An impressive speaking lineup at Thursday’s Indoor Ag-Con in New York set the tone for a constructive debate about the benefits of indoor farming.
From feeding a planet of declining natural resources, to improving food safety, reducing food waste, reducing water pollution and growing tastier and more nutritious food, the list of advantages over conventional, outdoor farming seemed endless.
There have also been some impressive fundings in the subsector recently. AeroFarms, one of the more established players in the room, has raised $50 million from Goldman Sachs and Prudential to construct a giant 80,000 square foot vertical indoor farm from a converted steel factory in New Jersey.
Gotham Greens, one of the first urban rooftop farms using greenhouse technology to sell produce into local grocery stores, has raised $30 million over the course of a few years from a range of private investors.
And Sundrop Farms, which is building a 20 hectare, self-sustaining greenhouse facility in South Australia, raised a whopping $100 million from private equity giant KKR last December.
But the speakers, who ranged from vertical farmers and software startups to lighting specialists, greenhouse producers and university researchers, revealed some clear challenges ahead too. Here are three of them.
1. A lot of the technology involved is still very early stage
Viraj Puri, CEO of Gotham Greens, warned that a lot of the technologies being used in his farms and others, do not have a long commercially-proven track record.
Puri used the example of LED lighting, which is poised to dramatically impact the industry by providing optimum light spectra for plant growth; Illumitex CEO Chris Hammelef said that all horticultural lighting will be LED by 2020.
Puri said that studies were still being done on the impact of LED lighting on the shelf life of plants. “In two years of studies at the Lighting Research Center in New York, some results have been great, but they are not all overwhelmingly positive. I truly believe it will be the future, but we are not quite there yet. There is still a lot of technology that will need work.”
The large amounts of energy that LED, and other lighting uses, was another topic of conversation after Neil Mattson, controlled environment agriculture co-director at Cornell University, revealed research pointing to a much higher carbon footprint for indoor ag, in both greenhouses and vertical farms, than outdoor farming, including the transportation costs and use of chemicals. Lighting was the biggest culprit along with heating. Mattson’s research, which it’s worth bearing in mind used data from 2008 and hence might be out of date, came into sharp contrast with other presentations. Matt Barnard, CEO of See Jane Farm, estimated his operations were producing food using 80 percent fewer greenhouse gasses than their conventional counterpart.
The two pieces of research will no doubt have taken into account different data points, and Mattson did point to some efficiency improvements in LED lighting on the market. But it seems that more work needs to be done on the carbon footprint of indoor ag, and the data used to promote the sector’s green credentials.
2. Availability of funding
While the examples above of AeroFarms, Gotham Greens, and Sundrop Farms indicate that funding is available for indoor agriculture — and from big name investors at that — this is certainly not the whole picture.
“We met 300 investors before getting funding from KKR,” Phillip Saumweber, CEO of Sundrop Farms told delegates, responding to concerns about the availability of funding for the sector. He joked: “I probably used more greenhouse gasses flying to investor meetings than we are saving with our facility!”
As with many agriculture-related investments, finding funding can be hard, and this can in part be put down to the challenge investors have in placing certain investments within their portfolio. With companies ranging from those selling the technology bought or used by indoor farms, to physical production assets, the investor audience could vary significantly.
“To some investors this might feel more like project financing than other types of startup funding,” said Sundrop’s Saumweber. “There is a lot of money that wants to come in, but there is of course still this greenfield nature to what you’re doing. So you have to convince the capital providers that you have done everything you can to de-risk everything you possibly can.”
Saumweber also described his project, which will power its whole operations from solar energy, desalinized seawater and recycled agricultural runoff to use in irrigation water, as more of an infrastructure play than an agricultural asset, which probably impacted its investor profile.
For the technology service side of the equation, the route to funding is more likely to align with more general technology startups: the angel and venture capital communities. Agrilyst, a software tool offering farmers analytical feedback on their operations, is one such example, and recently won TechCrunch Disrupt in San Francisco this summer. CEO Allison Kopf said the process was so worthwhile, not just for the cash prize and exposure it gave the business, but for the sheer number of relevant investors it put her in front of during the whole process.
There was the opinion among some of the delegates that companies like Agrilyst would find it easier to get funding than those focused on building, and likely operating, production facilities themselves. One delegate asked: “but who is investing in the farms?”
Limited funding also slows down the pace of the research happening at public institutions and universities, which in turn limits the availability of data and information for would-be growers. The need for more sharing and collaboration on data collection and research was a big theme of the event and discussions among delegates afterward.
3. Finding experienced talent
Few in the startup world will be a stranger to the struggles of hiring, particularly those in more niche industries. The topic of hiring came up on several occasions as a challenge for growing businesses in the field. The relatively young maturity of the industry makes it hard for businesses to find candidates with relevant experience.
Presenters ranged in their opinion of what was needed. Some said they were not there to provide education to their hires, but needed staff to hit the ground running, others, such as BrightFarms, differed.
“We do consider ourselves an education business,” said Paul Lightfoot, CEO of BrightFarms, the New York greenhouse farms operator. “We feel like the level of rigor in the specialist crop industry isn’t strong enough. When we hire people, we are developing their career. We talk about BrightFarms University.”
The skills required to succeed in the industry branch way beyond a biological knowledge of growing plants, and into deeper data understanding and manipulation, speakers told the audience.
“All great growers should be able to look at a data set and see what’s going on, but we want them to be proactive in avoiding situations so that they don’t need to look at the data set,” said Lightfoot.
Saumweber added: “We often ask them at interview ‘are you data-driven or is it more black magic that helps you succeed?’ If they say black magic, they’re out. We want data-driven people.”
David Rosenberg, CEO at AeroFarms, described the highly technical and sophisticated systems used in his operation as a key factor in his hiring process. “It’s data science which gives us the ability to optimize our products, and customers have said they have never tasted product as good as ours. We have sensors everywhere and software and ERP systems operated by handhelds that can manage the farm and capture 20,000 data points. That’s why we have MIT [Massachussets Institute of Technology] people to crunch the data.”
While hiring is a challenge, ensuring the right people are running indoor ag businesses is also of utmost importance as the industry scales, argued Rosenberg. He aired concerns that the industry was growing too fast as increasing numbers of people from other industries come into it.
“There is a romanticized notion of local food production and lots of people are getting into the space. Most of us believe this is the future and that it will have a meaningful place in the future. But lots of people who don’t come from the industry under-appreciate the risks associated, so I am worried there will be some slips,” he said. “Food safety is no joke. What I’ve seen from some peers is cutting corners. This is not the place to cut corners. It deserves the utmost attention. Just this week Dole had to recall some of its spinach over salmonella fears.”
Other challenges aired during the day included ensuring businesses took a measured approach to growth and keeping costs of goods sold (COGS) down. Costs associated with equipment and energy for lighting and heating were among the biggest culprits.
What do you think? Get in touch with your views on the challenges for indoor agriculture on email@example.com.