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Square Roots Partners with Major US Food Service Company Gordon in Mission to Achieve Local Food at International Scale

March 6, 2019

Urban indoor farming startup Square Roots is partnering with Gordon Food Service to bring Square Roots’ container farms to more locations throughout the US. Gordon has made an undisclosed investment in Square Roots as part of the deal.

“Consumers are saying that they have no connection to the farmer and they are starting to connect the dots between industrially processed food and things like climate change, obesity epidemics, and other issues. People want fresh local food in huge volumes–more than they did 10 years ago,” Square Roots co-founder and CEO Tobias Pegg told AgFunderNews. Serial entrepreneur Kimbal Musk is another co-founder. “Gordon Food Service is one of the largest food distributors in the country and they see that trend, too. Their customers are people who own restaurants, and those restaurants’ customers want local food.”

The big question on Square Roots’ mind, however, is how to build a scalable business model based on an inherently localized product. Unlike many other products that can be produced at a local factory and shipped internationally, achieving scale in the local food game requires a different approach.

Operating for over 120 years, Gordon is a broadline food service company providing everything from commercial kitchen cleaning supplies and disposable utensils to meat and dairy products. Its customers are food service operations including largescale and smallscale restaurants, hospitals, universities, and other purveyors. It also runs a series of brick and mortar stores open to its standard clientele and regular consumers alike. Each location offers in-store services like rewards programs for businesses and truck delivery service for weekly large orders. 

Most importantly for Square Roots and the new partnership, Gordon maintains 175 retail locations throughout the country on top of several distribution centers. Square Roots will create new campuses of container farms on or near Gordon’s distribution centers and retail stores, enabling Gordon to provide its clients with locally grown, freshly harvested herbs and leafy greens year-round. Details of the financial aspect of the partnership will be released in a few months.

Square Roots currently offers herbs and leafy greens for restaurants as well as CSA shares, but they’ve got plans to delve into “roots and fruits,” as Pegg says. Expanding its network of farms will help the endeavor from an R&D standpoint.

“Our network of farms is connected and we monitor them. We run experiments and change things like the climate to see how that impacts yields. As the network grows and we have more farms, it means more nodes on the network and it means our rate of learning increases exponentially. This will lead to the faster development of recipes for things like fruits and roots. We are already growing things like strawberries and tomatoes here in Brooklyn, which aren’t a market yet but they are close.”

The Brooklyn-based startup has made a splash in NYC not only with its tricycle-delivered herbs and leafy greens but its farmer training program, too, which it will soon launch at its new Gordon-backed campuses. During their year at Square Roots, farmer-trainees are educated on a variety of topics including plant science, food entrepreneurship frameworks, and engaging local communities—preparing them for successful subsequent leadership roles in urban agriculture.

For its first class, the company offered 10 spots and received a staggering 1,000 applications, says Pegg. At the time, the company had only signed a lease on a parking lot and was operating out of a co-working space.

“Twenty years ago, people wanted to go to Silicon Valley and build an internet company, but young people today thinking about exciting careers are thinking about food,” Peg says. “The opportunity to have full immersion for 12-months in local food systems surrounded by technology in the middle of  a city is a very luring proposition.”

The first season was so successful that the company raised a $5 million seed round in August 2017 to help ramp up for a second offering.

Indoor Ag is a Growing, Diverse Space

There are a number of indoor ag startups aiming to appease consumers’ demand for local foods, including IKEA-backed vertical aeroponics operation AeroFarms, and Plenty, which raised a record-breaking $200 million in venture capital and announced plans to open 300 new vertical farms near major Chinese cities in January 2018.

Like Square Roots, Boston-based Freight Farms also grows lettuce inside shipping containers. The company sells retrofitted shipping containers for indoor, vertical growing along with software to help farmers to track and control their operations remotely via cameras and a mobile app. The container farms sell for about $85,000 in the US and have the growing potential equivalent to eight acres of land. Square Roots even formerly included some of Freight Farms technology in its model.

New York-based indoor farming group Bowery Farming, which closed a $90 million Series B round in December 2018 operates two vertical farms int he Tristate area, claiming that they are the most technologically advanced in the world.

Square Roots closer competitor is likely BrightFarms, which constructs greenhouses near city centers and distributes its packaged salads and leafy greens through existing retailers. The company recently announced that it is opening three new greenhouses in Massachusetts, New York, and North Carolina giving it broader reach into the mid-Atlantic and Southern markets.

“We are competing against everyone else on the retail shelf, which means that we have to have high-quality food that is fresh and tastes great. There have been a number of tech-enabled food companies, but they are more oriented around the plant factory model, meaning big warehouse size farms,” Pegg explains.

Square Roots may be focused on taking locally grown food to the international market, but one of its core values is keeping the community involved. It wants to provide knowledge-hungry consumers with a way to reconnect with how food is grown.

“One of the things we understood from the beginning is that customers want transparency in food. OUr farms have a big window on the end so that anyone walking by can see the farm at work. We also host community-building programs and farm tours twice a month. We’ve had 200 people show up at night in the freezing cold and rain to learn about this technology and to taste our food. I think that speaks volumes.”

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