing the productivity and total production expenses.
The tech sector of vertical farming is still in its infancy, while early adopters of farming itself have proprietary designs of their own. This is normal for this state of the market, but sooner than later tech will be disengaged from the actual farming and there will be different operators for tech and vegetable production. When this happens, tech companies will have a lot of projects producing valuable information on more and more efficient ways to produce while the actual competition between the tech companies will dramatically speed up the tech development. This will be the maturation phase of the market, and then the cost of everything will be rapidly driven down.
FINANCIAL MODELS: The investment models scaling the industry
When looking at various industries, it is generally the capital flow that dictates what is developing and growing and what is not. How do we see the capital flow currently affecting the vertical farming market?
This is an excellent question. The fact is that vertical farming has received very little funding over the past years, and the adaptation of this production method has been estimated to be far in the future. We have seen only early adaptors with limited cash reserves running pilots and tests a few years back. This has been an important phase for learning from mistakes, so that the big cash is not wasted on faulty designs. However, we are seeing a rapid increase in investments in the vertical farm operator field (veggie producers), which is now rapidly driving the market forward. Operators have received significant financings while tech suppliers have raised only moderate seed/A round type financings. It is natural that if there is no tech operator market, there are no tech suppliers, only development companies. Now that we see the operator market receiving these quantities of financing and growing, this will kickstart the tech market as well, and I believe that we will see outstanding tech company growth both in value, but also in operative sales.
Now, if you look at the profiles of the companies, operators need outstanding capital reserves since in order to double the operative sales, they need to invest double the amount of money in the production facilities. However, tech companies may scale up with initial capital only limited by the size of the global vegetable market. This I expect us to see in tech company valuations which should overcome the operator valuations pretty fast. Meaning that I believe today or within a year, vertical farm tech providers will be outstanding investment opportunities for VC type financing, while farm operator financing will be taken over by traditional bank and private equity financing.
PODCASTS
Vertical Farming Podcast
S3E31: s3e31 Niko Kivioja – High-Tech for Small Vertical Farms
https://verticalfarmingpodcast.com/episode/s3e31-s3e31-niko-kivioja-high-tech-for-small-vertical-farms
Play • 51 mins // 21 Apr 2021
Episode Summary: Join Harry Duran, host of Vertical Farming Podcast, as he welcomes to the show Niko Kivioja. Niko is the CEO of Netled, an organization that designs and builds the high-tech platform for the world’s smartest vertical farms. Niko spent the first part of his career in controlled-environment-agriculture as a grower and has spent the last decade in high-tech closed-environment and vertical farming technology development. In this episode, Harry and Niko discuss the Niko’s familial history of entrepreneurship and the inspiration to start Netled. Niko speaks to the proprietary Vera vertical farming platform development that he’s recently been managing, how the global pandemic impacted the food supply chain and what excites him the most about the future of Netled and the vertical farming industry as a whole.
CropTalk
144. #KyleTalksAgtech: Designing and Building a High-Tech Platform for Vertical Farms via Netled w/ Niko-Matti Kivioja
Play • 47 min // 21 April 2021
Episode Summary: On this episode of the CropTalk series #KyleTalksAgTech, Kyle Barnett speaks with Niko-Matti Kivioja, CEO of Netled. Topics include starting a vertical farm successfully, the current status of the CEA industry and what the future landscape of this industry may look like.
Join the Netled team at Indoor AgTech and watch Niko Kivioja deliver a 10-minute presentation on ‘Eliminating Risk: The Power of a Perfectly Controlled Environment’ on June 25 at 14.50 EST. He will also host a roundtable discussion on ‘Optimizing the Indoor Environment to Perfect Produce Growth’ at 14.55 EST on June 24.
For more information about Netled, visit them on LinkedIn, Twitter, Facebook and YouTube.