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AeroFarms ‘Always in Capital Raising Mode’ as Vertical Farming Group Raises $20m

December 14, 2015

“The nature of the business means that we are always in capital raising mode,” David Rosenberg, CEO of AeroFarms tells AgFunderNews.

AeroFarms, which grows leafy greens using aeroponics –- growing them in a mist environment without soil –- LED lights, and growth algorithms, is set to become the world’s largest vertical farming business. Its headquarters, R&D facility and flagship production facility is currently under construction in Newark, New Jersey and will cover 69,000 square foot.

This is the company’s ninth farm and by no means its last; it has plans to build another two indoor farms in the Northeast of the US and is building a pipeline of farm projects on four continents globally, so it’s not surprising that the company is in need of lots of cash.

“Whether it’s for corporate expenses such as hiring or project financing, there’s always a need to be raising something,” said Rosenberg.

Indoor farming has gathered pace as an industry as consumers look for locally-sourced produce with a minimal carbon footprint and high food safety standards. Many indoor farming operators also pride themselves on being able to manufacture more nutritious and tastier produce than conventional outdoor farms. There have been some high-profile moves in the space too, most recently when the Ritz-Carlton in Florida built an indoor farming facility to supply leafy greens to its restaurants.

AeroFarms’ vertical farming facility are 75 times more productive per square foot annually than a field farm and 10 times more productive than hydroponic greenhouses while using 95 percent less water, 40 percent fewer nutrients, and zero pesticides, fungicides, insecticides, or herbicides, according to a statement.

But it’s a capital intensive business, with a lot of technology and equipment needed for success including LED lighting, and irrigation and crop protection systems.

This week’s $20 million Series B round of funding is the latest for AeroFarms, taking the company’s equity capital raising efforts to around $33 million. AeroFarms has also brought in debt financing this year from Goldman Sachs and Prudential to help fund the $40 million Newark project.

The Series B was led by a new investor, the Wheatsheaf Group, which is the UK sustainable food and energy-focused investment arm of the Grosvenor Estate. The Grosvenor Estate is the multi-asset business belonging to the established Grosvenor family and will bring vast real estate expertise to the table with its own $11.8 billion urban real estate portfolio globally. It will also bring agriculture knowledge as the owner of four rural estates in the UK and Spain, and investor in a range of agriculture-related technologies.

Wheatsheaf, which has offices in 17 locations, “can provide critical assets and insights on appropriate markets and locations where we should place our farms,” Rosenberg said in a statement.

Another investor in the round was GSR Ventures, a Chinese technology investor, and another strategic partnership for AeroFarms’ global expansion plans. Not only can GSR provide insights into doing business in Asia, but the firm has investments in 17 LED-based lighting companies in the world, including the recently purchasing Lumileds from Philips. Getting the LED lighting right is a core part of vertical farming and AeroFarms prides itself on its proprietary lighting algorithms.

The other two investors in the round were existing stakeholders Middleland Capital, the family office-backed food and agriculture focused VC, and MissionPoint Capital Partners, a sustainable energy-focused growth investor.

The Newark facility should start growing by April, according to Rosenberg, who already has some letters of intent from retailers in place for the offtake.

While many startups and growing businesses may argue that their biggest challenge is raising capital, for AeroFarms it’s the hiring process.

“I spend 25 percent of my time hiring,” says Rosenberg. “We need to find great people. We want engineers, industrial engineers, crop biologists, physiologists.”

And what about the challenge so many in the industry have with the cost of production? “It’s a very academic answer, and it’s very complicated,” says Rosenberg. “How do you optimize yield, taste and texture and decrease input costs? There’s a tremendous amount of complexity to it, but where there’s complexity, there’s opportunity. Part of what makes us great is we really understand the mechanical side of growing crops, how that interplays with the building around it, and how to manage the biology of a plant.”

“It comes down to how we select crop types and how the operators in the farm move around the facility. We have 57 standard operating procedures. There are a lot of things to manage, and we are proud of being great at it.”

AeroFarms’ attention to detail even goes as far as finding out which spectra of light plants do not use as a means of saving energy costs on lighting. “And we have equal sophistication at the pump,” Rosenberg adds.

He is so bullish about AeroFarms’ operating techniques that he believes 90 percent of indoor agriculture players out there will go out of business. “A lot of people have a very romanticised notion of local food production and an under-appreciation of the complexities to make it work. And there are a lot of them who are cutting corners where they shouldn’t be, and that raises a real concern about food safety. Just look at the recent outbreaks of E.Coli on produce farms.”

So will AeroFarms be back on the road to raise more capital next year? Absolutely. With grand plans to build 25 farms over the next five years and expand its reach across four continents, the company is ambitious to make an impact on the way produce is grown globally.

“There is so much interest in what we are doing and how we leverage technology to grow wonderful tasting and nutritious leafy greens,” says Rosenberg. “We are particularly excited about increasing our research and development efforts in order to improve quality and lower costs through streamlined operations and decreased capital expenditure. We are on a mission to build responsible farms and nourish communities all over the world, and we are very excited by the shared long-term vision with each of our investors.”

Have news or tips? Email [email protected]

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