The indoor ag space is on fire this year and Gotham Greens is stoking the coals. The New York-based startup just raised an $87 million quity and debt round led by Colorado VC Manna Tree with participation from Florida real estate and private equity investor The Silverman Group and others.
The round brings Gotham Greens’ total funding to $130 million.
Although the Covid-19 pandemic made for a more complicated fundraising process, there was a silver lining, according to the startup’s CEO Viraj Puri.
“It revealed opportunities in the food supply chain, which is really the core of what our mission is – to transform how and where fresh produce is grown,” he told AFN.
“Supermarket retailers were facing a lot of voids on the shelf and it really provided an opportunity for us to fill some of those voids and be nimble. It was relatively easy for us to move from foodservice customers to food retail customers.”
Founded in 2009, Gotham Greens operates a network of leafy greens-producing greenhouses across North America. It claims to use 100% renewable energy to power its greenhouses, which use 95% less water and 97% less land than conventional open field farming.
Greenhouses vs vertical farms
There is quite a bit of tech under the greenhouse hood, as well. Gotham Greens has been ramping up its use of automation and data science in its climate-controlled greenhouses.
When it comes to tech, Puri sees a key differentiator between greenhouse operations and vertical farming businesses.
“We believe that the benefits of greenhouse farming currently outweigh those of vertical farming, which is an exciting extension of modern greenhouse farming. There are still some open questions around the technology and the financial sustainability primarily because fully indoor growing environments rely on artificial light,” he explained.
“Even though they can theoretically offer much higher yields and levels of climate control compared to modern greenhouses, those benefits will come with significantly higher capital and operating costs.”
Gotham Greens sells branded salad greens, herbs, salad dressings, and sauces. It claims to have doubled its revenue over the past year, selling its leafy greens in more than 40 US states and across 2,000 retail stores including Whole Foods, Albertsons, Meijer, Target, and Sprouts. It has doubled its capacity in the past 12 months by opening new greenhouse operations in Chicago, Providence, Baltimore, and Denver.
The new round of funding will be used to fund expansion into new channels and geographic markets, increase capacity, and development of new products. It has recently launched new products including grab-and-go salad bowls, packaged salads, and cooking sauces.
Although one may wonder how many products a startup can derive from a few core crops, Puri said there is plenty of whitespace left to explore.
“There’s channel diversification, there’s pack size diversification. There are just different ways to grow even within that category,” he said.
Can greenhouse startups keep up the pace?
There have been a slew of indoor ag fundings in 2020 despite the pandemic. Kentucky-based greenhouse tomato grower AppHarvest raised $28 million, added Martha Stewart and Impossible Foods’ chief financial officer to its board, and later went public at a $1 billion valuation. New York hydroponic greenhouse startup BrightFarms raised a $100 million Series E while Plenty scooped up a $140 million Series D to research strawberry cultivation with new investor Driscoll’s.
One cannot help but wonder whether consumers or investors will soon have had their fill of leafy greens and micro-herbs, or whether this space has some serious leg room left.
“On balance, I think the momentum is a good thing. I think we still play such a small role in the total addressable market,” Puri said. “If you look at leafy greens alone, it’s estimated to be about a $15 billion category in the US and Canada. Current indoor production is around 1% of that. I think there is a lot of room for growth and multiple winners.”