High-tech greenhouse startup AppHarvest has closed a $28 million Series C funding, added some big names to its board, and created a new chief people officer position.
Narya, the new venture capital firm co-founded by author of best-selling novel Hillbilly Elegy J.D. Vance and Colin Greenspon as well as backed by leading entrepreneur and venture capitalist Peter Thiel, led the investment round with participation from existing investors ValueAct Capital’s Spring Fund, Revolution’s Rise of the Rest Seed Fund, and Equilibrium, which has provided nearly $100 million in project financing to date.
The round also brought on new investors including James Murdoch’s private investment firm Lupa Systems, early Facebook investor Jim Breyer’s Breyer Capital, food and agriculture fund S2G Ventures, NBA legend Kevin Johnson’s Black Capital, and Endeavor Catalyst, the co-investment vehicle through which Endeavor invests into companies founded by its entrepreneurs.
This brings the startup’s total funding to $150 million.
AppHarvest founder and CEO Jonathan Webb said that the startup wasn’t looking for a raise when investors began approaching them. The round – oversubscribed by double, he says – closed lightning quick.
“They’re all very strategic investors. In this round, we pivoted a little more towards getting some tech investors who can be helpful as we build out our tech team on top of our core business of building these greenhouses,” Webb told AFN.
“That’s the really exciting thing. There are so many threads that controlled environment agriculture (CEA) contributes to and it allows us to pull from all these buckets of capital including tech investors, sustainability investors, or investors concerned about people and community.”
AppHarvest describes itself as an applied technology company. With a background in the solar and wind industries, he’s chosen to partner with some of the best-in-class tech providers for the greenhouse industry in lieu of reinventing the wheel. A combination of cutting-edge tech is the secret ingredient in lieu of leaning on one particular category or provider.
The startup has created what it describes as a unique system to reduce water usage by 90% compared to typical farms by pairing a 10-acre on-site rainwater retention pond with sophisticated circular irrigation systems. This eliminates agricultural runoff, which has been linked to serious water quality issues like algae blooms in the Gulf of Mexico.
Also as part of the funding, Martha Stewart, Impossible Foods’ CFO David Lee, and Vance have joined the Appalachian startup’s board of directors. Martha Stewart brings big-name recognition to the brand. Webb met Stewart at ChefDance, a culinary festival taking place before Sundance, and met with her in NYC to discuss AppHarvest’s mission.
“She has an interest in indoor farming. She was talking to quite a few companies and wanted to be in this sector. We are very fortunate that she picked Appharvest and joined our board. When it comes to food and retail, I’m not sure there’s a bigger name out there. And she has a totally different skill set than what our team has right now, which is thinking about how to deliver a good retail food experience.”
Lee has experience working for Del Monte Foods as well as social game creator Zynga while Vance, an existing investor in the startup, has a deep commitment to revitalizing Appalachia.
Former chief people officer at Impossible Foods Marcella Butler is also joining the startup as its inaugural chief people officer. At Impossible, Butler helped build the startup’s staff of 650 people. She worked at Google before joining Impossible.
The addition plays directly into one of AppHarvest’s biggest missions as a fledgling company: changing the way the people who grow our food are treated.
Webb points to a recent NBC News article that shines a light on many of the human rights atrocities that occur in our food system every day such as poor living conditions for workers, abuse, lack of access to healthcare, and dismally low pay.
“We believe there needs to be a new standard for agriculture. It’s heart-wrenching to see what is happening on farms across our country right now. We are willing to take a lower profit margin in order to pay a living wage, provide paid time off, access to healthcare, and give every employee a path to ownership in the company. These are hard values to keep intact as our business grows and this is making sure we have someone at the helm looking out for people every day.”
The effort ties back to AppHarvest’s effort to revitalize the tobacco belt while raising awareness around the need for greater food system resilience. With the funding, the startup will construct what it describes as the world’s largest greenhouse in Fall 2020 consisting of a 2.76 million square foot facility in Morehead, Kentucky, on 60 acres.
Its first crop will be non-GMO tomatoes that will be provided to a variety of national grocers. The startup is hoping to fill the recent gap in fresh produce fulfillment due to Covid-19. It hopes to expand into leafy greens, berries, cucumbers, and bell peppers in the future.
The project has already generated 100 construction jobs and will lead to 300 full-time permanent jobs for Eastern Kentucky residents where residents face 44% more unemployment than the national average, according to AppHarvest. The location is also within one day’s drive to Washington, D.C., New York, Philadelphia, and Boston and allows AppHarvest access to 70% of the US population.
When asked whether Webb is concerned about maintaining harmony among the big-name list of investors and board members, he says the best idea will always win at AppHarvest regardless of whether its from an entry-level employee or a board member.
“It will always be something to manage but it will also be a big strength of ours. We try to bring as many perspectives to the table as possible. Our board is over half minority and female.”
The startup has plenty of challenges ahead, but the biggest one in Webb’s eyes has less to do with routes to market, technology, or scaling.
“I think our biggest challenge is changing the mindset in agriculture. We’ve put plans on the table and said we will raise the standard and that we are not going to compromise. Now it’s about not allowing outside influences to change the way we are going about this.”
Novel farming systems like AppHarvest’s greenhouses are seeing a renewed bout of interest. In 2019, startups in the category raised $745 million in funding, posting some of the biggest year-over-year gains, according to AgFunder’s AgriFood Tech Investing Report. Investment in the space grew 38% but with 16% fewer deals.